Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
I'm sure many have heard the numbers recently that the median net worth of individuals in the United States has dropped 39% in the last three years. I'm just curious how BP members have fared during the same three-year period.
Most of the loss in net worth was caused due to the devaluation of real estate and the lost equity in people's personal residences. There are many on BP, including myself that have benefited from the lost equity in other people's homes. I'm sure there are members on BP that were at the other end of the spectrum where their net worth decreased because of lost value in a home or actual loss of a home completely.
This represents a tremendous amount of buying power loss of the individual. I would like to think that BP members, with the knowledge we have have not been have Ridge and don't fall into this same median loss of the country on the whole.
There might even be some members here on BP that were involved in both ends of the spectrum, having lost their home or value in their home but gone into the business of purchasing short sales or REO's.
I would be one that has been involved on both ends having seen values of existing properties decrease, but also taking advantage of buying undervalued properties. Just curious into other stories and situations of how we at BP compare with the rest of the country. Rich
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
14y
This reply isn't meant AT ALL to be political (I'm a big fan of capitalism, probably fall closer to the "rich" side than the "poor" side and don't begrudge anyone earning and keeping anything), so don't take it that way and let's try not to slip down a political rathole...
With that said, I think the statistic presented is completely meaningless...
This is one of those situations where talking about "averages" is very misleading. While the average median networth may have dropped considerably over the past few years, I'd be willing to bet that the average networth has not.
If you're rich, you probably lost a considerable amount of networth back in 2007-2008. That's because you likely owned a disproportionate amount of capital assets that devalued quickly and steeply doing that period. Certainly, most people in this country lost a lot during that time, but among the "average Joe," there were fewer capital assets owned and therefore less of a proportionate drop (though if your sole asset was your primary residence, you probably lost a lot as well).
Then, during the period from 2009-2012, if you were rich, you likely had some opportunities that were pretty unique in an historical sense -- real estate was as discounted as its ever been, taxes were low, fear was rampant, government policy favored them, etc. Certainly, business owners were being hit hard, but if they had cash reserves, they had an opportunity to build networth through acquisition of capital assets outside their business. Of course, if you're rich, you're more likely to be intelligent about how to acquire wealth/cash, so there's that advantage again (and again, that's what capitalism is all about, those that have the resources and know-how and work ethic will get ahead -- not a bad thing).
Unfortunately, during this same period, those with little cash reserves and no entrepreneurial spirit had essentially no opportunity to get ahead and the world around them in economic turmoil. Employment was down, real estate (for many, the only source of capital assets) was getting crushed, and credit was tight. If you were poor or middle class from 2009-2012, you probably lost a lot more than 40% of your networth.
So, here we are now. The rich have for-the-most-part recovered or positioned themselves to recover from their losses from 2007-2008 (if they were smart), the ultra-rich have gotten ultra-richer or positioned themselves to get ultra-richer (again, if they were smart), and the poor (and even many middle-class) are now in a holding pattern waiting to see what happens around them.
The 40% drop in median networth may be a correct figure, but it's certainly not representative of what happened on the ends of the spectrum -- many lost everything and many increased their wealth considerably (or have positioned themselves to do so).
Btw, I'm guessing that many here on BP were smart enough to at least tread water for the past few years, or if they did lose a fair amount, they were smart enough to figure out how to recover or position themselves to recover.
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
14y
In my neighborhood house values have gone from the peak of 185,000 with foreclosures down to 75,000 at the bottom.
Now it has gone back up to 85,000 to 90,000.Most of the foreclosures are Freddie Mac in my subdivision with a couple Fannie Mae's.
I do the bare minimum to maintain the house.I am not worried about the value and simply the mortgage payment is much cheaper than rent for a similar house in the area.
Eventually if you hold long enough it will rise back up to meet debt payoff.I don't see the primary residence house as my source of retirement.
I see the other owners taking great care in my subdivision of their properties.This can only help the development to rebound sooner in value.
Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes
14y
I was definitely on the other end of the spectrum from 2006-2008 with a tremendous drop in my real estate holdings. Being in Florida, land I held fell like a stone and hasn't really recovered at all. Thankfully the land isn't leveraged and i'm fairly diversified.
I came late to the party and seem to have missed out on all of the flippers opportunity of the past 3-4 years. While my net worth has increased during that time frame, none of it came from real estate.
Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
14y
I don't expect much good to happen in the next 3 - 4 years... Europe is a huge mess... China is softening... I foresee a status quo of uncertainty for quite some time. If you have a good job and some wealth behind you, a great opportunity to set yourself and your family up for generations to come.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
14y
Thanks for the replies. Where are the others? It had to affect you one way or the other, or both ways.
