Getting Mobile Before the Next Recession Hits

A recession is out there somewhere waiting to happen. The best time to prepare is always before it hits. One of the best forms of preparation possible is getting mobile. That may include changing your living arrangement.

As is frequently the case with articles, a topic often takes unexpected turns. In If There?s No Inflation How Come Our Insurance Premiums are Exploding? I wrote about my recent experience with significant increases in both home insurance and health insurance, and how it points to a level of inflation no one in official circles admits even exists. But in the extensive comments thread, another area of major cost concern was housing.

Getting Mobile Before the Next Recession Hits
Getting Mobile Before the Next Recession Hits

That detour is the inspiration for this article. This is a radical topic, but one that needs to be discussed. Several readers expressed an interest in selling their homes for a variety of reasons. Now might be an opportune time.

Why Your Living Arrangement Matters More in Recessions

The rent vs. own debate is a fairly frequent topic in the financial world, and there?s a case to be made in either direction. But I’m of the opinion a recession slants the argument in favor of renting.

While a permanent base of operations may be highly desirable during times of economic growth and stability, it can be an unwelcome anchor in an uncertain economy. We seem to be in the early stages of that type of economy, as evidenced by dramatic rises in basic living costs, like health insurance and housing. Such price spirals are often both evidence of an economy at peak and the cause for its decline.

There?s also abundant evidence of this as housing sales decline and auto sales soften, since both are big ticket bell weathers of the health of the economy. And as many are aware, the stock market is looking incredibly wobbly these days, particularly with big Friday selloffs. It seems the dominos may be lining up for a tumble.

The Job Market: The Main Support for the Housing Market

There’s some speculation the condition of housing during the Financial Meltdown was an anomaly ? an example of the worst example. Many believe housing will fare much better in the next downturn.

But there?s a compelling reason why it might do even worse. Every recession is different from the one before it. In the next recession, there?s significant reason to believe unemployment will be much more dramatic than it has been in the past. Employment/unemployment has a greater affect on housing than any single factor.

Consider why unemployment may be much more acute in the next downturn:

The growth of the contingent workforce since the last recession. That group of workers ? which includes freelancers, contractors, on-call workers and temp agency workers ? doubled from 10.1% of the workforce in 2005 to 20% in 2017.

Such workers are typically the first to go when economic storms hit. If so, the higher number of contingency workers could cause the unemployment rate to rise much more dramatically than it did in the last recession.

Anecdotally, I’ve also noticed a common trend of people employed full time, but consistently working fewer than 40 hours. This seems to me to be a form of backdoor contingency employment.

Both show that even at a time of nominal economic growth and record low unemployment, many millions of jobs are intentionally contingent.

The explosion in health insurance premiums. 56% of the US population gets their coverage from employer plans. Those plans are no less costly than private plans. With premiums significantly higher than they were 10 years ago, this is another factor that could accelerate unemployment.

The minimum wage has increased dramatically in the past 10 years. This certainly hasn’t been the case across-the-board, but it is true in many urban states.

How Your Living Arrangement Enhances ? or Limits ? Your Mobility

High health insurance premiums and the higher minimum wage mean the average worker is much more costly to his or her employer today than 10 years ago. That will create the incentive to reduce staff quickly. The rise of the contingent workforce means the methodology for rapid staff reductions is already in place.

If unemployment is a bigger factor in the next recession than the last, home ownership could prove to be a serious burden. The problem is that a homeowner who is unemployed has less mobility. If relocation is necessary to pursue alternative employment, the house may prevent a move. This will be especially acute in situations where the value of the home drops below the amount of debt on the property.

A research paper, House Lock and Structural Unemployment prepared for the Federal Reserve Bank of San Francisco in 2013, reported the following:

Compared with renters, homeowners face additional financial constraints in weak housing markets that may lengthen their unemployment durations and hence overall unemployment.

The report noted the conundrum of millions of homeowners who had become underwater on their homes. That would prevent selling, without needing to come up with a substantial amount of money to close-out the sale.

As well, housing sales slow during recessions. It may not necessarily be that the value of your house drops significantly. The bigger problem is that an absence of buyers ? typically due to unemployment ? could make it very difficult or even impossible to sell your house at any price. This has been the case in several recessions in the past, and not just the Financial Meltdown.

The Renter?s Advantage

None of this is to imply that renters will escape a high unemployment recession unscathed. A person without a job is in trouble as an owner or renter. But as a renter, there are two distinct advantages in a time of chronic unemployment:

  1. The ability to move to follow a job. It?s much easier to get out of a rental situation than it is to sell a house in a bad market.
  2. The ability to move to less expensive quarters.

