Tuesday, August 07, 2007

What I’ve Learned

Believe it or not after months of determined pestering and a lucky break or two, my mortgage mess is finally settling down.

My mortgage company has the foresight to understand that all of a reduced amount is better than nothing at all.

But seriously folks, I’ve dodged a major bullet and am thanking the Lord that I still have a roof over my head.

So as a public service to you kids, I’m going to part with some lessons that I’ve learned about Chicago real estate.

1. Your home is not a piggy bank.

Don’t assume that the value of your home will continue to increase exponentially. Eventually all of these sky high values will shake out and come back down to earth.

2. Just because you got lucky once doesn’t mean lightning will strike again.

Yeah you may have sold your “started condo” for over twice the price you paid for it but that type of success rarely repeats itself every two to three years. Don’t think that you’ll be able to do that every time you want to sell or refinance.

3. Adjustable Rate and Interest Only Mortgages are the devil.

If you ever get one of these mortgages, please read the fine print and fully understand what you’re signing. You know how grandma always said you’ve got to pay the devil his due? Well those cloven footprints in the flower bed weren’t made by the dog. The devil wants you to pay up. Right now.

4. The ‘hood matters.

If you start seeing more than three foreclosures within a half mile radius of your home you probably shouldn’t plan on using your equity to send the tots off to college. As much as it pains me to inform you of this but the value of your home is about to take a nose dive---big time.

The aforementioned ARM mortgages, shady financing and mortgage fraud has hit everywhere but “emerging” neighborhoods where housing stock is less expensive are more vulunerable.

In short, a neighborhood (such as Woodlawn) is trying to turn itself around by attracting middle class home owners. Since the prices are usually lower than a similar unit in Lakeview or Lincoln Park, investors swarm all over newly renovated or newly built condo developments.

If you have an over leveraged legitimate home owner or a shady investor, everyone in the neighborhood will feel the pain of their bad decisions for years to come.

When the shit starts hitting the fan and units (or single family homes) start to get foreclosed upon the financial blood bath begins.

I should know, I’ve been living through it and writing about it for the past two years. It ain’t pretty.

Man, if I knew then what I know now…


kbr7171 said...

Sorry you had to learn these lessons in such a tough way but it is certainly good you did. I'm glad you've shared them with your readers too. No doubt there are others in your position. I hope they take this post to heart.

stuckinthecity said...

Ya, I've been telling this to all my friends and any ear I could grab on to for years now. It is sad for many. I'm just gald I'm not the crazy lone voice in the woods any more.