Life's Lessons: Golfing With a General Contractor!

Last weekend I was spending my time golfing at one of my favorite little golf courses in Monterey, CA.  I was paired with 3 gentleman that all live in that area.

As I often do, I like to engage people conversationally as to what they do for a living, what they see, what's going on in their local economy, and how they see the world financially.

One of the guys in the group is a general contractor.  He stated his wife is a local Realtor in that area.

You can imagine a General Contractor and Realtor (husband and wife) during the bubble days were rolling fat and sassy in the good times at the peak of the bubble.  In fact, he told me they were living the high life with a nice home, nice life style and $150K in the bank as their back up!

Then came the implosion in both of their worlds.  Like many they tried to make it work as they burned through their savings to keep life going.  And why not, in every other recession that has worked!  Unfortunately, no one told them this down turn was not your normal recession.

After a couple years of bleeding their wealth away, they had a mere $2K in the bank and their house was going through a short sale because it was upside down and they couldn't afford it.

They eventually move down and became a renter with a much lower housing payment.  Last year, while business is still soft in their world, they were able to increase their savings to $30K because they had finally adjusted their lifestyle.


Life's Lessons

He said they got caught up in the bubble day mentality, as money was to easy and cheap thanks to Uncle Sam, and it seemed like everyone was doing it!  How could it go wrong?

He said he never needs to own a home ever again, at least no where near today's values.  He's very happy having money in the bank, saving more money a long the way for retirement, and being a renter and keeping life simple is just fine with he and his wife.

He also stated in the beginning they were very emotionally tied to ownership and conflicted about letting a home go to short sale or foreclosure, or potentially having to use Bankruptcy.  He now realizes those emotions worked against them making better decisions early in the process.

Oh the lessons of life learned the hard way.


Critical Mass

Their experience is very common to others I hear, where people try to hang on to housing and a life style that the math of the current day doesn't support. It usually stems from denial about the math and the emotional hang ups we have with housing, short sales, foreclosure and bankruptcy.

To some degree, I can't help but imagine a large portion of this nation, one person at a time, is learning the very same lessons. 

With 28% of home owners upside down and possibly growing with values declining, we could see this kind of story for the next several years.

It's this psychological break down in attitudes towards home ownership, that if happens collectively in large enough numbers could create a Critical Mass and water fall event in the near future.  That is capitulation, which often marks or happens near a bottom in prices! 

Something like real estate values slumping 4-5% in one month, or 10-15% in 3-4 months.


Final thought and lesson

The use of short sale, foreclosure and bankruptcy is going to become very common in this nation, even more so than the past few years as we discharge all the real estate nightmares from the past. 

I encourage people to not take it personally or think it reflects poorly upon them.  The entire world was caught up in the go go bubble days spawned by the federal government's easy money and easy lending standards. 

Resolving a real estate nightmare requires a good decision based on the simple math based on an honest look at personal income and mortgage debt versus home values.  In the case of bankruptcy get an attorney involved as early as possible in the process.

Let the math guide your decision and move on, because like my new golfing buddy there is light at the other end of the tunnel.

Hope all is well.

J.D. Rosendahl, Rosey