Let’s spend a minute or two on that second point, because it’s critical.

If you lose your job, and can no longer afford to pay your rent, it may be possible to move in with family or friends to reduce living costs. That may give you an opportunity to regroup, and to eventually move into in less expensive rental.

As a homeowner, you don’t have that flexibility. In fact, it’s entirely possible your housing costs will rise. That can happen as a result of counties and municipalities raising your real estate taxes to make up for declining budgets. And there also seems to be a cosmic reality that whenever you’re dealing with financial difficulties, one or more major components of your home breaks down and needs to be replaced.

The renter doesn’t have those expenses, in addition to being able to move quickly. By contrast, it could take a homeowner months or years just to unload the house, but not before facing financial devastation in the meantime.

Changes in Market Conditions May Favor Renters

Just as renters are more fluid than homeowners, so is the rental market in general. For example, even if house prices fall, sellers often need to ?stick to their price? due to debt. If you owe $200,000 on a house that was worth $250,000 at market peak, and the value drops to $200,000, you can’t afford to sell at that price.

You’ll need to sell for at least enough to pay off the mortgage and cover any closing costs. You may decide you need $220,000. But if you decide you also need additional proceeds to cover the down payment on the next house, you may need something more than $220,000.

The problem is that your financial needs aren’t in sync with the then-current conditions of the housing market. This is one of the major reasons housing markets slow to a crawl during economic downturns. The large number of sellers, combined with the lack of buyers, freezes the housing market.

The situation is quite the opposite with the rental market. Unable to sell their homes, many homeowners are forced to rent them out. And as we saw in the last recession, distressed property sales are often purchased by investors, who subsequently rent them out. The end result is an increase in the number of rentals, due to the distress in the housing market.

Rents can see further downward pressure if high unemployment causes a reduction in the number of households. For example, as unemployed renters abandon their homes to move in with family and friends, the number of available apartments increases. Though they?re reluctant to do so, landlords are forced to reduce rents to attract tenants, under the ?half-a-loaf is better than none? doctrine.

The end result is that renters have more housing options, while owners have less.

My Own Housing Strategy

My wife and I sold our house before the Financial Meltdown, and have been committed renters ever since. The strategy enabled us to lower our housing costs as the economy tanked. As discussed above, the number of rentals increased as the economy deteriorated, giving us more housing options ? even with kids and pets in tow.

We found we could rent houses for less than it cost to own them. In the process, we were spectators as dozens of people around us lost their homes to foreclosure.

Now before I go giving the impression that the move from owners to renters was a brilliant strategy on our part, I must disclose that it was not intentional. I worked in the mortgage business before the Financial Meltdown, and my career began crashing before the economy did.

If there was any element of brilliance at the time, it was a decision I made that we needed to lighten our load before things got really bad. But after making that decision, we found that it fit well with what would turn out to be my upcoming career transition from mortgages into blogging.

Some might call it a happy accident, but as a Bible believing Christian, I?ve experienced many of those seeming ?accidents?, and have come to learn that God meets me wherever I am. I?m certain other believers have similar experiences to share. An unexpected benefit of these ?accidents? is that you come to realize you?ll be OK, come what may. But it often requires thinking outside the box, rather than waiting for the flood waters to come and sweep you away.

Where We?re at Now

For the past four years we been renting a condominium, and it?s been providing us with the following benefits:

  • We have no capital tied up in the property.
  • We?re free to leave at any time, on just 30-days notice.
  • We?re not responsible for major repairs.
  • Since it?s a condo, we have no exterior maintenance, like cutting the lawn, raking and removing the leaves, shoveling snow, or cleaning the gutters.
  • Due to the above, we have more time to do the things we like to do.
  • We?re free to relocate ? maybe even to follow our kids, if that situation develops.
  • If the economy gets bad, we can move to a less expensive space, or even to take advantage of lower prices due to a weakening housing/rental market.
  • We?re ?keeping our powder dry? to potentially buy a house later at distressed price levels.

The Downsides of Renting

In the interest of full disclosure, it’s not an entirely perfect arrangement. First, living in a condo, we have a homeowner?s association. Regular readers know my feelings on those organizations. However, they?re less threatening when you’re a renter than when you?re an owner. We’re also limited to no more than two cars, though we’ve been making that situation work to our financial benefit.

The other major issue is the rent isn’t cheap. Like house prices, rents tend to rise in a strong economy. But we?re willing to accept both limitations in favor of greater flexibility and mobility.

