For those of you that bought right before the 2008 housing crash how did you cope?

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Paul78
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For those of you that bought right before the 2008 housing crash how did you cope?

Post by Paul78 »

I am currently in the process of buying a house. It is at the top of my budget and the house has gone up in price 50% in the last 30 months. I am moving in large part because I could never afford to buy a house at my current location (this was even before the ramp up in housing prices during COVID). I am going into this with eye wide open that I could easily lose 200k (on paper) basically overnight if the market crashes. I feel there is a roughly 33% chance I lose a significant amount (on paper) so that is a reasonable high number. My question is for those of you that dealt with buying at the peak in 2007 how did you manage to not let it "keep you up at night" losing that much money? The house is at the top of budget but I have a very stable job so I should survive (ie still have money to pay mortgage and all bills) even if a recession comes (which hopefully it doesn't).

The way I am currently approaching it is that there is only a 33% it is an absolutely horrible purchase. There is a 66% chance it is a fine or even good time to buy. But I know there is a difference between saying something could happen in theory and it actually happening.

-33% this is basically the top of the market and the houses prices go down 20-30% over the next year. Mortgage rates pretty much stay where they currently are. This equals probably up to a 200k loss (on paper) for me. Would have been able to save a lot of money or buy a "better" house if I just waited a bit.

-33% no massive loss or gain the new few years. Might be a slight price drop or increase (say up to 10% either way) BUT the mortgage interest rates go up another 1-1.5% so I really don't lose that much money. I have a 30 year mortgage so the interest rates really do make a huge difference.

-33% it is actually a smart purchase. The house is in a nice neighbor of mostly middle/upper middle class or retired people. The prices increases slow down but say it gains 20% value over the next three year. The mortgage interest rates creep up another 1-2%. In this case it turns out to be a great purchase as I would have been "priced" out of this home if I would have waited a couple of years to buy. It is already at my max budget so zero chance I could absorb even a modest price increase and modest interest rate increase.
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JoeRetire
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by JoeRetire »

Paul78 wrote: Wed Feb 16, 2022 3:38 pm I am currently in the process of buying a house.

My question is for those of you that dealt with buying at the peak in 2007 how did you manage to not let it "keep you up at night" losing that much money?
Unless you are planning to sell this house, you aren't losing money if the real estate market drops. Since I wasn't selling in 2008, it didn't impact my sleep at all.

In 2012, I purchased a house. It had been on the market in 2011 for $400k. I paid $330k. It's now worth almost $600k.
Markets go up. Markets go down. Once you purchase, you don't need to even think about it until you put it back on the market.
I feel there is a roughly 33% chance I lose a significant amount (on paper) so that is a reasonable high number.
There is no basis in fact for that feeling. The 33% is just a random guess using a round number.
It is already at my max budget
Be careful. Just because the real estate market is hot now, you don't want to become house poor.

I had friends who bought a McMansion that they could barely afford on two salaries. Wife unexpectedly got pregnant and wasn't able to work. Then they got divorced. Then he got laid off. Bankruptcy.
Last edited by JoeRetire on Wed Feb 16, 2022 3:56 pm, edited 5 times in total.
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TheHiker
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by TheHiker »

We bought a house in 2007. It lost 20% on paper in 2008-2009. Sold it in 2018 with a 50% gain to move to a bigger house.
Did not lose sleep over it. We are not buying the house for the short-term gains so why do we care too much that it lost some value.
If anything, we paid less in property taxes.

You can "wait a bit", but your downpayment savings may be eaten by inflation, the prices may go up and/or the interest rates.
barberakb
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by barberakb »

To me paper losses don't mean anything. Just like stocks, its only a loss if you sell it at a loss.

You can hold it until it recovers.

But I never rec buying a home at the top of your budget.

If I am approved for say 500K, I will look at houses between 300-400k max
MarkRoulo
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by MarkRoulo »

Paul78 wrote: Wed Feb 16, 2022 3:38 pm I am currently in the process of buying a house. It is at the top of my budget and the house has gone up in price 50% in the last 30 months. I am moving in large part because I could never afford to buy a house at my current location (this was even before the ramp up in housing prices during COVID). I am going into this with eye wide open that I could easily lose 200k (on paper) basically overnight if the market crashes. I feel there is a roughly 33% chance I lose a significant amount (on paper) so that is a reasonable high number. My question is for those of you that dealt with buying at the peak in 2007 how did you manage to not let it "keep you up at night" losing that much money? The house is at the top of budget but I have a very stable job so I should survive (ie still have money to pay mortgage and all bills) even if a recession comes (which hopefully it doesn't).

