Pay Now or Later

Pay-Now-or-LaterMost recently people have been telling me that the market is good and houses are selling, but what we haven’t heard is the dark side of those sales which is a slow eroding away of market values in some price ranges. There are intermittent spikes in value vs sale price, but most of them are sales of homes that are picture perfect with all the updates today’s buyers are looking for, or they are homes that have special features that cannot be replicated without paying a king’s ransom. Acreages have still been a hot commodity since the 2007 meltdown, as well as homes in areas I consider to be the “look at me” neighborhoods where buyers are more concerned about having an address of a mini-McMansion rather than having enough sense to be a bit more modest considering their income vs debt ratios, rather than having so tight a budget they’re one paycheck from being in the red.

I have sold many homes over the years for those families who were from what I considered “old money” stock. They either created wealth themselves and or inherited enough to purchase an existing, or build the charming residence they called home for a number of years. All the rest of the home sales were either for those first time buyers out purchasing a modest 2 or 3 bedroom as their starting place. Then there were the second home buyers coming out of those modest first homes to upgrade due to their having built equity, increased their incomes, and likely tucked away a sizable savings to be partly used in their new purchase. Then came those empty-nesters who either down-sized or purchased what they’ve always dreamed about owning regardless of size or cost due to their having amassed wealth during their working years. This scenario took place during the first 20 – 25 years of my selling homes. Then came an interesting new set of rules for the first time buyers. First rule: We don’t want anything that needs much if any work. Second rule: We get what we want and hopefully similar to what our parents now have. Now the last, and most scary rule: We are likely going to purchase what our loan person has told us we can afford. Why would anyone want to purchase something in a price range that would place them at or near the top of their debt to income ratios? I do believe guardian angels exist, but I don’t think there are so many to go around making sure everyone is enjoying the perfect world they’ve set themselves up for.

I’m also a great believer in the “onward and upward” mindset of living and working, but when we find that we’ve likely set ourselves up for future failure, it must be quite the blow when one’s personal financial world start unraveling. Here we have the new world before us where if we can’t afford something anymore, then we just give it back. It’s happening with homes as well as vehicles. It’s no wonder I’m reading more and more about how the Federal Government as well as banks are taking a pro-active step in going after people with deficiency judgements that were filed against them for doing just that. Credit counseling is an absolute must with people who have this mindset. I’m seeing our future being one of “If you don’t pay now, you will pay later.”

Joe Chodur

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