Still another potential issue is that we haven’t had the benefit of the rise in property values that homeowners have had in the past few years. But that’s only a benefit if you plan to sell the house and reap the gains by exiting the housing market completely.

But we?re aware that’s not what most homeowners do. They stay in the house, and cheer on the rising equity, without giving much thought to the reality that said equity is in fact dead equity. It?s what causes property taxes and homeowner?s insurance to rise, and often temps owners to increase indebtedness by borrowing out the equity.

And perhaps just as important, many people die in their houses, without ever reaping the benefits of the higher value.

In my own life, I’ve come to realize that there are many things that are more valuable than money. Keeping your options open is just one, but a big one at that.

Final Thoughts on Getting Mobile Before the Next Recession Hits

I realize that to a lot of homeowners, would-be home owners, and anyone engaged in the housing industry, my position is a heresy. But at the same time, I think it’s critical to stimulate thinking in different directions. That can become a lifesaver when the economy deteriorates. And I think many of us have a sense that a downturn isn’t far off. There are even serious questions if we’ve ever actually fully recovered from the last meltdown.

Whenever crisis looms, the best time to take action is before it happens. No, I don’t claim to have a crystal ball on when this will play out. But I’ve lived long enough to know that it will, despite the abundance of experts who claim otherwise.

That said, getting mobile before the next recession hits shouldn’t be limited to transitioning from homeowner to renter ? if in fact that makes sense in your case. It may not, but rest assured if you’re struggling keep your home now, it will become even more difficult when the economy gets worse.

Other strategies that make abundant sense are to build up your savings, and pay down or pay off any debt you have. That will increase your liquidity, and like being a renter, liquidity is a way to keep your options open.

None of us know or can know how the next economic crisis will play out. But if there’s one realization we should all take from both the Financial Meltdown and the Dot-com bust, it?s to be ready for whatever happens.

Now is the time to make those preparations and changes, while there?s still time and breathing room.

( Photo by Images_of_Money )

36 Responses to Getting Mobile Before the Next Recession Hits

  1. Got caught in the last big recession of 2008.
    Husband lost job , had to move to find a new job. Had to file bankruptcy, short sale our home and move in with our daughter. In our 50s!!!
    Forward to now , moved back to Florida, work is good(for now)! Still digging out but should be good in less than 3 years. Renting with no plans to buy. Trying to save as much as possible but staying liquid. Will work til we?re dead I suppose but it?s not too bad! Of course it wasn?t that simple but I don?t want to write a novel. Really enjoy this blog. I?ve read a lot of financial stuff and you are by far the most sensible and practical one I read! Keep up the good work!

  2. Thanks Terri. If it helps, according to the research I did for this article, millions lost their homes in the last recession, so you’re not alone. But yours and others should serve as a warning for those who might forget how bad things got. In the neighborhood we lived in at the time, with 89 houses, there were several that went into foreclosure, including one right next door.

  3. The trick to being mobile to job opportunities also involves massive downsizing your belongings. ( it makes moving around easier). At this point in my life, I would make a change in my physical location, if and when my son decides to get a place of his own, where he takes on the major cost of the housing cost, If I am forced to not be part of his housing unit, I will have to relocate to Florida where my daughter lives with her family. I requested that one of my children will allow me to live with them, rather than go to a high-cost senior living facility.
    But being mobile for job opportunities, one also needs to like not having the need to put down roots, but like the adventure of adapting to new situations (sort of like the life of military families). I can adapt if need be if I had to be mobile but like the article states it also has to be for a financially better situation.

  4. Hi Maria Rose – We’ve made a few moves over the years, and there was only one that we didn’t like – though it was completely necessary. All the others were positive, especially this last one from Atlanta to NH. We’re just enjoying a better quality of life here, and I hope we never need to leave (unless it’s to move to Maine). But if we have to move, we have our parachutes ready. I just wish, as you said, we could get rid of some of our stuff. It has a way of psychologically weighing us down. BTW, that’s a good arrangement living with your kids. Anytime you can live with family, and make it work, it’s the best of all worlds. One of the real tragedies of modern life is the separation of families.

  5. Anybody who doesn’t have a nice stockpile of cash and no debt are very exposed to this kind of thing.
    If 08 taught us anything, It should be that.

    Gone are the days of living and working in the same town our whole lives.

    Yet most go on trying to live the way our parents did. It is not the same anymore and hasn’t been for a long time.
    The people who except that and plan around that way of living are way ahead of the game.

    Taking a debt, car payments, student loans using the equity in your home of you have any is a fools game.