...
Do you think of real estate losses differently than stock market losses?

How well did you handle early 2020 (before the stock market recovered)?
Thesaints
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Thesaints »

Paul78 wrote: Wed Feb 16, 2022 3:38 pm The way I am currently approaching it is that there is only a 33% it is an absolutely horrible purchase. There is a 66% chance it is a fine or even good time to buy. But I know there is a difference between saying something could happen in theory and it actually happening.

-33% this is basically the top of the market and the houses prices go down 20-30% over the next year. Mortgage rates pretty much stay where they currently are. This equals probably up to a 200k loss (on paper) for me. Would have been able to save a lot of money or buy a "better" house if I just waited a bit.

-33% no massive loss or gain the new few years. Might be a slight price drop or increase (say up to 10% either way) BUT the mortgage interest rates go up another 1-1.5% so I really don't lose that much money. I have a 30 year mortgage so the interest rates really do make a huge difference.

-33% it is actually a smart purchase. The house is in a nice neighbor of mostly middle/upper middle class or retired people. The prices increases slow down but say it gains 20% value over the next three year. The mortgage interest rates creep up another 1-2%. In this case it turns out to be a great purchase as I would have been "priced" out of this home if I would have waited a couple of years to buy. It is already at my max budget so zero chance I could absorb even a modest price increase and modest interest rate increase.
First of all, if you like the house and want to live there for the foreseeable future, loss or gains matter a lot less.
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sunny_socal
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by sunny_socal »

We bought at the top of the market, right before the 2008 crash. We stayed in the house until the market recovered, sold it for about $10k more than we bought it for.

I don't think timing the market really matters. If you buy high, you sell high. If you buy low, you sell low. Just get in the market.
59Gibson
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by 59Gibson »

If you weren't looking to buy at your top budget you probably wouldn't have to worry about it, but since your maxing it out you're opening yourself up to potentially more risk. Thats' the trade-off.. IDK about your 33% #s
invest4
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by invest4 »

barberakb wrote: Wed Feb 16, 2022 3:48 pm
You can hold it until it recovers.
Unless you can’t. These discussion often seem to focus on home prices rising or falling in isolation. A lot of people weren’t able to wait it out during the GFC. Of course, I am not making any predictions, but as always, one should give consideration to the variety of potential risks when making what is most often our most substantial purchase and whether the “juice is worth the squeeze”.
dekecarver
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by dekecarver »

I bought a few years before and watched it run up and then blow up. I stayed put b/c I strategically bought for proximity to schools, entertainment, and work. Still here, house is valued 3.5x what I paid for it and still meets family needs. Guess the point is I looked at the purchase as a long term expense and the gains just worked out. Also I basically followed the old rule of 3x salary for how much house I could afford on a 30year mortgage at that time. That worked for me from an affordability and piece of mind stance.
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David Jay
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by David Jay »

You will most likely stop looking at house prices after you purchase. You are actively tracking house prices now because you are in the market for a home.
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srt7
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by srt7 »

We bought 3 months before things went south in 2008. How did we cope? By staying the course!

During the downs (back then) and the ups (now) we've always reminded ourselves that both losses and gains are on paper until we sell.
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Thesaints
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Thesaints »

srt7 wrote: Wed Feb 16, 2022 4:33 pm We bought 3 months before things went south in 2008. How did we cope? By staying the course!
More like "staying in the house" in your case...
fortunefavored
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by fortunefavored »

I bought in 2008 right before the crash too. The main thing is.. do you want to live there and can you afford the payments? Since I hadn't planned to move and I could afford to pay the mortgage, it was mostly just annoying to see it tank 30%. But in the end, you gotta live some where.

If you think of it as renting, what's the difference if the value drops? Unless you plan to move shortly, in which case.. don't buy a house regardless.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by PugetSoundguy »

We bought in 2006 and then housing values crashed. For us, there were real (not just paper) consequences even though we still live in the same house today.

1. We bought during the go-go mortgage days and we only had to put five percent down. We still got a great rate. However, mortgage interest rates begin declining substantially and we wanted to refinance. In order to qualify for a new mortgage, we had to scramble to raise substantial cash to pay down the original mortgage because we were substantially underwater with the new, lower value of the house. We were able to do it, but it was unpleasant.

2. If we had wanted to move (we kinda sorta wanted a bigger house), for the same reason we also would have had to put in extra cash to pay off the mortgage. Which would have made coming up with an appropriate down payment for new house difficult if not impossible.

