No. of Recommendations: 1
Hey delsonc,

The aspect that I personally find tragic is that these people were not satisfied with their $750,000 house.

I'm with you. Here, by the way, is the passage from the Forbes article:

The most visible sign of deterioration is in Silicon Valley. Santa Clara County, Calif. has four months of inventory for sale, triple the levels carried in the past three years, according to Creekside Realty in San Jose. The market has been in the dumps since the beginning of the year. Elizabeth and Alan Fletcher first considered putting their home in Palo Alto up for sale in February, when houses like it had been selling for $2 million--quite a jump from the $856,000 they paid in 1998. They hoped to reap a nice downpayment on a new 5,000-square-foot place they were building in the foothills above Los Altos for $3.85 million.

But by the time they listed the house on April Fool's Day, an economic earthquake had hit Silicon Valley. High-tech companies were shedding tens of thousands of jobs, and shares of Oracle, where Alan was a vice president, had dropped from $33 to $15 in just three months. The Fletchers' real estate agent warned them not to list their house for more than $1.4 million. Even at that price, the house sat for more than a month without drawing a single offer. They lowered the price by $100,000, then knocked off another $200,000. A buyer offered $1 million; but then backed out. In late June they finally sold their home for $1.04 million--down almost $1 million in just five months. By then they had lost $250,000 in the stock market and had to borrow $2 million for the new house.


Now, a 5000-sq ft house in the foothills above Los Altos sounds pretty nice. I don't want to denigrate that. Still, this is an amazing example of conspicuous consumption at a time when that level of consumption was not called for. Could they not tell in April that there could be some eeensy-weeensy bad times ahead, and that maybe it was a good time to be a little prudent?

More amazingly, even after that lesson, they went right ahead and took out the loan for the new place. ('Course, I'm not sure what option they had, given that they were building it.) I hope they've got an eye on the exit.

Fool on!
BrianZ
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