    Somebody told me once Kevin, I believe it was a pastor. Borrowing money is the same as mocking God. Your borrowing into a future that is not promised saying nothing will ever happen for thirty years.

    If you cannot buy a home outright, rent! yes, forever if need be. It’s ok. That’s the smart move and the mature one.
    I do own a home, it was bought with cash. It houses my business and mother in law in her own apartment.
    That’s the only I would ever say buying is better. You can go and buy a house anywhere as long as you can pay for it outright. It’s the only way in this day and age.

  6. What that pastor said Tim is brilliant. Taking on debt is like yoking ourselves to the world, which also gives us stress and concern that takes us away from God and everything else in life that matters. I also agree with owning a house free & clear, it gives you a lot of options. Too many people forget the past (like recessions) and only remember the TV version of life in the past. It’s not easy to live that life anymore, and too many are making up the difference with debt. All debt really means is that you really can’t afford something.

    Unfortunately, it’s very hard to buy a house without debt, since the debt cycles of the past 50-60 years are largely responsible for the high price levels that now make borrowing to buy a necessity. Take away mortgages and the whole housing market will collapse. Then of course we’ll all be able to afford to buy houses for cash.

    Some interesting stats from my research for this article (that I didn’t include)…Only about 46% of households in 1930 owned, 54% rented. Of the 46% who owned, only about 1/3 had a mortgage. For most, either you paid cash or you rented. And even if you borrowed, the loans were generally five years, and might roll over for another five years, otherwise you had to pay off the balance. We’ve gone too far with this housing debt situation. When debt becomes normal, the average person becomes little more than a debt serf who only thinks he’s free.

  7. Absolutely. As the saying goes, “those who cannot remember the past are doomed to repeat it”. But in modern America, we all seem to have very short memories. Of course, the media and the ad industry have a lot to do with that.

  8. Nothing is certain. It never was. The media and wall street have brain washed people into this debt way of living.
    We have had it too good for too long here. We have been lulled into a sense of security that simply doesn’t exist.

    I try and live everyday like it could all be over tomorrow. I could wake up and have no business. The market could crash. Job’s disappear without notice.

    This is the way would should all be living Kevin!! My grandparents stuffed money in a mattress for 50 years. They lived through the depression. No matter how much they prospered in the time after they didn’t change the way they lived.
    They lived everyday like it was the last good day money wise they would ever have.
    My grandfather told me this a long time ago. He was surprised everyday when he went to his job and it was there.

  9. I get what your grandfather taught you Tim. Every time I get an income payment in, or move money into savings, I feel like it’s a personal victory. Both are something that gives me more pleasure than spending money.

    I had an interesting exchange with a couple of cashiers last night. My son and I were out Christmas shopping and I was buying two JC Penny gift cards for $25 each. One was really aggressive, trying to get me to by four $25 gift cards because then I’d get a $25 coupon. She explained it as getting $125 for spending $100. I came back and said that if I plan to spend $50, and end up spending $100, I didn’t save any money at all, because I will have spent more than I intended to.

    Only in America can you “save money” by spending money! But it doesn’t work with me.

  10. I had been wanting to retire early, 63 rather than 66+ and get out of the city.

    I saw the recession and declining housing market coming in the near future so a few months ago while the market was really good, I sold my house and paid cash for a smaller home in a small town where I had pretty much dreamed of living.

    My debt to income ratio isn’t perfect, but I’m working on that.

    I wouldn’t have thought that renting would ever be a good move, but this article has enlightened me. That’s good because my son and his wife just sold their house and are renting. It’s good to know that they may fare better in the coming recession.

    Thanks for another insightful article.

  11. Thanks Deborah! I realize that much of what I write is outside the mainstream, but that’s what I feel comfortable writing about. I see little value in regurgitating what the mainstream says. If it can help a few people, it’s well worth both the effort and the criticism I often get.

  12. Hi Kevin. Another good article. As a woman, I’ve always wanted to own my own home, and I still think it is a good idea. But the key is to “own” your home without a mortgage. I’ve always looked at owning a home, with or without a mortgage, as an emotional issue, which, of course, is wrong. It is a legally-binding contract with little to no buffer for nonpayment. But for many, we put too much emphasis on the emotional side of owning, (memories, etc.), and this is where we get into trouble. With age comes clarity, I suppose. When I was a single woman, I worked tirelessly to earn and save the down payment for my first home. I was never sorry about that decision, but it’s only now, in my later years, that I realize renting isn’t a terrible idea. We were raised to believe you were throwing money away to rent. There are pros and cons for both sides, depending on where you are in life. But I believe we all need to rid ourselves of this mindset that renting is bad. Again, it’s different for everyone, but I am at least open to renting again in the future, which is a huge leap for me. And I suppose an open mind is always good thing.

