Guest Columist: "Just another (now recovering) f@cked buyer"

I am always looking for people who are willing to tell us how the South Florida housing bubble affected them. I received the following from a reader. Again this illustrates that not everyone experiencing significant losses were irresponsible flippers and speculators.

If you would like to similarly tell your story or write a column, click here for some guidelines.

Here's his story printed verbatim:

-----------------------------------------------------------

I just wanted to tell you my story. I work for a major national finance company, and have moved several times in my 11-year career. I was in Louisville, KY for 18 months when a promotional opportunity opened up in Ft. Lauderdale in March 2006. Call me naive, but I hadn't even heard of a Florida housing bubble. I knew CA, NY, and northern VA had shot up, but I didn't know anything about Florida. So I accepted the job. Needless to say, I started looking online for a home, and immediately began to panic. I had bought a 2,000 sq ft new construction home in a nice neighborhood in Louisville in 2004 for $170,000, and my wife and I had our first child there in 2005. Now I was moving to South Florida (the office was in Deerfield Beach), and that same home in Boca Raton, Coral Springs, or Coconut Creek would be about $550,000. I was getting a $14,000/yr raise (to about $78,000/yr), but I had only $34,000 equity in my Louisville home (plus a $30,000 cost of living lump sum for moving to Florida), so my $68,000 equity plus salary was nowhere close enough for me to be able to afford a nice home. I also found out how expensive property tax and insurance are, and realized I was completely f@cked. If I was lucky enough to find a $450,000 home and put all $68,000 down, and financed $382,000 at 30 years fixed at 6%, my P&I payment would be $2,300. Property taxes would be about $8,400/yr ($700/mo), property insurance about $3,600/yr ($300/mo), PMI of $300/mo, and HOA payments of at least $300/mo. So $2,300 plus $700 plus $300 plus $300 plus $300 equals a $3,900 mortgage payment. I brought home exactly $5,000/mo, so I would have had $1,100 left over for other bills. I had a car payment of $400/mo, which left $700. Utility bills (power, phone, water, cable) would be about $500/mo, leaving $200/mo. Insurance for two cars came out to almost $200/mo. So it was perfect, as long as my family didn't want to eat, buy clothes, or put gas in our cars.

So the next choice was a condo or townhome. I found some pretty nice, fairly new 3-bedroom townhomes online for the low to high-$300's in two north Broward County places, one in Deerfield Beach (A), and another in Coconut Creek (B). Assuming a $325,000 price, $68,000 down (no PMI!!!), $257,000 at 30 years at 6%, my P&I would be $1,540, taxes $6,000/yr ($500/mo), insurance $3,000/yr ($250/mo), and HOA payments of $200/mo. So $1,540 plus $500 plus $250 plus $200 equals a $2,500 mortgage payment. That would leave me $1,400/mo for groceries, gas, and clothes. It was possible.

I asked my boss about A. He said I didn't want to live there, because it's next to a huge landfill and it stinks all the time. So I looked at B on Mapquest, and realized it was on the west side of the dump, while A was on the north side of the dump. So I called my wife and she refused to live next to a dump in either place. Also, this isn't just a regular dump, this is a monstrosity, it's a gigantic mountain in Pompano Beach that can be seen for miles from all directions.

So I started to look for something to rent. The problem with renting in South Florida is that the owners of those properties have to pay gigantic tax and insurance bills, so even if their mortgage is paid off, they need high rents to cover carrying costs. Plus, nobody's mortgage is paid off. The cheapest 3-bedroom I could find was $1,900/mo. It was a decent single-family home on a tiny lot with about 1,600 sq ft and a 1-car garage. The neighborhood was nice and close to work, and the owner was willing to negotiate on the rental price, probably down to $1,750/mo or so. The only downside was that it had almost no backyard, and the backyard it did have fell straight off into a pond with no fence. My boy was 8 months old at the time, and the thought of him drowning in the pond scared me to death. Plus, I had this conviction that there was something shameful about renting. I seriously felt like I would be less of a man if I rented a home. Looking back on it, the idea was just absurd. I should have rented that place. But I didn't. Back to square one.

I googled the health effects of landfills. Unless they were chemical landfills (this one wasn't), there appeared to be no harm, just a stench. My boss came back and told me that two people in the office lived in neighborhood A. I asked one of the guys who lived there if it stunk, and he said only a total of two or three weeks a year. Not bad, two or three weeks out of 52. I could handle that. I called the wife and told her why I thought we should live next to the dump. She reluctantly agreed. The realtor and I went to go look at neighborhood A and neighborhood B. Neighborhood A was fine, I liked some places there, the prices were as low as $320,000 for a 1,600 sq ft townhome (that most people had bought for $110,000 five years earlier), and there were a lot for sale.