So what I learned is that in buying a house, it helps to be as certain as you can be that you want to stay in the house for a significant period of time. Alternatively, if you want to move (or refinance) you need to have enough equity in the house (or substantial cash on the sidelines) to not limit your flexibility should the value of the house decline.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Chadnudj »

There is almost zero in common between the real estate market now and the real estate market in 2008. Lending practices are better/tighter, most borrowers have equity in the home thanks to a down payment and fixed rate mortgages, mortgage payments are generally more affordable thanks to still near historically-low interest rates, the economy is stronger, and housing supply stock is at all-time lows even as the large millennial/GenZ generations are beginning to enter the market.

In other words, I would have very little worry about your home losing value, and certainly wouldn't peg the odds at anything even approaching 33% due to macroeconomic factors (now, if a meatpacking plant opens up in your backyard or they re-route a highway outside your front door, all bets are off).
runner540
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by runner540 »

fortunefavored wrote: Wed Feb 16, 2022 4:37 pm I bought in 2008 right before the crash too. The main thing is.. do you want to live there and can you afford the payments? Since I hadn't planned to move and I could afford to pay the mortgage, it was mostly just annoying to see it tank 30%. But in the end, you gotta live some where.

If you think of it as renting, what's the difference if the value drops? Unless you plan to move shortly, in which case.. don't buy a house regardless.
I thought I was buying at the top…in 2019. Since then my house has made more money each month on paper than one of our income earners. :greedy
Exurbanite
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Exurbanite »

We bought at the end of 2005, selling our previous home during a market high to buy the one we have now. In 2008 our house lost more than half its value and stayed low for more than a decade. We were underwater on our mortgage until very recently. The value of the house has still not recovered to what we paid for it, but at least we seem to be building positive equity now; it has risen substantially over the past couple of years. We've accepted the fact that we are going to take a hit when we sell in a few years. But maybe not a huge hit. We love the house and are glad we bought it. We held on through the good times and the bad. It turned out to be a terrible investment but a nice place to live.
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Paul78
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Paul78 »

MarkRoulo wrote: Wed Feb 16, 2022 3:57 pm
Paul78 wrote: Wed Feb 16, 2022 3:38 pm I am currently in the process of buying a house. It is at the top of my budget and the house has gone up in price 50% in the last 30 months. I am moving in large part because I could never afford to buy a house at my current location (this was even before the ramp up in housing prices during COVID). I am going into this with eye wide open that I could easily lose 200k (on paper) basically overnight if the market crashes. I feel there is a roughly 33% chance I lose a significant amount (on paper) so that is a reasonable high number. My question is for those of you that dealt with buying at the peak in 2007 how did you manage to not let it "keep you up at night" losing that much money? The house is at the top of budget but I have a very stable job so I should survive (ie still have money to pay mortgage and all bills) even if a recession comes (which hopefully it doesn't).

...
Do you think of real estate losses differently than stock market losses?

How well did you handle early 2020 (before the stock market recovered)?
Money wise the 2020 stock drop was exciting for me. I figure COVID was either overblown so the market would recover or governments would pump a lot of money in the economy so the market would recover. So I took half my bond money (40k I think) and put it into the stock market close to the bottom.

But even if the market didn't recover I won't have cared too much as I am very far away from needing that money.
Afty
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Afty »

We bought a condo in Boston in 2007 and sold it in 2011. We ended up not losing money, though not really making any either after accounting for transaction costs. I think mentally you just have to approach it from an odds perspective, just as you do when investing in equities.

Remember that real estate is inherently much less risky than stocks. I think your 33% probability the market declines 20-30% in the next year is way too pessimistic. How often have 20-30% YoY declines in the real estate market happened? Based on https://fred.stlouisfed.org/series/CSUSHPINSA it looks like only 2008 and 2009 out of the past 35 years.
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Paul78
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Paul78 »

JoeRetire wrote: Wed Feb 16, 2022 3:43 pm
Unless you are planning to sell this house, you aren't losing money if the real estate market drops. Since I wasn't selling in 2008, it didn't impact my sleep at all.

No plan to sell. My goal would be to have the house until retirement in 24 years.

In 2012, I purchased a house. It had been on the market in 2011 for $400k. I paid $330k. It's now worth almost $600k.
Markets go up. Markets go down. Once you purchase, you don't need to even think about it until you put it back on the market.


There is no basis in fact for that feeling. The 33% is just a random guess using a round number.