Bill- I hope this isn't a "false" reading. # of jobs created had a short life upwards, now, not so much. It could be the same in the single quarter rise of 4%. Rich
Lehi, UT · Member since 2012 · 24 posts · 10 votes
14y
Over the last 3 years I've seen the value of my real estate decrease, but other investments have increased over this same time. My net worth is pretty close to even, probably a little positive.
What the last 3 years has illustrated to me is that timing can mean everything.
Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
14y
In December 2008, I just graduated college (late inlife) and my net worth was zero...minus my student loans! I'm probably about 5,000 upside down on the house I bought in 2008 and have a second property that I just paid off last week with a value of around 30K. My 401K has increased substantially from my contributions and my employer match too. So, I am still negative net worth, but it went less negative by right at about 40 percent. I'm looking forward to progress over the next 4 to 5 years. I am in the process of refinancing my residence and that will make it a profitable rental conversion rather than break even to slightly negative.
Hoping to find a good deal on another property or two and be at 0 net worth in about 2 years... Crawl before you walk!
I keep hoping the market will be mellow long enough for me to take advantage of it. I'm really amazed at how long interest rates have stayed so low and how low home prices have remained. It truely has been a blessing for those poised to take action and for those entering the game late and with little preparation such as myself.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
As far as my personal net worth, it has done nothing but climb up over the past 3+ years, in large part due to my RE investments. I guess you can say I have been on the side of the spectrum that home price decreases enabled my net worth to climb rather than fall.
The last part of this statement is not exactly correct. Personal residence is excluded from net worth figures, at least as far as accredited investors are concerned. Being one of them, I am not permitted to count equity in my personal residence as part of my net worth. All accredited investor forms and applications stipulate this.
For others who are not accredited investors, most of their worth is in fact in their primary residence, however, it really can’t be counted either as they still need a place to live and unless they sell, that equity is not obtainable. In a line of credit scenario, they have created a liability and only the arbitrage from investing that capital could be counted towards building net worth.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
14y
The replies are about what I expected. I will have to disagree with some of the comments from Will.
I read an article sometime back (year or more) 1/3 of the population had a negative net worth. If you counted the amount underwater on their mortgage, the % rose to 2/3 of the population. I don't know if it is better or worse now.
From Will-"The last part of this statement is not exactly correct. Personal residence is excluded from net worth figures, at least as far as accredited investors are concerned. Being one of them, I am not permitted to count equity in my personal residence as part of my net worth. All accredited investor forms and applications stipulate this.
For others who are not accredited investors, most of their worth is in fact in their primary residence, however, it really can't be counted either as they still need a place to live and unless they sell, that equity is not obtainable. In a line of credit scenario, they have created a liability and only the arbitrage from investing that capital could be counted towards building net worth."
My lenders have never made a differentiation in my personal residence from other real estate owned. Maybe I don't qualify for the "accredited investor" definition.
On primary residence valuation- I also disagree. The equity is obtainable in several ways. If they refi and hold cash, it will definitely be a countable asset. Maybe it can't be counted while it is in their residence, but it does exist.
I don't know your definition of "non accredited investors", but the generalization that most of their net worth is in their personal residence is also not always accurate. I know many folks who have free and clear autos, stocks, retirement funds etc that in many cases offsets the negative equity in their underwater house.
One size certainly doesn't fit all and that is why I asked for actual situations and input from BP members. Food for thought.
Rich
Accredited investor definition from Wiki as an FYI.
In the United States, for an individual to be considered an accredited investor, he or she must have a net worth of at least one million US dollars, not including the value of one's primary residence or have made at least $200,000 each year for the last two years (or $300,000 together with his or her spouse if married) and have the expectation to make the same amount this year."
Investor · Omaha, NE · Member since 2011 · 475 posts · 211 votes
14y
Overall net worth + 10-15% in last 3 yrs in part due to saving and in part due to real estate equity increase due to tenants paying down my loans and cash flow. That offsets stock market losses as I am 70% invested in real estate and 30% stocks.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
Michael X - Thanks for posting the definition, that provides a detailed explanation of the term.
Rich, while you stated you are in disagreement with what I said, your very own post regarding this article proves my point, that personal residence equity (or negatove equity) is not counted. See quote below.
Originally posted by Rich Weese:
I read an article sometime back (year or more) 1/3 of the population had a negative net worth. If you counted the amount underwater on their mortgage, the % rose to 2/3 of the population. I don't know if it is better or worse now.
