This article by L.A. Times reporter Peter Hong led The Times’ Sunday Business section. It’s a first-person account of Hong’s prescient decision to sell his Pasadena condo at the height of the market, in April 2005, and become a renter again.
We got nearly three times what we had paid for the place nine years earlier. It seemed to us like a staggering profit–and a sign that the market had been pumped up beyond reason. That’s why we decided to rent instead of buying another house right away. We wanted a place with a yard and a third bedroom, but we weren’t willing to pay the sky-high price or take out an exotic mortgage to buy something our income did not justify.
Hong writes that the run-up reminded him of the mania surrounding the tech-stocks bubble in the late 1990s. Despite real-estate agents and friends warning him about missing out on future gains and being priced out of the market forever, he followed his instincts.
I’ve always been wary of getting something for nothing, and that’s what made me so dubious about our latest real estate bubble. Too many people expected to get a bigger, better house without first earning more money. They expected to be able to buy more things by borrowing against their home equity, not by working to boost their incomes or saving. Many of the people who are struggling to make their house payments were duped by commission-chasing mortgage brokers who put them in loans they couldn’t afford. But it’s also true that many of the borrowers who are in trouble knew they couldn’t make the payments and were counting on rising home values to make up for any shortfalls.
This story has generated numerous comments, almost all of them agreeing with Hong’s viewpoint and congratulating him for his good sense. I congratulate him for his values and his lack of greed. I’m afraid I don’t have much sympathy for people who knowingly overextended themselves and/or used their homes as ATMs. So many people in this world barely get by or live in deplorable conditions. With all the people in this country who overextend themselves so they can look prosperous to themselves or others, it’s understandable why other countries can’t stand us.
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