Yes you are 100% right. I just made that up. But the general point is there is a horrible scenario, a wash scenario, and a scenario were this is a good time to buy.
It is already at my max budget
Be careful. Just because the real estate market is hot now, you don't want to become house poor.

Roughly speaking I have 600k in retirement assess, 150k in home equity, 50k in cash, and 600k mortgage. 24 more working years. So my mortgage basically equals my retirement assets. I understand maybe 1 out of 1,000 Bogleheads would approve of that scenario.

I had friends who bought a McMansion that they could barely afford on two salaries. Wife unexpectedly got pregnant and wasn't able to work. Then they got divorced. Then he got laid off. Bankruptcy.

My one salary basically just covers mortgage and living expenses (my take home is a bit over expenses-like 5k a year- but not too much). I will get modest raises (plus COLAS) but no massive increase in pay. As mortgage is a fixed payment and my largest monthly expense by far I will have some more flexibility over time (the modest raises). I also have a 50k emergency fund for unexpected expenses. Plus for huge emergencies can take out roth ira principle/hsa which is another 100k. Granted I hope it never comes to that but that is a back stop. And yes I understand maybe 1 out of 1,000 Bogleheads would approve of that.

Also my plan is to add a second income (hopefully spouse) in the next few years. Their income would be the extra money (either to grow emergency fund or increase retirement savings).

hoofaman
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by hoofaman »

We bought our last house near the top in 2006, for 215k, when we moved 8 years later in 2014 we sold for 180k. Although during 2009-2010 houses in our neighborhood were sold in the 120k range, Now it's worth 400k or course, lol

However it wasn't our first house, the prior house we bought in 2003 for 90k and then sold in 2006 for 145k

Also the house we are in now we bought for 450k and comparable homes are selling for 900k now.

Time in the market vs timing the market as they say, plus we need to live somewhere anyway
tim1999
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by tim1999 »

I bought a home in 2005 with zero down that I sold in 2013 for 15% less than I paid for it, minus closing costs/commissions. Thanks to mortgage principal paydown from having taken a 15-year loan when I bought it (I never did a re-fi), I still walked away from closing with a sizeable five-figure check. During my ownership I never really concerned myself with the home's value because I liked living in it and the monthly costs were very affordable as I bought a home that was below my means. I needed somewhere to live anyway, and I came out ahead vs. if I had rented a similar house from 2005 to 2013.

The value of that house probably peaked a bit earlier than the rest of the country (like, the day I bought it in early 2005 vs. 2006 elsewhere) due to some local economic factors including the loss of a couple major employers in the area that occurred immediately afterwards, so I don't think I ever actually had a paper gain on that house at any point in time.
Last edited by tim1999 on Wed Feb 16, 2022 5:39 pm, edited 1 time in total.
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baconavocado
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by baconavocado »

I was looking for a house in the 2005-2008 time frame and decided not to buy, but I knew several people who did buy and the value of their homes took a steep dip and are just beginning to recover the value they paid almost 15 years later. Fortunately they didn't need to sell in the interim so they didn't lose money per se.

I specifically remember discussing the market with one of my coworkers and he shrugged off all the reports of froth and easy lending and bought anyway. He had recently sold another house for a large profit and said, "it's all monopoly money anyway".

I bought a fixer upper in 2010 for about a third of what the house across the street sold for around 2005-6.

Of course, no one knows what the market is going to be like in a year, 5 years or even 10 years. In 2005-6 it was well known that the market was over-inflated. There were news stories and blogs all over that discussed it, the only question was, when is the bubble going to pop.
vfinx
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by vfinx »

Paul78 wrote: Wed Feb 16, 2022 3:38 pm how did you manage to not let it "keep you up at night" losing that much money?
Spouse went through this on a house purchased, just before we met. At one point it was under water and stayed that way for a long time. We sold that house only very recently for a modest gain. So it's something we've had to deal with emotionally for years.

It sounds to me like you've set your budget such that this isn't really an issue of being able to cover your living expenses if things go bad. Rather it's the emotional aspect.

In that case, I think the best approach is to not beat yourself up about it. There's no shame in mis-timing the housing market. I am not a fan of "It's not a real loss unless you sell". That's a psychological defense mechanism that isn't grounded in reality. If the loss happens, let it sink in, realize that it doesn't define your existence, and move on with life.
London
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by London »

I bought a house in NJ in March 2007 for $500k, and sold in 2015 for $450k. I made great memories in the meantime and didn’t care about the loss. I remember when I bought it, I knew it was a bubble and we’d likely lose money but it was the right time for us.

