A mercedes? 25k credit card debt? No estimated budget for expenses (including hard expenses such as health care)?
No wonder this couple got foreclosed on....

$25k in credit card debt, only paying $500/month (Over 4 years to pay it off not considering interest!)

$700/month in food (no kids even!)

2x Benzes (Benzen? Benze?) costing $1750/month

$675k home - teaser rate payment is just $500 more than the cars are costing.

These people did not get screwed by the housing bubble - they got taken by being financial morons. I think "Dr. Housing Bubble" was being facetious when he said they were "sophisticated investors in the know." He at least says later on how they got here by living way beyond their means trying to keep up with maintaining a glitzy SoCal lifestyle. Why didn't they put some of their $3000 of disposable income towards credit card debt or additional payments on their mortgage? How did they dispose of that disposable income? Crack?

At least it does illustrate how quickly the quicksand sucks you down once you've missed a payment.

Holy crap - I'm poor and just out of college, yet I have more financial sense than these people.

Holy crap.

This is more of a life meltdown than a subprime. What I don't get is they paid $675k, got in a jam, and tried to sell for $790k. They shoulda' known, being in their positions, that this was not a chance to profit but an opportunity to get out relatively unscathed, and chose the former. In the crunch, they lowered to $715k. I'll bet if they listed at $675-700k it coulda' sold and problem solved.

@Cowboys_fan: My thoughts exactly. Especially since it points out that they make a living in the real estate industry, shouldn't they have taken a more realistic view towards what they could get for their house?

Their spending is insane. I grew up in a house where 1 parent made more than they make combined, and the other parent made good money too, but you know what we drive? Honda's and Nissan's, not even the top of the line models either. Just because you can afford to spend 1,000's a month on non-essentials doesn't mean its a good idea. It's one thing to live outside your means when you are below the poverty level, and its a matter of feeding your family, but they were just foolish.

The worst thing about all of this is we end up paying for idiots like this with higher rates and fess.

@Cowboys_fan: keep in mind there are certain costs associated with selling a home. i don't remember the exact number, but if it's 15%, they're right on target.

As a family that has 2 paid off 2001 cars (Saturn SL2 and Subaru Outback), we do not feel sorry for these people. It's called LIVING ABOVE YOUR MEANS and it is not a reason to feel sorry for someone. I also worry that in 50 years these morons will be clamoring for the government to pay for their retirement since they refused to save a damn nickel to support their Benz habit.

Screw these people and bring back debtors prison.

When I bought my house, I looked at what was the minimum amount of money I could make and still pay all of the bills. It came in at $25/hr., the lowest amount someone in my field makes right out of school (I have over 20 years of experience). I was qualified to buy for much more than that, mind you, but stuck with what I was sure I could do even if things got tough. I also shopped around until I finally found a bank that would still make a fixed rate loan with no points or prepayment penalty. (The weirdo loan thing was all the rage back then, and it was really hard to find a traditional loan.)

Flash forward a year after I buy: the dot-bomb crisis peaks. With no warning, I was laid off in quick succession by two HUGE companies in big RIFs (two days after I had been promoted in one case, the other a week before I was supposed to be paid a $13K bonus!). There were no jobs in my field in my area, so I ended up out of work for 14 months, used up all of my savings, and ran up $5000 in credit card debt (from $0). Since then, I've only been able to get contract gigs, making my old rate, but only actually working half time. I'm making it, but just barely, and had to get a loan to pay property taxes one year (paid off last month).

Even really careful planning only guarantees you a BETTER chance to survive when the economic sh!t hits the fan.

Who are these people carrying 25k of credit card debt? And they have a Mercedes as well? I have a hard time feeling sorry for people who are so foolish with their money.

@Keter: If these people had been laid-off or had an emergency or an illness, that's a different story. These people had negative savings of at least 25k. They should apologize to us for screwing up the economy and adding more fees to my next loan.

Higher incomes make people lazy when it comes to financial responsibility. Someone should send them a copy of "The Millionaire Next Door."

@tadowguy: At myself, I will note that Joe did get laid off, but did find another job.

Wow. I'm speechless. And that doesn't happen often.

The most amazing thing is that if the bubble had lasted another year, they might have gotten away with it.

$25,000 due in just five months time? Heck, in just two years they could pay off my house!

@ipsedixiter: The article isn't intended to bring out feelings of pity, it's intended to give insight.

