Looking Back On the Last Housing Bubble From the Precipice of the Next One

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I could have used a trigger warning for Ryan Dezember’s recent Wall Street Journal essay commemorating the 10th anniversary of the bursting of the housing bubble.

Dezember writes about getting stuck for more than a decade with a deeply devalued house he’d bought on the Alabama Gulf Coast at a speculator’s price during the market’s peak in 2005.

My husband and I had a similar experience. Around the same time, we paid asking price for a house in Rosendale, New York, a depressed town in the Hudson Valley, after our lower offer was rejected. “Rosendale is really coming up now,” the owner argued. Two years later, the bubble burst, and Chase cut off the home equity line of credit we’d been using to renovate, saying we were now under water. In their opinion, our house was worth about 30 percent less than what we owed on it.

Due to the recession, we had less work, our incomes dropped, and the price of oil soared, making it hard for us to heat the house and pay the mortgage. We tried taking in a tenant, but for a variety of reasons, that was only workable for a month. We looked into ways to convert the house into a two-family so it would bring in income, but that would have meant borrowing money on credit cards to hopefully, maybe make some money. Eventually, we rented the whole place out and moved to an apartment in nearby Kingston.

Dezember’s experience was much more dramatic and painful than ours: His marriage fell apart, ours is intact; his renters used the place as a drug depot, while ours are actually about to buy our house (we close next Thursday!). And our home’s value has healthily rebounded to the point that we’re not losing too much of what we put into the place.

Now we find ourselves looking for a new home to buy in suddenly-chic Kingston, where we’ve been renting for four years, and where prices have quickly come to feel artificially inflated. We worry we’re about to buy into yet another housing bubble. How long before this one bursts? Dezember writes:

At a staff meeting last summer, my editors at the Journal put out a call for stories to commemorate the 10th anniversary of the housing crash. One colleague pitched a story about young Wall Street types who viewed the crisis as a historical event. Such a story would have never occurred to me. As far as I was concerned, the housing crisis had ended just a few weeks earlier.

About 2.5 million American homes are still worth less than their mortgage debt, according to estimates by CoreLogic . That is about double what it should be in an otherwise healthy market, said Frank Nothaft, CoreLogic’s chief economist.

Those of us who have emerged from underwater missed the chance to buy low. Home prices in many markets now exceed their 2006 peaks.

Investors such as Mr. Schwarzman who amassed thousands of houses to rent have bet more than $40 billion wagering that the crisis was so traumatic for people like me, and so destructive to our finances, that we’ll be renters forever. They may be right.

At a wedding I attended recently, I met a real-estate broker who touted the riches to be made by buying units in the glassy residential towers popping up along the waterfront in Brooklyn, where I live. No matter how slapdash the construction, she said, prices have only one direction to go.

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