The house I purchased in 2015 has gone up $1m in value. I’m no smarter now than I was in 2007. Sometimes timing works, sometimes it doesn’t.
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JoeRetire
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by JoeRetire »

Paul78 wrote: Wed Feb 16, 2022 5:15 pm
JoeRetire wrote: Wed Feb 16, 2022 3:43 pm
Unless you are planning to sell this house, you aren't losing money if the real estate market drops. Since I wasn't selling in 2008, it didn't impact my sleep at all.

No plan to sell. My goal would be to have the house until retirement in 24 years.
Then why would you care at all what happens to the housing market in the next few years? You won't be in the market!
The only important points in time are when you buy, and when you sell.
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anon_investor
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by anon_investor »

TheHiker wrote: Wed Feb 16, 2022 3:47 pm If anything, we paid less in property taxes.
The opposite is happening to me right now… extra property taxes for a house I have no plans to sell for a long time…
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Elysium »

Paul78 wrote: Wed Feb 16, 2022 3:38 pm I am currently in the process of buying a house. It is at the top of my budget and the house has gone up in price 50% in the last 30 months. I am moving in large part because I could never afford to buy a house at my current location (this was even before the ramp up in housing prices during COVID). I am going into this with eye wide open that I could easily lose 200k (on paper) basically overnight if the market crashes. I feel there is a roughly 33% chance I lose a significant amount (on paper) so that is a reasonable high number. My question is for those of you that dealt with buying at the peak in 2007 how did you manage to not let it "keep you up at night" losing that much money? The house is at the top of budget but I have a very stable job so I should survive (ie still have money to pay mortgage and all bills) even if a recession comes (which hopefully it doesn't).
I would stay away from buying a house in an overheated market, period. I am not saying I know it is overheated or not, it's been a while since I tracked home prices actively since I no longer have a need having bought my current home at lowest point in the crash back in 2009. I also sold a house for a profit during the crash, and I was able to do that only because it was bought when prices were not overheated. What you pay certainly matters when it comes to housing market.

One thing I have known is that home prices do not keep going up 20% 30% 50% forever, they are not supposed go up over 5% average nationally over long term, and even high priced markets shouldn't be able to keep up increase like excess of 20% without a pull back. Therefore, if you feel they have gone up a lot, and out of your reach soon, then there are a lot more buyers in your situation, in fact many worse than your situation likely, and all of these folks wouldn't be able to keep the prices up forever. I wouldn't buy a high priced property in an overheated market even with a stable job. House is an illiquid asset that you cannot get rid of easily without significant costs. There are exceptions of course, for some individuals it wouldn't matter what they pay.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by snackdog »

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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by brawlrats »

We bought in August 2007. Still live in the same house. We have no plans to move. I have no idea what our house was worth in 2009, 2012, 2015, 2020. No idea what it’s worth now.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by ApeAttack »

David Jay wrote: Wed Feb 16, 2022 4:28 pm You will most likely stop looking at house prices after you purchase. You are actively tracking house prices now because you are in the market for a home.
Yup. I've had no idea how much my house is worth since I purchased it in 2015, except when my wife occasionally looks at Zillow out of curiosity.

We plan on living here until at least 2030 (probably much longer), so it simply doesn't matter.

Initially my PITI was much higher than renting. Now it is similar. In 5-10 years, it probably will much lower.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by TheGiantess »

We bought our house in 2006 and it is just this year that it is now worth more than when we bought it. We considered it our forever home so it didn't matter that the value went down. The good thing about it was that our property taxes went down but now this year they are back up again. Our house is small and we bought less than we could afford so we were not worried about its value during the crash.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Grt2bOutdoors »

Bought a house in late 2007, watched it fall 25% in value during 2008-2009 and stay there for about 3 years before value started climbing again. The one thing that hasn't declined is the amount of property taxes, that's up 50% and climbing. This is not a "hot" real estate market area, no matter what the real estate agents say, values are just getting back to where they were 15 years ago. I coped by paying my bills and remained in the house, many others lost their jobs and their homes. I made upgrades to the home along the way, but I'm living here.
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Paul78
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Paul78 »