  13. Hi Bev, in truth there may also be an emotional component to renting. When we owned I never felt financially safe. As you pointed out, there’s no buffer for non-payment. But I also worried about a major repair I couldn’t afford to pay, which would result in more debt (when I was in the mortgage business I was keenly aware of this darker side of homeownership as I saw it all the time). Then there was the trapped equity factor. Your equity rises, but like owning a stock, you might struggle with when to sell and “cash-out” on your gains. For better or worse, you gain nothing until you sell and bank the windfall. Many sit and watch the value fall, reversing those gains. Then we also lived in an HOA, with all the extra problems that brought. I had a lot of sleepless nights that disappeared when we sold.

    I was raised with the same “renting is like throwing money away” mindset from my parents and others. It’s part and parcel of the middle class mindset that ironically can act as a trap. For me, stepping out of homeownership was emotionally liberating. The financial stresses went down a few notches (trust me, they never completely go away), and I felt a sense of freedom I never knew as a homeowner.

    But even on the building memories front, my family have had excellent ones but in different homes. We sometimes refer to times and events based on where we lived at the time. Some houses we even gave pet names to, like one we always refer to as “the beaver hut”, because it was a low-lying ranch house that was covered by shrubs and very large trees, and bore a serious resemblance to the beaver hut in The “Chronicles of Narnia”. Renting has driven home the reality that life is who you are and what you do, and not what you own.

    I realize a lot of this comes from the fact that I probably think differently from the average person. That may come from being a writer, since you do tend to think of things from outside the box rather than inside. But it works for me, and I write about it because I think it can help others who may feel trapped in their lives by forces they don’t fully understand.

    Either that or I’m on a serious ego trip;-)

  14. If you have a mortgage you are renting. The bank is the landlord and you can’t call them when you need a repair.

    Kevin’s right though. In today’s with the prices of real estate, it is almost impossible to buy a home with cash.

    I speak a lot on here about my father and grandfather. Money and debt were taught to me at an early age. Those stay true.
    There are many more things that don’t work anymore. They lived and worked with stable money that was backed by gold. There were jobs. Prices were stable and the country was much more stable.

    I have never known this. In my era, it’s credit, bubbles, crashes, unstable money. No jobs and a much more unstable country and society.
    Funny, how those things go hand in hand. Unstable money, unstable country.

    It’s a matter of changing is the mindset to survive in today’s world. The things I was taught and the things most of us were taught do not work anymore. They are from an era that was different.

  15. Amen, amen, amen Tim! I’ve been saying for years that both the homeowner and tenant are renters. The only difference is where the tenant pays rent to a landlord to live in the property, the “homeowner” pays rent to the bank for right to live in the property and call it his own. (Interest is the rent you pay on the money you borrow.) But miss a couple of “mortgage” (really rent) payments, and the eviction process is pretty much the same, and sometimes even more brutal for the alleged owner.

    And another amen on what you were taught by your father and grandfather. It applies to most of us. We were indoctrinated to survive in a world that no longer exists. But we shouldn’t ignore the basic work-save-invest philosophy that guided many of the WWII era generation. It served them well, but for us it’s a core survival strategy. In most ways, I think our situations have more in common with those who were adults during the Great Depression, and saw the economic pie shrink. It may be happening more slowly in the last 20 years, but it is happening. Work-save-invest is the best way to deal with that – along with keeping living expenses low and avoiding debt. It seems most are either ignoring that lesson, never had it, or are too low on the economic ladder to make it work in any meaningful way.

    That circles back to the topic of this article. Homeownership has put millions into houses they can barely afford, or can’t afford at all. That inevitably leads to increasing living costs and debt, and an absence of saving (hence 78% of Americans living paycheck-to-paycheck). And I think it also creates the entrapment that prevents people from taking the chances they need to better themselves. Owning a house, after all, creates one of life’s biggest financial burdens. The most effective people are those who have the least to lose. The homeowner perceives himself to be a member of the establishment, and needs to protect that status. The renter is “living on the edge” by default. But what’s sad is that more renters don’t perceive the advantage they have, and spend too much time fretting over not being an owner.

    Boy our society is majorly screwed up!

