“Nothing But Building Equity”

Remember the real estate crash? I do.

Short-term thinking is a large part of how we got to the last housing-based recession.

Welp. With clients over the weekend, we went into a new construction model home. When the salesperson said this, I was taken aback.

“If you build in this phase, all you’ll be doing is building equity, because there are more phases to go!”

Said the salesperson.

No. No. No.

Seriously, NO.

Anyone remember the last recession? Parts of the Charlottesville market still aren’t out of it. Some homeowners are still under water.

Buy a home. Buy a place to live. As I said in my most recent monthly note:

  • Buy smart. If you think the house you’re buying is your 4-7 year house, pretend it’s your 8-15 year house. Would you still like it?

Telling buyers that they’re going to have “instant equity?” Profoundly irresponsible, revealing, and in a word, BAD.

I couldn’t not think of this story and paragraph from 2007:

The key reason the Subprime problem exists as it does today has to do with the wanton disassociation of risk inherent in the machine that churns out Subprime loans. ….  This transference of risk is the crux of the Subprime situation. Just think about it- if you were a 20-something making mortgage loans in California using someone else’s balance sheet and being paid per loan (with no lookback to performance of the loan), how many dubious loans would you underwrite?

God help the unrepresented buyers enamored with sheen, veneer, and an inability to see beyond the irresponsible BS being slung.

 

Related:

Has the Charlottesville Real Estate Market Ever Been Bad?

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