Elysium wrote: Wed Feb 16, 2022 7:24 pm
Paul78 wrote: Wed Feb 16, 2022 3:38 pm I am currently in the process of buying a house. It is at the top of my budget and the house has gone up in price 50% in the last 30 months. I am moving in large part because I could never afford to buy a house at my current location (this was even before the ramp up in housing prices during COVID). I am going into this with eye wide open that I could easily lose 200k (on paper) basically overnight if the market crashes. I feel there is a roughly 33% chance I lose a significant amount (on paper) so that is a reasonable high number. My question is for those of you that dealt with buying at the peak in 2007 how did you manage to not let it "keep you up at night" losing that much money? The house is at the top of budget but I have a very stable job so I should survive (ie still have money to pay mortgage and all bills) even if a recession comes (which hopefully it doesn't).
I would stay away from buying a house in an overheated market, period. I am not saying I know it is overheated or not, it's been a while since I tracked home prices actively since I no longer have a need having bought my current home at lowest point in the crash back in 2009. I also sold a house for a profit during the crash, and I was able to do that only because it was bought when prices were not overheated. What you pay certainly matters when it comes to housing market.
The issue is I have no idea how overheated it actually is. When I made the decision to move 2 years ago this was one of my destinations on my list. I was extremely confident at that point the market was undervalued and long term it would go up significantly. But yes at this point I think it is "up to value" or maybe slightly overvalued (I don't know). But I don't think it is massively overvalued. In general I think people moving from HCOL areas to medium cost of living areas will continue (wont get into the reasons why I think that but one could guess). I am pretty confident the area I am moving to will remain a popular destination for west coasters to move to. And it will always be a popular area for retired people.

Another area on my list was Boise Idaho. Applied for a job November of 2020 didn't end up getting that but if I did I would have surely gotten part of this COVID wave housing increase (as I would have bought the house sometime between 1/21 to 2/21). But of course that would have just been "paper profit" as in that alternate universe I would have been planning to keep that house until retirement so would have no intention to sell/cash out.
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ClevrChico
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by ClevrChico »

I bought in 2007, partially because I didn't want to get locked into another year-long apartment lease. :oops: Well, fifteen years later I'm still here.

I had years of buyers remorse as I saw I could buy much more house in 2008 - 2010. I stayed put (no other option) and went from being underwater, to breaking even, and now I'd even make a profit. The neighborhood is now in pretty high demand and doing well. It's worked out.
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Paul78
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Paul78 »

JoeRetire wrote: Wed Feb 16, 2022 6:40 pm
Paul78 wrote: Wed Feb 16, 2022 5:15 pm
JoeRetire wrote: Wed Feb 16, 2022 3:43 pm
Unless you are planning to sell this house, you aren't losing money if the real estate market drops. Since I wasn't selling in 2008, it didn't impact my sleep at all.

No plan to sell. My goal would be to have the house until retirement in 24 years.
Then why would you care at all what happens to the housing market in the next few years? You won't be in the market!
The only important points in time are when you buy, and when you sell.
Well yes there are very rare cases when I would sell before I retire. If one of those catastrophic cases does occur losing 200k won't be a major concern. If a positive case occurs (ie I end up marrying someone who has a nicer house than me- I think this is a very unlikely scenario) I will be in a way better financial position that it will be easy to forget about the lost 200k.

But I am not going to be naïve and think there is zero percent chance I will 100% be able to ignore a huge market downturn (hence the reason for posting the topic to see what others did in that situation). Cause if there is a significant downturn it will be obvious even without me actively looking for it (ie I am not going to be checking estimates on Zillow or any comparable site).
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by m@ver1ck »

The real question is whether this house is a compromise - whether you really need a bigger/nicer home - and you’d be stuck in this house if you bought it now - vs. being able to get the home that you want if the market corrects.
However even this house might be out of reach if homes keep going up….
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by m@ver1ck »

The real question is whether this house is a compromise - whether you really need a bigger/nicer home - and you’d be stuck in this house if you bought it now - vs. being able to get the home that you want if the market corrects.
However even this house might be out of reach if homes keep going up….
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Paul78
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Paul78 »

m@ver1ck wrote: Wed Feb 16, 2022 9:11 pm The real question is whether this house is a compromise - whether you really need a bigger/nicer home - and you’d be stuck in this house if you bought it now - vs. being able to get the home that you want if the market corrects.
However even this house might be out of reach if homes keep going up….
This house is the bare minimum that would met my needs for the needs for the next 24 years. It is in a nice neighbor, it is a large enough/nice enough house for a family (currently have a significant other but not married/no kids), but at the same time a small enough house that it wont be ridiculous to live in if I just end up married without kids, it has the lot size I want, the views I want, ect. Which is why I feel the incentive to buy it as even slight price/mortgage interest rate increase would make this house out of my budget. Thus if I wait a couple of years to buy a home but the market keeps going up I will have to make a compromise to fit my budget (ie worse neighborhood, worse schools, smaller lot, smaller house, wont have to give up all of those but at least some). Don't get me wrong there are other things I would want in a house and if I had an extra 500k I could basically buy my dream house right now. But those are more "extra" things not my bare minimum wants.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Bogle7 »

