why you will never be rich

[fj]

This is a very funny place that I have stumbled upon. Don't ask me how, but I ended up here and spent the last few hours reading "The Tim's" posts and the copy-cat comments that always follow. High comedy. The "impending housing implosion of doom" couldn't come soon enough for the bitter old ladies around here.

Besides mocking you, I do have one other purpose in the form of a question/comment:

There seem to be a fair number of reasonably logical (maybe overly so) people around here. Also, a few people that know something about finance and a little about statistics. Also, a really amazingly heavy-handed approach to personal finance. All that being given, why aren't more people on this blog taking advantage of the current situation in Seattle? Banks are basically falling over themselves to hand out money (the recent sub-prime snafu not-withstanding - posters here don't seem to be the sub-prime type, more the type to make fun of the sub-prime type). This is a prefect opportunity to use your good credit, your burgeoning nest egg, your steady income, your "saver" mentality to take advantage of the banking industry's ridiculous appetite to loan good money to people with solid financial footing. This is an opportunity that you could actually leverage, because you are so whiz-bang smart, and turn into real wealth. In fact, this is how wealthy people become wealthy! Wealth isn't built by taking a pay check home every month and putting it in the bank. Wealth is about investments and leverage, whether it be investing in yourself, your ideas, the stock market, real estate, or, in this case, investing in the currently insane condition of the housing market.

I will give you a small example: In 2004 I had about $10k cash in the bank and some student loan debt (I had graduated with my computer science degree one year earlier), and had a job as a C++ programmer at a local .com. My wife and I decided to take the plunge and bought a nice house that we in no uncertain terms could not afford for $409k in the Central district. Mortgaged to the hilt (80/20, 5 yr ARM, interest only payments), we put $0 down (the $10k cash went to closing, if only Redfin had been around back then). Fast forward three years, we just sold that house for $650k, and will likely end up putting 20% down on a $1.0 million dollar house in, probably, Lecshi, Madrona or Mt. Baker.

See, that is how you do it. You take advantage of the banks willing to give a guy with $10k cash in the bank $409k and you turn that into very solid financial footing in one of Seattle's nicest neighborhoods.

And because you sat around complaining about the situation instead of taking advantage of it, you will never be rich.

fj

[vancouverdr]

Okay, Drive-by Mocker:

It is theoretically possible that you found a greater fool to relieve you of "your" house and you came away with a 231K profit. Quite a few have benefited from the bubble, even though yours (if true) and many others' were due to dumb luck, since houses already were a bit overpriced in 2004 and thus could have fallen instead (but obviously did not).

I recommend that you buy that $1.0 million house IMMEDIATELY and claim your just reward. Don't be surprised if you lose all of your prior profit after three years, though. 23% down seems conceivable to me. Shiller is predicting worse.

I for one believe in buying low and selling high, or AT LEAST buying at a fair valuation, so at this point in time am watching and waiting. If I wanted to, I could buy a house (or two) tomorrow without the help of a bank.

[blueskitten]

Wait a second, you admittedly could barely afford the mortgage on a 400K house with zero down in 2004, and now only three years later you're going to mortgage yourself to the hilt on TWICE as much debt? 80% on a $1 million house gives you an 800K mortgage. Has your income really doubled in that time, as well? If so, I salute you.

If not, I'd seriously reevaluate the risk that you're taking. Luxury homes take much longer to sell than entry-level homes, so if you ever need to sell, you might end up taking quite a bath.

I think it's funny that you graduated from college in 2004, so you're probably about 25, and think yourself a financial genius. And this is coming from someone who graduated in 2002, and also bought a property in 2003 (which I'm now in the process of selling). But at least I don't think I've stumbled upon some wealth-secret just because the mortgage industry has a screw loose! An economy that allows 3-years-graduated 20-somethings to own million dollar houses just reeks of dot.com unsustainability.

Usually I'm firmly in the unresponsive "don't feed the trolls" camp, but I can't leave this hanging waiting for some gullible reader.

[jeremiah_lopez]

He said he was a C++ programmer, so he can't make that much.

-J

[george]

[meshugy]

[wreckingbull]

This troll makes me a little wistful for when I was young and dumb. Those were the days.

[dgeng265]

[Alan]

[mike2]

[deejayoh]

[redmondjp]

[biliruben]

[mike2]

[TJ_98370]