Net worth update : Sept. 2008 = -$16,591

Our net worth was down $16,591 for the month of September. In Sept. our net worth ended at $577,045 whereas in August we were at $593,636. I track my net worth as Freeby50 at NetWorth IQ.

The loss this past month is due to the drop in the stock market. I still own some employer stock that I've been divesting and that went down over $3,500 this month and my retirement accounts dropped over $10,000 as well. Lastly I have some options at work that went down in value by a few thousand too.

I'm not worried about this drop. The stock market will have its ups and downs. Most of my loss was in my retirement accounts which are long term investments that should recover in the coming years.

Best of Blog posts for the week of October 3rd

Trent at The Simple Dollar point in his morning roundup on Wed. to an article Behind the ‘We Deserve It Dividend’ Hoopla at the MSN site. The article points out a major math flaw in a proposal floating around the internet.

Another post from The Simple Dollar is The Only Thing We Have to Fear Is Fear Itself where Trent urges that people not let fear cause them to take irrational steps or panic during the current financial difficulties.

Bargaineering has a post on How Your Credit Score Affects Interest Rates They have some tables showing the different interest rates you might pay based on your credit score.

JD at Get Rich Slowly recounts his brothers foreclosure story in Drama in Real Life: Foreclosure!

Home foreclosure rates past and present.

There is a LOT of talk right now about high home foreclosure rates. From how bad some people make it sound, it seems as if every other home owner in the country right now must be currently in foreclosure. Currently the foreclosure rate is around 2.8%. That is a historical high. How high is that really compared to previous decades?

This FDIC report from 1998 has data on foreclosure rates from previous decades. That document has foreclosure rates listed for 1950 to 1997 in the appendix.

Foreclosure rates for 1950 to 1997:


If you look at the period from 1970 to 1998 you can see that the foreclosure rates had gradually increased over those 3 decades. The FDIC article also has some interesting discussion on the why foreclosure rates have increased gradually over the years. Interestingly they don't find a strong correlation between unemployment rates or interest rates and the foreclosure rate. So in other words the foreclosure rate didn't seem to go up directly in relation to high unemployment or high interest.

Another document from the Federal Reserve in St. Louis looks back at the foreclosure rates around the great depression.

They give foreclosure rates for the years 1926 to 1941 :
You might look at this data and conclude that the problem right now is worse than the great depression. But the report points out that the delinquency rate on mortgages in the 1930's was much much higher than it is now: "Thus, at the beginning of 1934, approximately one-half of urban houses with an outstanding mortgage were in default (Bridewell, 1938, p. 172). For comparison, in the fourth quarter of 2007, 3.6 percent of all U.S. residential mortgages and 20.4 percent of adjustable-rate subprime mortgages had been delinquent for at least 90 days."

So back in the great depression nearly half the people were behind on their mortgage. Today only around 4% of people are delinquent.

Another interesting report on recent foreclosure rates is from the Clevelend Fed. They show the foreclosure and delinquency rates for both prime mortgages and subprime mortgages. Their data is very revealing about how the current problem is almost entirely with the subprime mortgages.

Here's a chart from that report showing foreclosure starts for prime mortgages in blue versus subprime in red:

Looking at that chart we can see that prime mortgage rates foreclosure rates have been pretty flat for the past decade. Its really the subprime mortgages foreclosure rates that have been high.


Also see:
Some Truth About Historical Foreclosure Rates, Please
Realtytrack report on Q2 2008

Using Zillow.com to estimate home values

Are you curious what your home is currently worth? Homes in the US market have depreciated in most markets over the past year or two. Some areas are down a lot since 2006. Other areas are not doing quite as bad.

If you live in a major metropolitan city area then you can find the figures for median home values over the past couple years at the Realtor.com website. They track median home values here. Lets say you live in Anaheim. If you look at the figures at the Realtor site you can see that home values were 2005 : $691k, 2006 : $709k, 2007: $699k and now in 2008 they've dropped to $553k. These are median home values. It is a pretty decent bet that your home will follow the price trend for your city in general. Homes are down about 20% from 2005 to the 2nd quarter of 2008 in Anaheim. so if you live in Anaheim its likely your home is also down about 20% in that time period.

Zillow offers another source of information on home values. Zillow will give a value estimate specific to your own home. If you go to the Zillow.com website you can enter your homes address and it will tell you what the home is estimated to be worth. Keep in mind that the Zillow estimate is only a rough estimate based on general market trends. It may be off by a certain margin. If your home is in a scarcely populated area or has unusual traits then the Zillow estimate may differ a lot from the real value.

But Zillow is still a decent starting place to get a free and easy estimate on your home. I checked a couple randomly selected homes and found their 10 year price history graphs. First is a home currently in foreclosure from the Anaheim, CA area:



Another home is shown below. This one is from Seattle, WA:

As you can see the Seattle market has fared a lot better than the Anaheim market for these individual homes. The Seattle home is still up significantly from its 2005 price but the Anaheim home has dropped below the 2005 price.

You can get his same kind of chart for your own home at Zillow. Just keep in mind that the figures they cite are only a rough estimate. When I look at Zillow I use it for a ballpark figure. There are 2 key items to look for. Zillow gives what they call their Zestimate property value. This is their estimate of your homes value. For example the home in Anaheim has a Zestimate of $435k right now. Also make sure to look for the 'Value Range' which is a range of low and high estimate values. The Anaheim home value range is $322,270 - $444,210. Thats a very wide margin. The maximum of the range is 37% more than the minimum. So this is a clear sign that there isn't a high confidence in the estimate and the actual home value has a wide potential range. For my own home on the other hand the value range is only about 15% more for the maximum than the minimum. So the they have more confidence in the estimate for my home.

Use Zillow for ballpark estimates on your home but keep in mind the accuracy isn't always that high. Pay attention to the value range to see what the range of values is estimated at.

Graphics are from Zillow.com