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grogu
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by grogu »

I bought right at the peak in 2006. I had been holding off for a while knowing that the market was overvalued, but I eventually caved and bought--at the worst possible time. I knew I wasn't going to be living in that house forever (or even for a very long time), so when the market tanked, I just accepted the fact that I made a bad/unlucky move and was going to have to pay a steep price. What really stung is that I felt like I was the only one who was screaming how overpriced and overvalued everything was in 2006, and yet I played along anyway.

After the crash, I make a conscious effort to make significant additional principal payments. I sold around 2014 at a 40% loss. But since I had been paying it off aggressively, my remaining mortgage balance was still less than the sale price. (In today's ultra-low interest rate environment, I might do things differently, i.e., pay the minimum, and then do a strategic short sale, assuming a non-recourse state, if the market tanks.)

People were incredulous how I could move and lock in such a loss, but back in 2008-09 I had already accepted the fact that I'd have a big loss, so by 2014 I was over it. Some of my neighbors said they were never going to move until they got back to even. When I sold in 2014, the general consensus was that they'd likely be stuck there forever. (I just checked, and the current estimate for that house is about 95% of what I paid for it, so the prices have almost came back--and my buyer did very well.)

Still living in the house I bought in 2014 and am up 10-20%, so I've had a little better luck with this one.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by exodusNH »

Paul78 wrote: Wed Feb 16, 2022 3:38 pm I am currently in the process of buying a house. It is at the top of my budget and the house has gone up in price 50% in the last 30 months. I am moving in large part because I could never afford to buy a house at my current location (this was even before the ramp up in housing prices during COVID). I am going into this with eye wide open that I could easily lose 200k (on paper) basically overnight if the market crashes. I feel there is a roughly 33% chance I lose a significant amount (on paper) so that is a reasonable high number. My question is for those of you that dealt with buying at the peak in 2007 how did you manage to not let it "keep you up at night" losing that much money? The house is at the top of budget but I have a very stable job so I should survive (ie still have money to pay mortgage and all bills) even if a recession comes (which hopefully it doesn't).

The way I am currently approaching it is that there is only a 33% it is an absolutely horrible purchase. There is a 66% chance it is a fine or even good time to buy. But I know there is a difference between saying something could happen in theory and it actually happening.

-33% this is basically the top of the market and the houses prices go down 20-30% over the next year. Mortgage rates pretty much stay where they currently are. This equals probably up to a 200k loss (on paper) for me. Would have been able to save a lot of money or buy a "better" house if I just waited a bit.

-33% no massive loss or gain the new few years. Might be a slight price drop or increase (say up to 10% either way) BUT the mortgage interest rates go up another 1-1.5% so I really don't lose that much money. I have a 30 year mortgage so the interest rates really do make a huge difference.

-33% it is actually a smart purchase. The house is in a nice neighbor of mostly middle/upper middle class or retired people. The prices increases slow down but say it gains 20% value over the next three year. The mortgage interest rates creep up another 1-2%. In this case it turns out to be a great purchase as I would have been "priced" out of this home if I would have waited a couple of years to buy. It is already at my max budget so zero chance I could absorb even a modest price increase and modest interest rate increase.
I essentially bought at peak in August 2005, or at least just before. I don't feel prices moved up too much after that.

Following the crash, I "lost" about 20-25% of my value. As I had put 20% down and had been paying extra on my mortgage, I was never underwater.

My house stayed below my purchase price until the COVID run up. It needs to appreciate another 20-25% to get to a real return, that is after accounting for run-of-the-mill inflation over the 17 years.

While I was single, I didn't have any kids, so affordability wasn't really an issue.

My overall wealth is lower than it could otherwise have been. In retrospect, I should have stayed with my condo. But you can't change the past.

Just make sure wherever you buy, you want to live there for 15 years.