Neighborhood B was more expensive. Most were asking $375,000 and up, but one was listed for $360,000, it was 1,600 sq ft and had a 2-car garage, and a decent back yard that backed up to a nice forest preserve. This was March 2006, so the boom had just ended and prices were at their all-time highest. Sales had slowed a lot, though, and my realtor told me I could negotiate a signficantly lower price. I took a deep breath, didn't smell any dump, and offered $330,000. They countered at $345,000, and I accepted. I came up with an extra $1,000 to avoid PMI, put $69,000 down, and got a 5-year term, 30-year amort, $276,000 interest only loan at 5%. I got a good deal on insurance, $2,000/yr, and for the first year, I could enjoy the lower tax payment of the previous owner (taxes reset to the higher amount the year after purchase). So my entire monthly payment came out to only $1,677, plus a low $103/mo in HOA payments, for a total of $1,780/mo. I knew I could do that, and $1,780/mo buying was much better than $1,750/mo renting because of the tax advantage. I thought I had made a really smart move. The offer was made in late March, and we closed in early May.

Then the bad things started happening. First, the real estate market completely fell apart. When I made the offer on my townhome, there were 4 others for sale in the neighborhood of about 200 identical townhomes. Within two weeks of moving in, there were 13 for sale. Uh oh. One down the street also sold for $345,000, and although it was closer to the cul-de-sac and had a bigger yard, it still made me feel good. But within 60 days two others on my street sold for $325,000. A couple others in the neighborhood sold for similar prices, two for even more than mine, $350,000 and even $360,000. But then everything went from slow to completely stopped. A month after I moved in, my neighbor (who bought for $165,000 in 2002), put his up for sale for $360,000. He had almost no viewings and almost no offers for months. The three actual offers he got were all around $285,000 or $290,000. He and his wife laughed at what they thought were ridiculous offers. This was all within five months of moving in to my place, so I knew I was in big trouble.

Throughout the month of May, no stink from the dump. It's incredibly, unbelievably hot and humid from April through December, but even in May there were some cloudy days or evenings where we could walk to the park. The park was beautiful, and we thought we were OK. In June however, the smell arrived. I tried to ignore it and deny it, buy there was no ignoring this. It was really an awful, putrid trash smell, just like you would imagine a landfill smelling. I hated it, but I remembered what my co-worker had said about it only being there for two or three weeks a year and thought it would go away quickly. It didn't. After a couple weeks of smelling the stinky dump and feeling guilty for moving my family to this place, I found that I could check wind direction on weather.com. The 10-day forecast said wind was coming from the east every day, which meant it was blowing straight from the dump to my front door. I realized that my co-worker lived in community A, directly north of the dump and out of the usual wind direction, and I bought in community B, directly in its path. Oh no.

I won't bore the reader with the rest of the sad, predictable details except to say that it kept getting hotter, we smelled a very strong stench from the dump at least every other day, and the home prices in my neighborhood kept going down, down, down, while the number of listings went up, up, up. My neighbor's house never sold, even after he dropped his realtor and listed it as FSBO. He took it off the market. Mosquitos swarmed, the sun bore down, my air conditioner couldn't keep the house cool, and we were constantly worried about hurricanes. A month after moving there, we found out we were pregnant again.

In October 2006, the company announced they were closing all branches and relocating us to six business centers, in Nashville, Greenville SC, Tampa, Las Vegas, Dallas, and Colorado Springs. I'm from NC originally, so I only applied for positions in Greenville. I got the job I wanted. I didn't care how much I lost on the home, I just wanted out, plus a large portion of the loss was made up of the $30,000 lump sum I had been given to move there. I sold the home for $285,000 in June 2007, the same home I had paid $345,000 for a year earlier (more than a 20% drop!!!), and at the closing the buyers still said they were worried they were paying too much. They were right. Now there are two other homes for sale in the same neighborhood for less than $300,000. That's listing price, so I'm sure the sellers will let them go for less than the $285,000 I sold for. There are also a lot of other homes for sale in there that will never sell, because the sellers are delusional with their asking price.

In July, I bought a 2,800 sq ft home in a nice neighborhood in Greenville for $248,000. It was built in 2001, is in a very nice neighborhood, has a quarter-acre lot, and is less than two miles from my office. Plus it's not so hot and it smells wonderful.

The South Florida real estate market is dead, way, way dead. Prices keep falling, and more homes keep getting listed. But I'll say this, too. South Florida gets a bad rap. My wife and I loved the people there, loved the diversity, and loved the beach. The schools in our area were good schools. The neighborhood kids were polite, our area had no crime. It's just too hot and too expensive. People told me I was crazy for moving from Kentucky to Florida, and they were right. It was a bad move. But I still see some of the old Florida there, I talk to the natives and they tell me what things used to be like. I think if the money-hungry flippers leave and never come back and the prices get back to reasonable levels, it would be a really nice place to live. My second child was born there, my wife made a lot of good friends there, and a piece of my heart will always be there.

And one more thing. People wish their home would increase in value, but it's really not a good thing when it does. How are your kids going to buy a home? What is happening with your property tax? And the SOH exemption is just terrible, it just creates envy in the ones who bought recently, and smugness from the ones who bought when it was cheap. It creates an underlying neighbor-vs-neighbor resentment. But it's too late to do anything about it now.

Just another (now recovering) f@cked buyer