Tuesday, April 21, 2009
Among the many other sad, interesting, and inspiring developments over the last week or so, the car that we purchased with the help of that initial wave of home equity money back in 2002 was sold in preparation for our move to Oregon.
It was cause for reflection as so much has changed in those seven years.
Recall that, back in early-2002, the nation was still trying to recover from the effects of the September 11th attacks and short-term interest rates were just below two percent on their way to one and a housing bubble was in its gestation phase, the seeds being sown for the mess that is all around us today.
Home prices were rising, but they had been rising for years.
In the Los Angeles area, starting in about 1998, real estate prices began climbing at a rate of about 10 percent a year which, given the severe downturn earlier in the decade - an overall decline of more than 25 percent from 1991 to 1996 - seemed like a normal sort of rebound.
Having (mostly) unwittingly purchased a house near the bottom in 1995, by the time 2002 rolled around we had oodles of home equity and when the banks started pestering us to refinance or "tap" some of our gains, we went along, hesitantly.
We needed a new car and, between the $15,000 that was just sitting around in a savings account earning a measly two percent and an equal amount that could be quickly "extracted" from our house, it was kind of a "no-brainer".
According to recent sales in the neighborhood at the time, there would be plenty of home equity left over after that withdrawal and, for the first time ever, we began to think of our house as if it was a savings account.
I'm just glad that we never became dependent on that method of financing purchases in the years ahead as so many others did.
After making another equity withdrawal or two to buy some "dumb 'ol gold coins" we soon began thinking about our long term plans and, after refinancing when rates hit rock bottom in 2003, we sold our place and became renters not long thereafter.
I hasten to think what our lives would be like now if we did what so many others did at the time and opted to upgrade our lifestyle by simply repeating this process over and over until the bubble burst.
When we finally did sell our house, we actually felt bad about our loan amount being higher than where it began in 1995 by a few thousand dollars, but knowing that some of that debt was converted into real money at less than $400 an ounce made this a bit easier to take.
It's funny to think about how much the world has changed since 2002.
The seven year old Nissan Maxima shown below was in perfect working order and the only reason we got rid of it is that we need an all-wheel drive vehicle since, wherever we finally end up calling home, we are sure to be driving around in snow during the winter.
Selling it now, before we move, makes that whole process a bit easier and, lest anyone forget, there's no sales tax in Oregon. Coming from a state where you can add 10 percent to the final negotiated price of a new car will make our next purchase, where a simple $200 charge gets tacked on for four years of registration fees, feel like we won the lottery.
I remember puffing out my chest a bit when negotiating the purchase price on this great car back in 2002 as the dealership would have to rule out making any money from this transaction via financing - paying cash for a large purchase such as this was something of a milestone for me, even though half of it was borrowed money.
That era has now come to an inglorious end for most people.