  16. Kevin, I think your last paragraph says a lot…that renters don’t perceive the advantage they have… And I agree, you’re a renter until the mortgage is paid. Fortunately, I’m in that camp now, but it took a lifetime and many mistakes to get there. And even after it’s paid, you’re still looking at taxes, maintenance, etc. It really gives all of us a lot to think about when discussing what doesn’t work anymore. It’s difficult to unlearn what you’ve been taught for decades. It helps to hear everyone’s stories and learn from their good advice or from their mistakes.

  17. That’s the great thing about these discussions Bev, we get to open up and discuss life from different angles. I find the variety of opinions stimulating. It makes me more aware of how programmed I’ve been all my life. It often feels like adulthood has been a constant process of unlearning and relearning, within the reality of ever-changing circumstances. Meanwhile faith has taught me we’re all just passing through, and to avoid digging in too deep. In the end, permanence is an illusion, while flexibility is a lifestyle that can serve us well. This just isn’t the 1950s and 1960s anymore.

  18. I?ve been feeling this way for years but kept holding onto old fashion ideas. No more- if I am a renter til I die so be it!
    In 40 years of marriage we have moved dozens of times and I would like to have the money I wasted buying homes and then moving too soon. At worst you will be dinged a months rent to break your lease but then your free! When we moved back to Florida we were able to stay with family and take our time finding a new place that we liked with rental terms we liked no rushing and no putting down 10s of thousands of dollars!
    I could write a book on what NOT to do when moving and home buying !
    We also have pet names for the homes and towns we lived in!!

  19. Realistically, if you move a lot, owning doesn’t make any sense. I’ve seen the career fast track types do that, moving every two or three years, but you couldn’t convince them it was a mistake.

  20. For real liberation, after becoming a renter, the next step is eliminating the car. Find a place close to work and groceries.
    The step I’m working on now is getting rid of stuff. The goal is all I own can be moved in one van load and live easily in one room. Then you have lots of renting options from an efficiency to just renting a room. Just having a room usually means utilities are included or split, saving more.
    This way of living has become an adventure of sorts. More entertaining than TV!

  21. I agree Ric. But I think you can do a mix and match too. For example, eliminate the house OR the car, and you’ll still be way ahead of most people. The problem is everyone’s still trying to “have it all” and it’s no longer doable unless you’re in the top 10%. But I saw people in the top 10% lose everything in the last recession. I like the idea of whittling your stuff down for an easy move. Most of us only need a few things to be comfortable and the rest is just emotional baggage. My wife and I need to work on that.

  22. Thanks for the article Kevin. We purchased our house in 2012 but rented for several years before that. Denver housing has gone stupid over the last few years and I’m seriously considering “cashing-out”. We’ve put a lot of sweat equity into improvement (re-did a major kitchen renovation ourselves, added 1/2 bath) but the list of what should be done is never-ending.
    Our youngest is 13 and I’ve been looking more into the “stealth van-life”. I’ve encouraged my oldest to research and look into it. Sink anywhere from $5K-$10K into a work van that serves as your mobile efficiency apartment and park wherever you can find a spot. It certainly is on the more adventurous side, but I think a viable option for young males (I wouldn’t want my daughter trying that lifestyle for safety reasons).
    Proverbs 22:7 The rich rule over the poor and the borrower is a slave to the lender”.
    Enjoy your blog site, keep up the good work!

  23. “unless you’re in the top 10%” . . . nah, it’s the top 1% now.

    I have been renting for almost my entire adult life, and never owned a home. I was recently mocked by a young woman on line who considered herself more successful because she was paying a mortgage on a home in a very high crime neighborhood of Philadelphia. No way in hell am I exposing myself or my family to that kind of life. If my own neighborhood ever takes a turn like that, we are free to go in a month!

  24. I survived the last crash by downsizing, significantly, worked 1.5 jobs to pay off debt. I learned to squeeze a quarter until it screamed! While I?ve never gone back to ?living large? there were still thing that hit such as car died, furnace went out, dog became deathly ill, etc. all while getting a divorce!

    The fear that all put me through will make me always stay in check with money. As a result of it I?ll be working well into my retirement. Something I never expected I?d have to do.

    Like you, i was in this industry and because I saw it coming, i was able to react n get ahead of it. I watched GOOD loan officers n realtors go down. I no longer criticize folks when they go down financially. One just doesn?t know the full story. You can be wiped out with anything.

