It's a sign of the times, to be sure. But it sure gets you thinking a lot about it when it happens to your own neighbors/friends.
The couple who live behind me bought their house 9 years ago. He makes roughly $150K; she made I'm guessing about $50K before she quit her job.
When they bought the house, it was 2,000 square feet. Although it was just the two of them, plus his teen daughter who moved in with them, they decided to put on an addition quite some time ago. A big one, measuring 3,000 square feet. That's DOUBLE the size of my entire house!!!
She didn't want it, but he talked her into it apparently, saying it was "an investment in their future." Umm, yeah, or a noose around your neck.
Although he makes good money, he's not very good at managing it. I don't know that they have much in retirement savings.
So anyway, a few months ago, when they wanted to cut her hours at work, and there was some politics involved, she balked. Her husband said, why don't you just quit? I guess he figured they could still live quite nicely on his salary. Mistake #1. I'm sensing there was a disconnect in making the decision to quit over such a relatively small thing, with a general disregard for the state of the economy and their own personal circumstances.
Now they've learned that he'll be losing his job in March. While he got 6 months notice, he's getting NO severance. According to the wife, they didn't even actually say why, but she did say he was overpaid and I assume the toy company, likely experiencing a business slowdown, did it as a cost-saving measure.
The addition is still not finished; although it's meant to have a kitchen, it doesn't have a complete one now, they decided it would be too much money to make it rent-ready, and she doesn't want to give up her privacy, either. Plus their driveway is extremely long (about 1,000 feet?) and steep and would likely cause problems for a tenant. (They sunk somewhere in the neighborhood of $50,000 to pave the driveway because in the winters the gravel driveway used to ice up so bad their 4-wheel drive couldn't make it up the hill, so they'd have to park halfway down and walk up. The walk itself was treacherous as well.) The driveway actually belongs to me; an easement exists on their deed granting them rights to use it.
He's not even looking for a new job. He's in a somewhat specialized field: toy designer.
Their plan is she is looking for full-time work now at Starbucks where she can get health insurance for the two of them, and also the job would help them pay to do the minimal needed to finish their renovation enough to be able to sell it.
Then they'll put the house on the market in March, hope for a quick sale (she wants to get $800K) and then they plan to move to Tennessee and pay cash for a smaller house.
They plan to move there knowing no one there and even with no jobs lined up. They simply won't be able to afford the house they're in now once the renovation is done because it will boost their $9,000 property taxes to about $14,000.
She is most unhappy. She doesn't want to move, but that's what they're going to do.
It astounds me that this has happened. They're very intelligent people. I've socialized with them from time to time. I think they'll have trouble selling the house due to the driveway, which as I said, is very steep.
It's interesting that if people are working full-time, they may very well believe they are somehow immune to the economic diasters that have befallen so many others. In this economy, I don't think I would have given up that job, even if my husband was earning that much. And I certainly would never have added that kind of addition to the house. If he had that much money burning a hole in his pocket, I would have socked more away for retirement and then taken several extravagant trips abroad.
A story about over-extending yourself, financially
October 15th, 2012 at 09:14 pm
October 15th, 2012 at 10:19 pm 1350335989
October 15th, 2012 at 10:27 pm 1350336479
But really, who makes a 3000sf addition to a 2,000sf house? and why on earth would 3 (soon to be 2, when a teenager grows up and moves out) people need that much space. (that needs to be heated and air-conditioned, and cleaned and maintained - so there are a lot of additional expenses on top of property taxes).
But would they be OK if it were not for the addition?
October 15th, 2012 at 11:19 pm 1350339577
October 15th, 2012 at 11:21 pm 1350339677
It's too bad these folk have their head in the sand about the seriousness of their situation. Perhaps they have never had a major disappointment. If communities are downsizing police and teachers and municipalities like Stockton, Ca, Harrisburg, Pa., Jefferson Country, Ala have declared bankruptcy and defaulted on loans why does he think moving to another state will fix his problems?
Your neighbors could help themselves by injecting a bit of reality. They can check on-line to see how many houses have sold in your neighborhood and how many days it took to sell. That isn't terribly accurate since if you change listing you re-set the clock and they may not have issues like awkward driveways.
Can you imagine what a shock it was to all Lehman Bros staff to hear on the TV news that the company collapsed and even 6 figure salaries vanished! I can't imagine how many mortgage brokers abruptly lost employment when the housing market crashed. How many jobs were lost in the total housing market collapse?
To be honest, I'm hoping a goodly number of politicians will lose their jobs in the next election but that's up to you.
October 15th, 2012 at 11:26 pm 1350340013
A couple who ALMOST bought my house when it was for sale in 2007 but who instead bought a house 3 doors down (bigger, more expensive) had to sell it when they realized they couldn't make ends meet. (He was a freelance photographer.)
I discovered recently they are living in Chatanooga TN.
the state seems to be attracting a lot of folks.
October 16th, 2012 at 12:43 am 1350344618
I am surprised that her getting a job w/Starbucks would help so much. I didn't realize it paid so well??
October 16th, 2012 at 01:09 am 1350346190
October 16th, 2012 at 02:39 am 1350351597
October 16th, 2012 at 03:46 am 1350355561
October 16th, 2012 at 05:00 am 1350360006