The Housing Bubble (All Your Worth Revisited)

I was looking for an old link on the site, and I ran across my book review of Elizabeth Warren (yes, that Elizabeth Warren) and Amelia Tyagi’s personal finance book, All Your Worth.  We had a really heated discussion here, with several readers arguing that it just wasn’t possible to follow her guidelines for housing spending and live anywhere acceptable in big cities.  It’s kind of strange reading this again from other side of the housing bubble.

At the time, I wrote “The problem — at least in this area — is that in those 3 years, the same house will go up to $400,000 and you still won’t have your 20% downpayment. Warren and Tyagi’s answer is to say that you shouldn’t be chasing markets like this.”

With hindsight, yes.  clearly, yes.

I’m not sure if any of the folks who commented at the time other than Dave S are still reading here.  If so, I’d love to hear your reactions with the benefit of hindsight.  TCAndreaMoxie?  New voices are also welcome…

2 Responses to “The Housing Bubble (All Your Worth Revisited)”

  1. sasha Says:

    Looking back on this in hindsight, I think that Warren and Tyagi still have a lot of good to say (sorry I wasn’t in the original conversation). We bought our home in 2005 (sold one that had appreciated greatly and poured our appreciation into the next one). Our current home is down 20% from when we bought it. But, since we did in fact put 20% down, we are not underwater. And since we bought a house that fell into the Warren/Tyagi framework – we had the ability to pre-pay our mortgage a bit. If we had to sell – heck, we might even get a little money back out even with the downturn.

    Thankfully, at this point we aren’t in a position to have to worry about the housing market. However on a “status” level, we never had much due to our home or lifestyle. Most of our friends/acquaintances think that we aren’t financially successful since we have a rather small home, in not the absolute “best” location in town and we only drive one car. The benefits of these choices (we are very close to public transportation, across the street from a blue ribbon school, and close enough to most facilities to walk and/or ride a bike) are not looked at as features to most residents of our very snooty, very conservative, very republican suburb.

    On one hand – hey we know that our friends like us just because, but on another hand – it is a more difficult lifestyle in terms of fitting in. It took us several years to really find a nice niche within the community as many of the superficial indicators of “relatability” within our community didn’t fit the choices we as a family had made. As we have built our niche, it becomes clearer and clearer that while we don’t have the outer trappings so many of our friends have – we are much more financially stable. And the peace of mind that financially stability has brought to us has been worth the struggles to build our social network and feel “at home”. Ironically, in some ways the bursting of the housing bubble makes our house choice less of a bug, more of a feature. When we first moved in – we got lots of negative feedback from the administative office of the blue ribbon public school (the “right” people wouldn’t want to live right across the street from the school since the traffic patterns were less than desirable for 2 hours a day), and most people thought we must be poor not to drive more than one car (due to environmental beliefs). Now it seems like more people are willing to entertain the idea that the choice not to over-extend might be the better bet.

    We didn’t really start using the rough balance of 50/30/20 until about 2007, but it is amazing to see our balance sheet stay positive and even increase – even while we took pay cuts due to the crappy economy. The formula does give you breathing room – but it also demands that you live a very different lifestyle than those who have the same income. Becoming comfortable with that is the real test.

  2. liz Says:

    I wasn’t here for that discussion, I don’t think, but now I need to read that book.

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