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