Housal Units

How unfortunate!

Forty Eight percent of Nevada homeowners owe more than their unit is worth. So the next time you're driving through the suburban wasteland of Summerlin South in West Las Vegas, every other housal unit that isn't already foreclosed upon is upside down. Cumulatively, Nevadans owe 89% of their units worth...meaning they've only paid down 11% of their mortgages.

Then, as you look in each upside down driveway, 100% of every new vehicle that's been financed (i.e., 99.44% of them) is also upside down...the owners owe more than their worth.

For some reason we look upon underwater homeowners as hapless victims of an unfortunate economic downturn, but in every fucking driveway in America are vehicles that are also underwater and they have been since the 1950s. we routinely accept one circumstance, but not the other.

My neighbor the cop sold his housal unit in ~2004 and used the equity to pay off his loan on his Infinity SUV and then declared it was "paid for." They moved on, and wouldn't you know it, moved up...and as I've said before, the equity gains he realized were never plowed into reducing total debt, they were used only to help finance another larger house and take on even more debt. He didn't reduce his vehicle debt because he's taken on a 30-year repayment plan when he put that much less down on his new housal unit.

The golden rule has been that consumer spending rises 1% for every 10% rise in home values. For the life of me I can't understand how this works, how it could ever work in our moronic nation that has never been conditioned to pay off their mortgages. This golden rule could work if people moved down, took on less debt and then spent the difference, but that never happens!

When I sold my first house (the rental) in 2006 and plowed most of it into my current house mortgage and commodities, the buyer's broker, the Wells Fargo bank manager, my 401(k) manager and the escrow lady all told me how idiotic I was for paying the capital gains and taking the money, all suggesting I do a 1031 like exchange (i.e., buy another property and defer the capital gains.) Well...aside from the 40% loss I'd have taken in the real estate downturn since, more relevant to me was the fact that, at some point, I'm gonna have to pay those taxes! Not one of these people made mention of that! It's as if the rule of the game was to keep the machine rolling, to keep inflating housal unit prices, to keep paying commissions to each player for each new transaction, ad infinitum.

I have to admit that when my long time rental tenant decided in 2006 to buy the house, I urged him not to do it. I'm no idiot, I certainly sold it with a massive gain, but I know the guy and I didn't think it was a good idea. And I looked over what he was being charged for his mortgage and urged, urged! him not to go with that broker, but he did so anyway. He will be in that house until 2023 before its value is in excess of his mortgage, but you know, it really doesn't matter how much the house is (or isn't) worth. It's what he owes than matters. It's all that ever should matter.