  25. I think your response to your situation is a perfectly healthy one. Rather than live in denial, you dealt with it constructively, by finding ways to earn a living and cutting back on your living expenses. It’s the best reaction anyone can have. I believe you’ll come out better for it. For better or worse, it’s the bad experiences that shape us more than the good ones, maybe because they have a deeper emotional impact. We’re stronger if we learn from them. You’re doing that by adjusting your expectations for the future. And even if you do have to work into your retirement years, it doesn’t mean you’re life will be lousy. You may step into a new career – supplemented by Social Security – that opens a whole new chapter in your life. What can be better than stepping into something completely new in your 60s or 70s? I see too many people in their 60s and 70s working to despair about it. Retirement can’t be the holy grail by which we measure our success or happiness.

    But I really want to spend some time on your last comment – “I no longer criticize folks when they go down financially. One just doesn?t know the full story. You can be wiped out with anything.” – Boy, how I wish I wrote that!!! It’s so true. When you’ve been through a personal financial crash it gives you an entirely different perspective. I’ve known people who never have, and they’re absolutely merciless in their judgement of people who have crashed and burned. Having been through it, I know that’s a cold view of life and of people. None of us are immune from crisis, though it is true some are so well insulated that it’s highly unlikely. But I feel my own crash and burn has made be a better, more compassionate person. When I hear or listen to those who judge others for personal crisis, I can almost feel the cold breeze emanating from them. I don’t want to be that person, and it sounds like you’ve had a similar revelation.

    Excellent comment Ruth Ann!

  26. Owning a home is as much about lifestyle as it is about a financial choice. Renting does not offer the same kinds of choices that owning does. When you own it, you can do what you want to it. If you are very flexible about your accommodations, then renting becomes more viable.

    Cashing out your home and renting does offer financial safety, but it is not the only option. Being out of debt, living within your means, diversifying your income, having a cash cushion; these are all other ways to be ready to weather a storm.

    Many people lost their homes in the financial crisis. But how many of those situations were simply about buying more house than they could afford?

    It is true that the working population is more mobile than ever before, but a very large percentage of people still live and work in a single city for their entire lives.

    If you live on the edge of financial ruin, then owning a home and having a high-ratio mortgage is probably a bad idea.

    When it comes to financial planning, there is not one-size-fits-all. Understand your risks. Try to mitigate them. Keep your eyes open. Act with intention.

  27. I agree with you Neil, that it really comes down to overall financial management. But more people are becoming hesitant about buying a house, and I think it’s an issue we need to take seriously, especially since it’s one of those “conventions” that historically most people never questioned. As finances become constrained, and they are for an increasing number of households despite all the happy stats on the economy, people are going to need to entertain tough choices.

    In the Financial Meltdown I watched as dozens of people lost their houses in foreclosure. In most cases, I felt they had other options that they refused to consider. It’s best to think about alternatives before it becomes necessary, and options become more limited.

  28. Renting was an option we chose for about three years, after selling a home in an HOA. We chose to rent for two reasons – mobility and to avoid another HOA.

    In fact, I would not even RENT in a HOA or condo, both because of the onerous restrictions and also because of the maintenance and repair bureaucracy. When you rent a condo/HOA home, you have two landlords?the owner of your home or condo unit and the HOA. Especially in a condo or townhouse situation, if anything goes wrong, your landlord and the HOA will waste time arguing over whose responsibility it is to fix the problem. In the meantime, the tenant has to live with the problem. Examples: leaky plumbing, water infiltration through the buidling envelope (windows, doors, siding, or roof), pest control issues, heating and air conditioning (unless each unit has its own equipment), sewage backups, storm water flooding, etc.

    If you?re lucky enough to be able to afford ?market-rate? rentals, you?ll have more choices, and better choices when you decide to move. But if you need ?affordable? rent or a subsidized rent, your choices are severely limited. Landlords at the low end of the market know it, so they tend to be irresponsible about keeping the property safe and in good repair.

    And in many, many real estate markets, there just aren?t many houses or apartments to rent, because decades of zoning policies have discouraged rental properties.

    Another problem is that most HOA and condo associations, and even some local governments, restrict homeowners? rights to lease all or part of their property. And I?m not just talking about short-term rentals either. When your HOA won?t allow to to take in a roommate, paying rent for that extra bedroom you don?t really need, that severely limitis the ability to save money ? for both the homeowner and the renter.

    Luckily for us, when we moved to another state for employment in 2009, we were able to lease our home to tenants for about 2 years, until the real estate market was better for selling. That home was NOT under HOA governance, thank goodness. The rent helped to cover the carrying costs of the home. It wasn?t the idea situation ? we were reluctant landlords ? but it was better than taking on further debt to pay the mortgage and taxes. So renting all or part of your home is an option if you cannot sell the home or don?t want to sell.