Also, make sure you're buying a house because you want to own a house, not because you think that it's the "grown up" thing to do. Over the course of your life, the renting will be better than owning and vice versa, and likely switch places several times. It's likely a wash in the long run.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by mmmodem »

Paul78 wrote: Wed Feb 16, 2022 8:59 pm But I am not going to be naïve and think there is zero percent chance I will 100% be able to ignore a huge market downturn (hence the reason for posting the topic to see what others did in that situation). Cause if there is a significant downturn it will be obvious even without me actively looking for it (ie I am not going to be checking estimates on Zillow or any comparable site).
That is pretty much what we did after purchasing in 2004. We celebrated as the value kept going up in 2006. We tried really hard not to look up the value as it fell in 2008. Failing that, I found the Boglehead forum in 2008 and commiserated with others worried about their home values and listened to advice from seasoned members here. It's just paper money. You don't lose anything until you sell.

What else is there to cope with? The value of the home has no effect on our spending or livelihood in 2008 other than what we budgeted when we purchased the home. We purchased a home we could afford in a place we planned to stay long term. If we lost our job, we found another as soon as possible.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Paradise »

What about the opposite?

You rent thinking this will crash and you can get a great deal eventually, but let’s say this is only the start of inflation and eventually it gets so bad that the fed drastically increases interest rates ? At that point, you’ll forget what the house is even worth because if interest rates go to let’s say 15% like in the 80s, you’re really priced out of a house unless you can afford to pay cash.

Back to your question:

Because you’re only considering that doomsday scenario plus this bubble is different than 07. (I bought in 07). Interest rates were a lot higher back then, and so you got double dipped: both house prices AND interest rates dropped. So the house you just bought, you could have instead bought two. In this market, rates don’t have much more to fall so you at least have a good mortgage payment to ride it out.
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LSGP_545
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by LSGP_545 »

We bought a new construction home and closed Sept 2007. The cost was $315k at the time, over the next few years we spent maybe another $10-15k in landscaping, garage renovations, etc. During the lowest part of the market here (Albuquerque, NM) and that was maybe sometime in 2011/2012 our home would have been hard to sell for $200k. Fast forward to today and we’re just about to put it on the market for around $385k - 405k. I had a 15 year mortgage on the house and it is now paid off, but never really thought too much about the decline in value during those years. I never really planned on selling, but conditions were right for us to build a bigger house in a better location not far from our old house. Had I sold, it would have been a loss, but we were never underwater as were many of our neighbors and the area in general. I remember homes listed as foreclosures everywhere during that time. We initially put 20% down and always put more down on the principal, so we were able to pay it off a couple years early. Maybe never being underwater help me sleep better too.
rage_phish
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by rage_phish »

Never effected me. Kept paying my mortgage. Sold in 2015 for high then I bought. Worked out fine for me (since I didn’t need to seek when I was underwater)
Last edited by rage_phish on Thu Feb 17, 2022 8:29 am, edited 1 time in total.
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by Monsterflockster »

We bought a townhouse in Silicon Valley before the crash. It was what we could afford, in a not so great part of town for 570k. When the market crashed it also coincided with my wife being laid off, a new baby and a 5% pay reduction for me. We had no debt but put a hearty down payment of 80k and had a balance of about 455k when the sh*t hit the fan. We tried to make it work, but after a year felt trapped and made the decision to short sale. That cost us a lot of money and we should have toughed it out as the home is valued around 900k now.

It took us some time but we ended up moving to a beach town and started over. It still stings to think of the money we lost, but in a weird way we are better off for it, better paying jobs & in a better community. My brother once said, “all we can do is make the best decision for our family in the moment. Can’t look back, just forward.” Tough to do but good advice.
Last edited by Monsterflockster on Thu Feb 17, 2022 11:00 pm, edited 3 times in total.
gtrplayer
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by gtrplayer »

I could be proven wrong but I’m not as convinced the housing market is going to plummet as you are. 2008-2009 was caused by a very different set of circumstances than we’re in now. The housing market hasn’t gone up because of easy access to mortgages, it’s gone up because of a limited supply of homes. This isn’t a quickly correctable situation. My suspicion is home prices will start increasing much slower as the supply eventually catches up to demand but that is going to take some time.

Then again, I could be totally wrong and the market will collapse tomorrow. I bought in January 2020 and my realtor said I’d probably lose money on the house, and the value has gone up by about 30% since then. Who knows anything?
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Re: For those of you that bought right before the 2008 housing crash how did you cope?

Post by InNameOnly »

We chose to not go large back in 2000 so we were able to build with 25% down, finance 50% and cash flowed the last 25% as we were building and finishing the interior. Then we paid off our mortgage before 2005. When 2008 happened we saw retirement balances drop for a year or 2 but home was paid for and was water under the bridge so to speak so a nonissue.

Don't make yourself house poor. Good luck. :sharebeer
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