I want to tell you a story about this little house I bought 17 years ago for $1 down. It’s also the story of the American housing crisis, predatory lending, and the economic ripple effects of our nation’s disease of gun violence.
In 2003 at the depths of the dot-com bust my wife and I left our apartment in San Francisco and moved to a small, bucolic town in New England for new jobs. We were just a few years out of college, saddled with student loan and credit card debt, and low-paying careers thanks to our shared pursuit of journalism degrees.
But that didn’t seem to bother the mortgage broker who immediately cleared us for a home loan far beyond our means, using my wife’s previous salary as proof of income even though she was out of work for a few months. $1 down. A first and second mortgage to cover the rest, and we moved in to our new home. The American dream!
Six months later, with the housing boom in full effect we got an offer from Countrywide to refinance our first and second mortgages at a lower monthly payment. The broker told us we could even cash in on $70,000 in equity our house had earned since we bought it. We said OK, bought a car, fixed up the place, and installed a cozy wood-burning stove to crank up the heat when home-heating oil prices tripled to $4 a gallon.
A few more years went by before we realized our adjustable-rate loan was about to balloon big time, and we refinanced again, this time at our hometown bank with a 30-year fixed-rate loan just like my parents told me. Our second baby was on the way. Horray for Ben Bernanke and irrational exuberance!
I’m embarrassed to say that I was caught off guard a few months later in March 2008 when the economy came to a screeching halt, housing prices crashed, and the bank froze our equity line and sold off our two loans into toxic assets. Our oldest kid just started kindergarten in a great school district, so we hunkered down.
When a new job sent us to Los Angeles in 2010 we had a choice to make about our house-under-water: Foreclose and wreck our credit score; Try for a short-sale and suffer the tax consequences; Or rent it out at a loss. We chose option three and headed back to California.
On Dec. 14, 2012, things changed. A 20-year-old gunman walked into the local elementary school we had just left and gunned down 26 first graders and teachers. Our former home town of Sandy Hook, Connecticut was on newscasts around the world, including the public radio show Marketplace where I was now employed. I helped our East Coast reporter track down some locals to interview; and that night America heard from the hardware store owner where I used to buy my home improvement supplies.
Soon after, our tenant moved out. Her son, a former classmate of my kids, was in 1st grade at Sandy Hook Elementary School that day and barely escaped with his life. He saw his friends and teachers die and had a hard time re-adjusting. They needed to try for a fresh start.
That year the housing market was starting to rebound around the country. But a mass shooting at an elementary school is bad for property values, and our house declined further in price when the rest of the nation’s real estate was rising. We found another tenant, and continued renting at a loss.
I remember one time flying home to LA on a business trip sitting next to a young guy who was coming from North Dakota where he was a seasonal worker in the natural gas industry, living in a “man camp” with hundreds of other (mostly men) doing the same thing. He was flush with a big pay check and a free plane ticket anywhere he wanted to spend it. LA, apparently.
I asked him a bunch of questions about his experience and somehow the conversation turned to my former house in Sandy Hook. It startled him, and he looked at me a little stunned and surprised. The look in his face read as if he thought Sandy Hook was a fictional place.
“I’ve never heard of anyone from Sandy Hook.” he told me, kind of flabbergasted. “So, do you really think it happened?”
I had never met anyone before who had thought such a thing or at least thought about it in a sober mental state out loud. I didn’t even know how to respond.
But ever since then, when someone asks me where I lived in Connecticut, I alway answer: “Western Connecticut, near Danbury. My wife and I loved taking the Brewster Line into Manhattan…”
Another seven years passed as landlords. We paid off the home equity loan. Started chipping away at the principle. Brought the loan-to-value ratio above water. Replaced some appliances. Installed a new furnace. Replaced the roof. Repaired the septic system. Painted inside and out. All from 3,000 miles away.
This year, I’m sad and excited to report we finally sold that little house in Sandy Hook. We are no longer homeowners, and that town no longer stands alone with its scarlet badge of senseless gun violence. Hundreds more communities around the country now wear one too.
After lamenting the horror of each new school shooting tragedy I see on my news feed, my second thought always goes to local property values.
Some of you reading this might think I’m a financial idiot for holding on to that house for 17 years at a loss. But at some point it became bigger than the financial burden. It was an investment in a devastated community and the neighborhood where our kids were born. It was hard to foreclose on that.
That’s the end of my story of homeownership, for now. I’ll save the next chapter about being a renter in California for another day.