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The Bubble Sitters: Vicki and Steve Sweeney

Vicki and Steve Sweeney escaped a declining neighborhood and became bubble sitters.

"We were unhappy with the direction our neighborhood was headed and were unhappy with the elementary school that our daughters attended," Vicki Sweeney says. In October 2003 the Sweeneys sold their three-bedroom house in Aurora, Colo., for a modest gain. They rented a three-bedroom town house in Littleton, another suburb of Denver.

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They plan to keep renting at least two more years, through the end of the lease. "Although I yearn for the day when I can garden again, there is no way we would currently consider buying," Vicki says. "We firmly believe there is a real estate bubble underway."

Changing neighborhood
They could have kept their house in Aurora; they had remained there even as Steve was unemployed for a year. But a couple of drive-by shootings happened on their block. Owners were moving out and renters were moving in. The Sweeneys worried that home values would fall in their neighborhood and then in the region. "The main reason we decided to sell when we did was our fear that a housing bubble was forming, and we did not want to be stuck in our neighborhood," Vicki Sweeney says. "So we decided to take the equity and run."

They had bought the house in 1997 for $142,000. They later added $25,000 in home equity debt. They sold the house for $200,000. The Sweeneys paid bills with some of the cash resulting from the $58,000 capital gain and saved the rest.

Now the Sweeneys pay $1,170 a month in rent. That's about $400 less than they paid on their combined mortgages on the house in Aurora. Vicki estimates that if she and her husband were to buy the town house they're renting, the monthly payment would rise about $300. That would cover principal and interest on the mortgage, plus taxes and homeowner association's fees.

Vicki and Steve Sweeney

What the Joneses say
Even though it costs less to rent than to own, Vicki says she gets the occasional snide remark from acquaintances and relatives who think the Sweeneys are wasting money by renting. "I think appearing prosperous in this country is really, really, really important, and homeownership comes into that," she says.

The monthly savings are only part of the appeal of the town house. The home has three bedrooms, a basement and a garage. Steve's commute is 45 minutes on days with heavy traffic, compared to 65 minutes when he lived in Aurora. Vicki is now a stay-at-home mother to their two daughters, and the family still manages to save money every month. The neighborhood feels safer, and the elementary school is better. (At the school in Aurora, 18 primary languages were spoken by the students, and only half the children spoke English as a first language, Vicki says.)

Vicki keeps close tabs on nearby real-estate prices and rents, and she says there has been a slow erosion in asking prices for homes. The town house that the Sweeneys are renting would sell for about $200,000 today, but probably would have sold for around $219,000 when they moved in, Vicki believes.

Waiting for a 'pop'
But the Sweeneys aren't ready to jump out there and buy a house. Two years remain on the lease of the town house. And they expect a housing bubble to pop, beginning next year and continuing at least through 2008. "We plan on renewing our lease for as long as it takes," Vicki says.

As long as it takes for what? "We are in a position to save a substantial sum for a down payment when conditions are right," Vicki says.

She avidly keeps track of the local real-estate market, taking her younger daughter to open houses. She reads blogs such as Mortgage Matters and The Housing Bubble 2. She was awestruck by an article in the Rocky Mountain News that reported that interest-only loans accounted for half of the mortgages underwritten in the Denver metro area in 2004.

Vicki believes interest-only mortgages are popular "because people can't afford the houses they're buying," and she interprets that as a sign of a bubble.

'Hoping we're not chumps'
She has her doubts, though. What if she's wrong, and there isn't a bubble? "I'm hoping that we're not chumps, and that we can eventually get back in the market," she says. "I do worry that we won't get into a house again. I do want to.

"Or I worry that maybe even if prices stay flat, then interest rates will go up in the double digits in coming years and that would put the kibosh on that, too. However, to us, being in this neighborhood and this school system -- we have met so many nice people that we have in common with, and the school district is fantastic. All things considered, our situation is much better."

She adds, half-jokingly: "Sometimes we entertain the idea of being permanent renters and saving as much money as we can!"



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-- Posted: Aug. 25, 2005
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