We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
What's my house worth? What's yours worth? We all have no idea today. Probably darn little right now - or nothing at all - because I hear there are no bids out there for anything. No bid means no current value or, as they say sort-of euphemistically, a highly "illiquid investment."
I'm glad my place is my home, and not an investment. I wish it were fully paid for.
Yes, I've been told it's terrible that I live in an area where the property values have fallen about 35% in the past year. My answer is what do I care...I bought it to live in, and I live in it and enjoy doing so, so it's of great value to me regardless of what it is "worth."
We bought a new home 3 years ago. Our old home was a starter home in a great neighborhood. This neighborhood has few starter homes.
I saw what was happening (contrary to so many doom and gloomers, LOTS of us saw this coming), and suggested to my wife that our home would lose less value (turns out I was right) while bigger homes would lose more. In the meantime, we could save more money!
Her response was this:
"I intend on living in our new home for at least 10-15 years. Why do I care if prices fall? We will have 50% down and prices WON'T fall 50%. Even if they do, I will be living in the house. I can't live in cash, bonds, stocks, gold or any other investment. What do I care if prices fall? I don't intend to get rich off the house, I want to live in it."
Truer words were never spoken. This is the difference between the mentality of investment, which created our current "troubles", and the mentality of good, clean living. Some things are investments, others are not.
Rick ,,, Your wife is right -- and wise. She says "what do I care if prices fall? I don't intend to get rich off the house. I want to live in it."
Right now, the little house my husband and I bought in 1974 has probably lost value on the market. We don't care. We love the house. It's just right for us, and, since we're in our eighties, it's probably our final house. So who the hell cares what the market says it's worth? It's home, and it's perfect for us, and later, for whichever of us survives the other.
In an absolute sense, houses are worth what they are worth to the owners. To us, our house is priceless.
You have described an element of mark-to-market accounting under FAS 157, which is (i) market based and has observable data points (ii) based on the exit price versus an entry price, (iii) based upon management assumptions in thin markets when no relevant market data is available and can marked to model in certain circumstances.
If your neighbor sold his home in a distressed process, FAS 157 would require you to mark your comparable home to market accordingly. Your net worth would be less.
Does this mean that you would realize a similar amount under an orderly, non-distressed process? Most likely no.
Now apply the concept to banks, which have been forced to write-down various assets based on FAS 157. Capital is destroyed and the capacity to lend is impaired. In fact, banks shrink assets (such as loans) in an effort to keep adequate capital ratios.
Why would a bank make a loan, if it immediately had to write the loan down? It won't.
The write-down doesn't necessarily mean that the loan is not money good. Nevertheless, bank capital is impaired.
This one of the dynamics at work today and continues to contribute to the financial crisis.
yes 'your house is a very fine house' to live in and until you are staring down the barrel of divorce hell and focred to sell in an economy where no one has the money nor inclination to buy anything. Love my house too only wish i could affrod to stay in it. I believe i will reread Atlas Shrugged now that the world as I know it is over.
Opie, I read an article about how badly things are affecting couples undergoing divorce. What to do about the house. I wish I could remember all the options, but one was to rent the house for a while until things stablize, and one was to stay together - though separately in the house until things stabilized. Darn. It was a good article, and it might give you some ideas. Maybe you could try Googling "divorced, what to do with house" and find some tips. I like the idea of renting it for income and the possibility of getting back in as you buy out your ex.