And this:
Originally posted by Rich Weese:
My lenders have never made a differentiation in my personal residence from other real estate owned.
What lenders are you using that look into your persoanl residence equity to loan on your investment property? I don't know of any and all my lenders don't care about my personal residence, they only care about the LTV in the investment project.
And lastly:
Originally posted by Rich Weese:
On primary residence valuation- I also disagree. The equity is obtainable in several ways. If they refi and hold cash, it will definitely be a countable asset. Maybe it can't be counted while it is in their residence, but it does exist.
I already mentioned this, but referenced a LOC rather than a refi, either way, that capital received is now owed to the bank and is a liability. So unless that capital is then invested in something that returns a higher yield than that of the cost of the loan, the equity is useless. I agree it exists, I simply stated it does not count towards net worth.
Investor · Asheville, NC · Member since 2012 · 184 posts · 76 votes
14y
Our net worth is up greatly from three years ago, but mostly from factors not related to real estate. The real estate I was holding during that time decreased in value. The most extreme is 25ac of raw land that was worth half of the value in Oct 2008 -our market peak. I bought it in 2006 at roughly 50% of market value, so broke even when I sold it earlier this year (whew!). The improved properties have dropped 20-25%. I made money on rehabs during this time.
Most of my friends own one house, have roughly median income, and do not do much investing. They have roughly zero equity now, and I'm guessing a barely positive net worth. They feel much less secure than before- they just grind through the months and make their payments. The sense of optimism (however false) that the housing market gave them is gone.
Although my family is doing well, I'm looking forward to the time when the general population is doing better- or at least thinks they are! I'm with Nathan about the next three years. I plan to take advantage of it.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
14y
I think that when the govt comes out with economic figures they are not looking at SEC regulations and excluding investors or their personal residence from these figures. Apples and oranges. Net worth of familes is a household matter and that 4.7% mentioned on the news yesterday was largely a fubction of national averages of RE values returning, not jobs or income.
I agree that things will be slow regardless of the outcome in Nov. Plenty of time to profit and frankly, I have never seen a period where one could not profit in RE. Preaching doom and gloom is not good for the economy regardless of who is in charge. I find it difficult to tell someone that they better get gold for the next big one and then turn around and ask them to buy a house! Know what I mean????
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
Very true, in fact, during the downturn and poor economy, I personally have been able to profit from it through RE. During the upswing, spec building was easy and very profitable. So, pick the proper strategy for the market condition and you can profit and increase net worth. Pick the wrong one and look out.
Bismarck, ND · Member since 2011 · 142 posts · 16 votes
14y
I may be a tad optimistic but I firmly believe that there is money to be made in any market - you just have to embrace what ever situation you are in. With principal reduction, I don't know how you can not make money in real estate over the long haul unless you absolutely have a lemon of a property or run into legal issues.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
14y
Will-We'll just have to agree to disagree. I'm not interested in the banter or definitions back in forth again. I don't have that much time. Personal residence IS included in net worth and was included in the #'s given by the Federal Reserve, where the following info came from:
1. The median family net worth dropped 39% of which 3/4 of the drop was housing.
2. in a 3 year period (2007-2010) 7 TRILLION was lost in home equity. This reduced the amount of POTENTIAL spending by the same number.
3. Those between age of 35-44 lost an average of 53% of their net worth during the same period.
4.Median family income dropped 7.7% during the same period from $49,600 to $45,800
5. Families saving ANY AMOUNT dropped 7.8% to only 52% of the population
One other interesting point(in my mind). Incomes have dropped5.9% since the recession ended in June 2009. That is a bigger drop than during the ACTUAL recession!
To quickly address your points.
First- "I read an article sometime back (year or more) 1/3 of the population had a negative net worth. If you counted the amount underwater on their mortgage, the % rose to 2/3 of the population. I don't know if it is better or worse now."
This was just from an article. They weren't saying it wasn't included, but just pointing out the differences in the two.
second- "What lenders are you using that look into your persoanl residence equity to loan on your investment property? I don't know of any and all my lenders don't care about my personal residence, they only care about the LTV in the investment project."
Lenders are interested in LTV etc. On larger projects, they want to consider ALL assets for ability of repayment by the borrower. I have multiple residences, so maybe that is why they like to see them free and clear. It helps to show ability for payback if we go througha double dip.
last- "I already mentioned this, but referenced a LOC rather than a refi, either way, that capital received is now owed to the bank and is a liability. So unless that capital is then invested in something that returns a higher yield than that of the cost of the loan, the equity is useless. I agree it exists, I simply stated it does not count towards net worth."