    The other option is to have a home based business, or work as an independent contractor, based from home. Then it doesn?t matter so much where you live. I think there are many jobs where it?s not really necessary to go to an office or workplace each day, but yet, too many employers still require the daily commute. For example, if you?re in sales or marketing, and you spend a great deal of time on the road or in the air traveling anyway, why do you have to relocate to be near a sales office? It makes no sense.

    And some direct service jobs ? nursing and many jobs in health care services, hair stylists, auto mechanics, HVAC repair, etc. are needed almost anywhere you might move. When you have a profession or career that is location or industry specific, or where there?s an oversupply of workers for that job, THAT?S when you get stuck moving from city to city to follow job/career opportunities.

    But the problem of housing affordability is even deeper than the concentration of job opportunties and wealth in urban cores.

    The problem, in my view, is that too much land is sold to real estate developers, rather than selling individual plots of land directly to people who want to own a home. Developers buy up acreage, then subdivide it into dozens or hundreds or thousands of parcels or ? if building up ? condos. Then they resell to home buyers. Of course, developers want to make a profit, so your cost to purchase (or rent) is much higher. And most of the new housing built by developers is HOA or condo, with the developer in control during building phases. That control can last years, if not decades. At best, you?ll be left with a benevolent dictator in charge of your property rights. At worst, you?ll be exploited for the benefit of the developer and/or the HOA controlled by the developer.

    It would be far better for the consumer to buy a plot of land, and not have to live under the thumb of a developer or HOA. But it?s getting harder to find vacant land, because developers and homebuilders scoop it all up and hold onto the land for years, mostly to avoid competition, and to drive up the cost of land for future resales.

    As for Senior Living, that?s an even bigger boondoggle ? it?s the unholy intersection of the health care conglomerate + the HOA industry. I?m not sure which is a bigger ripoff.

  29. Hi Deborah – You’ve covered a lot of territory, but I’m going to focus on what you said about employment. It tends to be a huge mental restriction on where people live, and how much they pay for where they live. But in the internet era, there are more employment options than ever before, but people still have a 1950s view of employment. That’s exactly what most employers want employees to have. Most businesses today continue to be run on the plantation model – everything is local and under the strict control of the bosses, including every move you make. I personally could never take that kind of oversight, nor concede that much control over my life. I’ve built my work life around avoiding that trap for the past 20 years. It’s possible to do, but you have to actively pursue it.

    There’s self-employment, but there are also sales jobs and work-at-home arrangements. All are becoming more common, and I think the trend will accelerate when the economy turns down and employers are forced to cut costs. But workers also need to change their ideas about what work should be like. We often forget that until about 100 years ago, most people worked from home, whether it was a family farm, shop or very local business. But in that time, we’ve surrendered our work to the plantation, which was really just the 19th Century American version of European feudalism, a system Europeans rejected centuries earlier. So I think we need to gradually move from being trained ponies, to reclaiming our sovereignty as human beings.

    And in a real way, the HOA phenomenon is an outgrowth of that corporate/plantation mentality. It takes huge numbers of people, puts them in one place, tells them how to behave, gets them accustomed to close oversight and authority at every turn, and causes them to lose their individuality and control over their own destinies. What’s really tragic, is most go along willingly. They can’t or don’t even see what’s happening.

  30. And the other problem with HOAs is that, in a recession, they tend to be hit with an increase in assessment delinquencies (people lose jobs and fall behind on fees), bank foreclosures, and a slow new construction and/or resale market.

    A downturn in the economy and collections leads to deferred maintenance. The place starts to look shabby, and, depending on the severity, even blighted. No protection of property values!

    But yet, if you don?t pay those HOA fees that keep going up, you could literally lose your home to the HOA by way of lien and foreclosure. Or if the HOA doesn?t want to pursue foreclosure, then they can ruin your credit and get a money judgment to garnish wages or liquidate other assets.

    At the same time, HOA rules and restrictions could limit your options to work from home, if you don?t meet the vague ?single family use? restrictions.

  31. As you know Deborah, I’ve written on all those possibilities. That’s why I’ll never own in an HOA again. Very limited benefits, restrictions ranging from mild to oppressive, and virtually unlimited liability. That’s what people are signing up for when they buy in an HOA, but they don’t know it, and no one will tell them. For anyone reading these comments, please be aware of what you’re getting into with HOAs. They’re very literally the wolf in sheep’s clothing. But you don’t know that until they turn on you, or things get bad and they want to stick you with the bill.

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