“Here’s another, less-discussed perspective on this RE madness: the sickening feeling of watching those you love commit slow financial suicide by buying yet more RE, right at the peak, and the fractures created when we try to warn them.
A week ago a family member called to say that they have just bought a house near us. Great, except that (1) they are buying the new place at the probable peak of the market, (2) they are keeping the old house “because (they) think it will be worth more later” (it’s only gone up about 8% total in the last 5 years, less than the rate of inflation), (3) they also (I think) “own” two rental places which have dropped about 10% in value in the last 3 years and a non-revenue property (which is just straight expense), and (4) they have young children. Good thing they have well-paid, secure government jobs.
For otherwise intelligent, financially savvy people to simply assume that real estate always goes up or at least not down much, nor for very long, (and they’re 40, so as far as they know, it does always go up) and not even cross-check their assumptions simply stuns me. I’ve been trying for the last 18 months to get them to reduce their risk, given that we’ve got to be close to the market peak and the chance of a significant move downward is probably far higher than that of even a 5-10% move upward. So, at risk of making them even madder at me, I sent them another massive email detailing all the reasons RE is extremely risky now. Of course, they desperately need real estate to continue upwards, so they wrote back a mean, rude personal attack email, cc’d to the entire wider family.
It’s so futile. In the end when they lose their shirts in the big collapse, they sure won’t thank me for the warning they ignored nor even acknowledge that they got a warning! Sigh. At least since they cc’d the entire family, they are the ones who will end up looking foolish, although they are attempting to make me look foolish now. It’s too bad that it will be some years before we’re all proven right about the upcoming crash severity and length. (and, they will probably quietly struggle along financially for many years afterward without any of us being the wiser).
I was awake most of last night stewing about this, and in tears due to the very mean things that were publicly said to me. Unfortunately all of the family will now be mad at me for causing what will probably be a semi-permanent rift. The only way forward that I can see is if & when they are proven wrong in the coming years and are in a bad financial situation, they might admit I was right. But, I doubt this will happen, it will be too painful for them. Guess I just should have kept my mouth shut for all the good it has done, leaving me feeling like the unwanted evangelist in the room (albeit with a better supported belief)
My mistake was to not realize the intensity of their belief in the cult of real estate, and that any appeal to reason would be met with vitriol, as with any other cult. “
- ‘JCH’, via e-mail to vreaa,21 Mar 2012