"Squeaking by on $300K a year salary...trying to maintain 2.5 million home)

[trickymost]

Originally Posted by Arrowette

I do... well, not exactly. I take into account what will happen if we have to only rely on one income, though - disability, death, the loss of one of our jobs, etc.

While not everyone makes enough money to have that luxury, planning the necessities around ONE income provides a heckuva lot of security, freeing a lot of cash for retirement savings, emergencies like medical costs, and simply enjoying yourself rather than being obligated to pay for rooms you never use or whatever.

Folks who make $30,000 a year don't have any other option than living month-to-month, but people in this circumstance don't have any excuse. It just isn't smart.

I agree, but if you read the article, she is able to afford the house. It's just that she can longer have the house plus the lifestyle.

Plus, and this may be the straw that breaks her, I gather many posting on this thread would not try to stay and wait for a bounce off the bottom, and would sell the home now even if it is for a loss.

She is not. It is a gamble. It may pay off, or it may not. Right or wrong, Wall St. is basically taking less than free money and the Fed is manufacturing profit for them. Record bonuses abound, so there's every reason to expect she *may* have the opportunity to sell with a small loss or a small profit.

Of course, Wall St. is still doomed, but it would seem until the musical chairs stop, there is a new generation of newly minted rich folks who probably are moving into the neighborhood who can afford the lifestyle, and will probably be the last set of "greater fools".

[trickymost]

Originally Posted by elflord1973

There are a number of government interventions that are designed to prop up house prices.

It's true that if she pays off her mortgage in full and never has to sell, then no-one is bailing her out. I don't believe that she can keep making the payments.

If she does sell and she's not underwater, then she benefits from the market interventions that prop up the value of her house (these include interventions in the credit and bond markets and foreclosure prevention measures. The 8k credit is also a measure to prop up demand, though that isn't going to affect a $2.5M house)

If the bank takes the place back from her because she can't afford it, then we paid for that too. In a number of ways, the public has been forced to eat the losses of the banks.

I would argue this community does not benefit from the various government interventions in its housing market. They are benefitting directly via record salary and bonuses paid through the firms which are taking free money from the government and using that liquidity to push bond, equity, currency, and commodity markets around with ease. A buyer for this home probably won't have a large enough mortgage (if they have one at all) to be affected by a point or two on the rate.

Also, really, this is an old, established, and stable communities for the wealthy. It probably will be so for the long term future. A bank would probably love to foreclose on this home. Given the record bonuses on Wall St, there's every reason to expect it would generate a profit for the bank holding her lien when it is sold.

IMO, the bailouts and interventions are really targeting a limited number of markets. They're for California/Vegas/Phoenix/Florida/Atlanta and for pockets of subprime nationally like Prince George County in Maryland outside of DC.

Other markets benefit from them, examples being the mid-atlantic and northeast, but the problems there are nothing like they are in the aforementioned markets.

[elflord1973]

Originally Posted by trickymost

I would argue this community does not benefit from the various government interventions in its housing market. They are benefitting directly via record salary and bonuses paid through the firms which are taking free money from the government and using that liquidity to push bond, equity, currency, and commodity markets around with ease. A buyer for this home probably won't have a large enough mortgage (if they have one at all) to be affected by a point or two on the rate.

If it is indeed the case that places in this neghborhood only appreciated by about 20% or so in 2000-2006, I stand corrected. Otherwise, I'd argue that one way or another, prices there are indeed affected by cheap credit.

I'd agree that the interventions probably do more for those who are living a 250k/year lifestyle off 80k than someone living a 1million/year lifestyle off about 250k.

IMO, the bailouts and interventions are really targeting a limited number of markets. They're for California/Vegas/Phoenix/Florida/Atlanta and for pockets of subprime nationally like Prince George County in Maryland outside of DC.

I suppose it depends on what you mean by "target". Some of these interventions, especially in the credit and bond markets affect everyone who is a long term debtor (or creditor).

In my home state (NJ near NY), prices are still excessive, and this is made possible by heavy distortions of the market (cheap credit and the 8k home buyer grants)