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Tuesday, January 24, 2012

Underwater in Miami

So my lovely condo is worth less than $100K.  I have a mortgage that is about $300K. That is my reality today.  Let's not be confused with being underwater and being in foreclosure. Underwater simply means that you owe more on your home than it's worth. Foreclosure means that you're not paying your mortgage and it's being repossessed by the bank. Big difference. However, there is an economic and emotional toll of seeing your most important asset turn into something else. 

Let's think about the concept of "home" for a second. What words come to mind? Security, safety, status, and much more. Now think about the term homeowner. You think prosperity, security, status and so on.  Now imagine if those words meant things like trapped, ambivalence, insecurity, debt, risk. Because for those of us severely underwater that's exactly what it means.

Don't get me wrong. I did not buy more than I can afford. I did not "overextend" to live in some kind of dream penthouse. No I live in a modest two bedroom condo that doesn't quite occupy 1000 square feet. 960 to be exact.  Most of us in our small building of 24 units are underwater. There are doctors, police administrators, designers and other very prosperous middle class people living here.  None of us can move. None of us can sell. The couple (one of which is a physician) with the 5 year old and the newborn cannot move to the suburbs for better schools. Why, because we're underwater.

Underwater means things like, should I plant a garden, buy a new sink, paint a room because it just feels like throwing good money after bad.  Every decision about the house is just a little bit bitter, because in your heart you feel like a fool for making such a bad investment.  Yes, it was a bad investment.....we are on the hook for hundreds of thousands of dollars and no real asset to back it up. Most smart business people would say walk away and take some kind of tax write off because it's such a bad asset. But this is not just any asset, it's the roof over your head and you can't just walk away from your home without ruining your entire financial profile. 

Underwater means that the lovely 2000 square foot, 3 bedroom Spanish Mediterranean Revival two blocks away, which now costs less than what you paid for this condo is forever out of reach, because despite the fact we make a large enough income to cover mortgages on both properties, you cannot get financing because: "you're so underwater on your property, how do we know you're not just going to walk away from it.?" "No, you'll need a 50% down payment on any property you buy in the future". I'm sure it'll be many years before I have enough money to even buy a modest property if I need to come up with 50%.  Seriously, I doubt I ever will want to leverage $200K on a piece of real estate after the experiences in this economy.  

So I'm stuck in a place that I love, there are worse problems.  My prosperity will be reflected in my choice of decor, vehicles, art and savings.  The "dream house" will wait. Underwater means staying put, paying off  something that's essentially worthless. I'm sorry I can't help the housing market as much as I would like to.  

Oh well, I guess I can still make a worthless property pretty.