What amazes me is the way banks play games with mortgages. A home payment, of all things, is not something to "tease" people with.

I'm not sure on how they got to 25k in cc debt but its real easy. Especially if your not following advice of sites like this.

I as a single person have hit 12k twice in the past 10 years. First time was from living above means in College. Was bailed out by help from my parents. Second time was a stint of about 8 months after being layed off.

Things happen and its hard to make changes in your life when they would make you leave your "comfort zone". So they get hit from the "pretend everything is ok" mind set.

I've cleared off my CC debt and have been keeping it payed off at the end of the month for about 4 months now. And at least personally its got the AA sort of feel to it.

"Hi my names Godai and I spend too much on credit. I haven't carried a balance in 4 months now"

So that's how the neighbors are driving $60k cars. I wonder if the used car market is about to be flooded with 1-2 year old luxury cars coming 'off lease'.

Now I realize how so many people can afford to drive around in cars that cost 40K+. Just carry a massive debt on your credit card. I realize there is an entire market of cars out there that I will never own, or lease. I'm fine with that, obviously these people are not.

I'm also curious how the market would ever keep up with houses that gain ~15% every 2 years. Is it normal to expect this? This is why I don't own a house.

$700 a month on food for two people? We don't even come close to that feeding 4 that eat like adults.

After reading the whole breakdown I don't feel sorry for them but it is pretty clear how fast someone can torpedo into being totally screwed.

The first things that should go are the cars. A couple of slightly used Hondas or VWs could work just as well.

We have people just like them were I live in the midwest. They spend money on image, far beyond their means even though both make good incomes.
When people like that start getting snotty with me I remind them that I OWN my older vehicle and I have no credit card debt. They tend to shut up and go away at that point.

@K-Bo:

I came from a similar background. Father made 7 figure income, mom stayed at home. Dad drove all toyotas, all for 7-10 years, all used. Mom drove a lexus but not the tops, and also used. I would give your speech to everyone in the world, and Dallas especially.

@Keter:

Even really careful planning only guarantees you a BETTER chance to survive when the economic sh!t hits the fan.

Definitely true, but if these people hadn't spent their entire post-college lives trying to live like rockstars, they could have weathered one of them losing their job for months. Maybe even both of them!

It's not the high cost of living, it's the cost of living high.

I was just about to say that I would expect a realtor and a mortgage lender to know better than this...

... but then I realized that it's the realtors and mortgage lenders who get other people into these situations in the first damn place. I guess I'm just surprised to find evidence that people in the housing industry are genuinely dumb enough to think these loans are a good idea -- I thought they were crooked, not stupid.

@Craig:
Amen to that book.
@CumaeanSibyl:
My brother was a mortgage broker, recently unemployed. He kept telling me, in essence, that the bubble would never burst because the banks and brokers were making so much off the various "new lending products" that they would continue to make changes to the packages to continue to entice people to either trade up to larger houses or refinance to take equity out of their existing home. I know what an ass my brother is and avoided any of his "recommendations" but I can see where other people would fall for it.

@Sudonum:
Wow, after reading my post I started thinking that this whole thing was one big pyramid scheme.

Dear God. I understand expensive housing is hard to avoid in more fashionable cities/states, but still. My husband and I together make more than this couple, and we bought a $68K house with a boring old 30-year FRM, drive cars that cost less than $20K combined, and spend maybe $350 a month on food. We have less than $20K of credit card debt, and that's all mine - my husband has none.

Have people completely lost their minds? Just because you have a good solid job, that doesn't mean you can live like Paris Hilton. I think people have either lost all perspective or have forgotten that plenty of successful, happy, rich people live very very cheap.

@Snakeophelia: Where do you live, Haiti? It's easy to "get by" on $130,000 a year when you live where you can get a 68K house... Most normal places that wouldn't even pay for a lot to put it on.

@Sudonum: the amusing thing about bubbles - how you can tell that you're witnessing an ongoing one - is that "this time, the old rules don't apply because..."

The dot-com one was b/c the economy was radically transformed.

The housing one was b/c those clever Wall Street guys will always come up with a new instrument (followed by, everyone will always need a house (followed by, they aren't making any more land (followed by, renting is throwing money away.)))

And, when you see people that have NO business being involved in that sector knee-deep into it, run. Buying stocks on margin, spec'ing houses...