My Personal Experience with the Housing Market Crash

After being crammed into a 900 square foot apartment my husband, his cat, my rather ginormous dog and I all needed to find some extra space. I had taken to spreading my work out on the living room floor since there was no room on the table for me to sprawl my paperwork on, the dog spent most of his time curled up in his kennel asleep because there was no room to run, and my husband and his cat barricaded themselves in a tiny back bedroom which we had jam packed with two desks in an attempt to create an office space. This was the summer of 2006.

We spent some time reviewing finances, debated for a few weeks over whether or not we truly wanted the responsibility of owning a property and then finally determined that we were not in a "want" situation. We all needed more space than our apartment, or any apartment, was going to afford us. We needed to buy a house.

In the fall of that year, the housing market in the Portland Metro area was still relatively strong. We had heard that housing prices had begun to fall in other parts of the country, but when we looked around there didn't seem to be much evidence of a "housing slump" in the neighborhoods we were shopping in. In fact, with a budget of $200,000 most of what was available on the market was well outside our financial reach. But still we pushed forward, knowing that eventually we would find a house within our budget that we could live with.

By October and November, we were discouraged. Sellers were still holding firm to their listing prices, and everything that our realtor was able to find within our price range seemed to be in ruins. We looked at one house that had no floor - we wandered through rooms on 2"x 6" boards suspended across plumbing to avoid walking on the dirt 18" below where the floor should have been. Another house on our list had open holes in the walls where doors should have been hung and a kitchen that was so unfinished that the current homeowner was cooking on a camp-stove in the dining room.

And so, we widened our scope. We decided that we could drive a little further to work each day if we had to, and that we would be ok if we didn't end up in a traditional frame home. Our realtor dug deep for us, and finally we found a home worth looking at more than once. From the exterior it was an unassuming manufactured home with a postage-stamp front yard, but the interior was far superior to anything else we had looked at. From the 15 foot vaulted ceilings throughout to the open floor plan, the four bedrooms and 2 bathrooms, and the small but fully enclosed back-yard, we were sold.

When looking at the neighborhood surrounding our potential new home, I counted 3 other homes in the neighborhood that were for sale. I asked our realtor if that was common, and she said that with large technology companies nearby, it was likely that there would be some turnover in housing as people moved from site to site. It all made sense, and we determined that the property would lend itself well to being rented as an investment property in three to four years when we were ready to move on to something bigger and better.

We closed on the house in December of 2006 and while the whirlwind of first-time homeownership was a bit overwhelming, we finally had the space we needed. Amazingly, we had gone from 900 sq. ft. of space to almost 1,600 sq. ft. and we didn't need to buy a single piece of furniture. We had gone from crammed to comfort overnight, and were comforted in the thought that in a few years the property would start paying us back as a rental.

Shortly after unpacking, we began to hear rumors that a large transportation project was going to be planned for the town and that it would help to grow the tiny suburb into more of a commercially sound city than the sleepy bedroom community that it was. As whispers of public transportation, shopping and manufacturing floated around the neighborhood, housing prices in the surrounding neighborhoods went up. In fact, in February a manufactured home around the corner from ours had a price tag of nearly $40,000 more than what we had paid just two months ago. Now we felt we had an investment property.

The joy of equity was short lived, however. Construction on rumored projects never started, and the handful of houses on the market never sold. As weeks and months rolled by, the number of homes for sale increased from 4 to 10. A couple of the properties were put into the beginning of foreclosure proceedings, and the overall prices in the neighborhood began to drop.

Initially, the drop in pricing was marginal. Neighbor A lowered his home price a couple thousand dollars lower than Neighbor B. Neighbor C lowered his home price a few thousand below Neighbor B. And so it continued, until housing prices returned to what they had been when we purchased our home. The home prices stabilized, and prices held through the summer of 2007. We determined that although we weren't still blessed with tens of thousands in instant equity, we were at least at a break-even point on our investment. We knew that once construction in the community started that the market would bounce back.

As winter of 2007 came and went, the number of homes for sale increased from 10 to 18. Then "For Sale" signs jumped again from 18 to 22. In a neighborhood of around 200 homes, there were at least two houses for sale around every corner. Prices dipped again as people abandoned trying to get equity out of their homes and just tried to get enough to pay off their mortgages. The number of homes in foreclosure jumped from 2 to 6. A couple of our neighbors just up and abandoned their properties; vacating properties overnight and without warning.

We did pricing comparisons in summer of 2008 and found that houses similar to ours were now priced close to $30,000 less than what we paid. And there they sat, with homeowners either too in debt or too stubborn to lower prices any further.

We decided last fall that any plans to use this home as a stepping stone to something bigger and better are unlikely to come to fruition any time soon. We finally stopped worrying about equity and have stopped thinking of the house as an investment property almost entirely. We began renovating and remodeling the living spaces more to our liking, since it appears that we will be here much longer than the three or four years we planned initially. We've repainted, re-landscaped and rethought the purpose of the house.

Now that we've sweat and bled over repairs, covered the walls with red paint and installed our own custom floors, the house is transforming into a warm home that we hope to stay in for many years to come instead of a blank slate to be rented to someone else. We've noticed that many of the neighbors who have stayed in the neighborhood are doing the same - making the houses into colorful and comfortable homes for families.

While a couple of the long vacant properties finally sold, the other 18 "For Sale" signs don't seem to be disappearing, and to date there have been 20 homes in the neighborhood that have gone into forclosure. It appears that none of the neighbors who are still able to afford their mortgage payments are going anywhere soon, so we may as well make the best of it.