In the study presented above by the Federal Reserve, home equity was included. Whether you want to include it, is irrelevant to the article.
As I said above, we'll just have to disagree and I'm not interested in a back and forth,,,again- and won't.
Michael X and Will- I'd love to know the # of "accredited Investors" on BP based on this definition. Not many of the 90,000 members would be my guess.
Bill- the facts and article was from Federal Reserve and it was all about home equity. I was only interested in what BP members had experienced and posted my results. Thanks to those that actually addressed the question in the Thread topic. Rich
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
14y
My net worth is up 120% over the past 3 years.
I attribute that to the following factors:
* getting a better salary and saving it.
* improvement in my spouses RE brokerage due to REOs
* increased rents received and lower mortgage payments
* the fact that Dallas did not have a housing bubble and thus the correction has been mild
* having never invested in the rigged casino, err - I mean US stock markets.
Real Estate Investor · Amarillo, TX · Member since 2008 · 547 posts · 214 votes
14y
While my net worth has slightly gone up, it was due to acquiring more properties and slowly paying down ones I had, if I hadnt bought or paid down anything my net worth would be almost the same as it was 3,4 even 5 years ago. In my area it seems the lower income just hasn't moved, although they still sell for the same, the only difference is they are rarely on the market. Although I would of loved for it to go up, After reading this I'm just thrilled it hasn't gone down!! Gotta love the Texas market!
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
14y
Eric-thanks for the correction. I don't know whether 2011 would increase the % or decrease it. Do you? Maybe it takes an extra 6 months to calculate it... Rich
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
14y
This reply isn't meant AT ALL to be political (I'm a big fan of capitalism, probably fall closer to the "rich" side than the "poor" side and don't begrudge anyone earning and keeping anything), so don't take it that way and let's try not to slip down a political rathole...
With that said, I think the statistic presented is completely meaningless...
This is one of those situations where talking about "averages" is very misleading. While the average median networth may have dropped considerably over the past few years, I'd be willing to bet that the average networth has not.
If you're rich, you probably lost a considerable amount of networth back in 2007-2008. That's because you likely owned a disproportionate amount of capital assets that devalued quickly and steeply doing that period. Certainly, most people in this country lost a lot during that time, but among the "average Joe," there were fewer capital assets owned and therefore less of a proportionate drop (though if your sole asset was your primary residence, you probably lost a lot as well).
Then, during the period from 2009-2012, if you were rich, you likely had some opportunities that were pretty unique in an historical sense -- real estate was as discounted as its ever been, taxes were low, fear was rampant, government policy favored them, etc. Certainly, business owners were being hit hard, but if they had cash reserves, they had an opportunity to build networth through acquisition of capital assets outside their business. Of course, if you're rich, you're more likely to be intelligent about how to acquire wealth/cash, so there's that advantage again (and again, that's what capitalism is all about, those that have the resources and know-how and work ethic will get ahead -- not a bad thing).
Unfortunately, during this same period, those with little cash reserves and no entrepreneurial spirit had essentially no opportunity to get ahead and the world around them in economic turmoil. Employment was down, real estate (for many, the only source of capital assets) was getting crushed, and credit was tight. If you were poor or middle class from 2009-2012, you probably lost a lot more than 40% of your networth.
So, here we are now. The rich have for-the-most-part recovered or positioned themselves to recover from their losses from 2007-2008 (if they were smart), the ultra-rich have gotten ultra-richer or positioned themselves to get ultra-richer (again, if they were smart), and the poor (and even many middle-class) are now in a holding pattern waiting to see what happens around them.
The 40% drop in median networth may be a correct figure, but it's certainly not representative of what happened on the ends of the spectrum -- many lost everything and many increased their wealth considerably (or have positioned themselves to do so).
Btw, I'm guessing that many here on BP were smart enough to at least tread water for the past few years, or if they did lose a fair amount, they were smart enough to figure out how to recover or position themselves to recover.
Investor · Pasco, WA · Member since 2010 · 27 posts · 16 votes
14y
I have actually done ok the last 3 yrs. I graduated from college and started work in 2007 so I didn’t have much money invested for the big fall. I bought a rental in 2008 which I lived in and prices in our area never went down. The stocks that I purchased in the 2008 timeframe have returned about 15% annually. Rents in my area have also gone up at least 20% since I bought as well. I think I’m just fortunate to live in an area hardly hit by the recession.
