Are we screwed?

MojaveLoveMarch 21, 2012

I'm recently married and before my husband and I met he bought a townhome. This was June of 2007, when the home prices were at their peak. I'm so aggravated with this situation because I never in a million years would have done what he did and now I have inherited the problem. He bought it when he was 22 and making big bucks (why buy a house at 22 when you're making good money...ugh), some of that due to overtime. Now he no longer gets overtime because of the economy. We're still able to pay, it just hurts, especially since today we could have a nice single family home with a yard for the same price we're paying now.

He bought it for ~$216k, currently owes about $200k and I would be surprised if it were worth $150k. There are three models of these townhomes, he has the medium sized one. He also has all of the bells and whistles - stone fireplace, hardwood floor, cherry cabinets, spa shower etc. It's a beautiful home but, I can't imagine who would buy it. We live in a fairly small middle to lower middle class town with lots of younger couples and families. The other places in our neighborhood are on the market right now for 90k - 110k. Right next to us is an abandoned unit, and a few down there is a bank-owned one for sale at $70k. No one would buy our place if they can get the end unit bigger model with basic stuff for less money, right? Also, THERE IS NO BASEMENT. Most of the other buildings in the neighborhood have basements but I do not believe our street does.

I know it's silly because there's nothing I can do about it right now but it is starting to depress me. We don't treat this as our first house because we want to get out ASAP and don't want to spend a lot of money on it. We can't get a dog because it isn't big enough. Kids are out of the question right now. We're not getting any younger, and I feel so stuck. I feel like we'll be here for another 10 years. In 3 years our rate goes up so we have to be out by then. We obviously have to try to wait it out but I don't have high hopes. I really don't think anyone will want this place.

He was in the mortgage industry at the same time he was in college. He's more familiar with housing than the average person and he is confident we'll be fine. My mom has been a realtor most of my life so I am very familiar with it. I don't have the confidence he does.

His backup plan is to get a loan to cover the remaining amount when we sell, he said foreclosing and renting is out of the question.

I'm looking for honesty in what you think of this situation, and please....anything that may give me hope.

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Honestly, I know you're frustrated, but try to let it go. Second-guessing the decisions your husband made when he was young and before you were together is just going to poison your marriage.

When you say "it hurts" , do you mean you're actually in financial distress or is this about wanting to move elsewhere and being unable to?

As for kids, people have kids in apartments/townhouses/small houses all the time. If size is the big thing worrying you about having kids, I don't think that alone should stop you.

    Bookmark   March 21, 2012 at 2:53PM
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"Are you screwed?" - No. You've got some work ahead of you, but 50k is not an impossible hole to dig out of. Of course, if you want to get out of a bad situation, you have to admit the reality of it and not just stick your head in the sand.

This IS your home. You aren't going to get another one anytime soon. (Fortunately for you, it is a really nice place to live, not a prison cell.) If you short sell or default, nobody is going to give your hubby a mortgage for years to come. If you want to be a homeowner in the near future, your only course of action is to start saving up enough money to be able to pay off any shortfall in cash when you move.

So, get started. If your hubby was used to working overtime and now only gets 40 hours, he needs a part time job to fill that gap. Between that and your salary, you should be in a position to put away some major cash. If you aren't, then you need to cut your lifestyle back until you are. Over the next couple of years, the economy will improve and hopefully bring your salaries and home values with it. Until then, you'll just have to hold on and start chipping away at this debt.

BTW - have you heard of Dave Ramsey? He's very good at getting people motivated to get out of debt. He constantly has callers who were in much worse shape than you who managed to dig theirselves out. If you are looking for some motivation, I'd check that out.

    Bookmark   March 21, 2012 at 2:59PM
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"We don't treat this as our first house because we want to get out ASAP and don't want to spend a lot of money on it."

Then you wil mnot be able to get out quickly without a lot of damage to his, amnd possibly both ouf your, credit ratings.

"We can't get a dog because it isn't big enough."

What townhouse is not big enough for a dog?

You may not be able to get a large dog, but just about ANY house is big enough for some type of dog.

    Bookmark   March 21, 2012 at 3:25PM
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Thanks. He is making about 50% less than he did 5 years ago. We're not really in any financial stress, we aren't behind on any bills, but we have cut back on our lifestyle already. We never go out or order dinner. Basically, we can only save a few hundred a month. I work full time and also take care of the house and all of that. He already does side work on weekends outside his full time job and sometimes even after work. He drives a truck, and drives very long distances and he alone spends almost $500 a month in gas (apparently we have the most expensive gas in the nation now, I believe it). We've thought about getting a small car in addition to his truck but there's really no where to put it. Plus, that's still losing a few thousand in one sitting.

Because we're young we don't have that much money under our belt, that's easily available at least (outside of certain investments). So in about 2 years (I'm expecting this house to be on the market at least 6 months) we basically have to save 50 grand to cover the hole (realistically more like 80), and then whatever we need to put down on a new house since we won't be getting anything back from it, and in addition to that extra money for emergencies and money to furnish the new place since we don't have much in terms of furnishings.

Personally I would rather foreclose and then get a loan myself off of just my salary but he won't go for that.

    Bookmark   March 21, 2012 at 4:06PM
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If your salary alone is enough to qualify for a mortgage of a $150k house, then your 2 salaries plus part time work should be WAY more than enough to save more than a couple hundred a month.

Like I said, you need to face reality. Unless you come up with some money, you don't get to move in 2 years. You need a new plan. Based on what you have said sofar, I think it is doable, but you need to crank it up a few more notches to make it happen.

Do you have other debts? Cars? Keeping the house might mean getting rid of a truck.

    Bookmark   March 21, 2012 at 4:28PM
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You are still plenty young for planning a family in a few years. In the meantime, work, live frugally, and sock away money for the day you finally do sell and move elsewhere.

I had our first two babies while we lived in a townhouse, and it worked great. I too highly recommend Dave Ramsey's radio show. I learn a lot by listening to him; he's on in LA every day from 11am to 2pm. I also learn what awful messes some people have gotten themselves into. You are not in a mess, but it's certainly not ideal to be in a house that was bought at the height of the real estate boom and overimproved for the neighborhood.

A lot of people in worse straits than you would love to have your problems.

    Bookmark   March 21, 2012 at 5:22PM
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Could you rent it? Then you would only need to come up with the down payment for the new place and could wait to sell until the market improves.

    Bookmark   March 21, 2012 at 9:07PM
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Even if you turn it into a rental, lenders will not count it as an asset for two years. It will be counted as a debt, even if you make a profit on the rental income.
So... yes, you are screwed, as you put it. But, like others ahve said, you need to look on the positive side of things in your life. I run into persons almost every day that really are in a bad place.

    Bookmark   March 22, 2012 at 7:14AM
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And, you certainly aren't the only one "screwed" in today's economy.

Add to that that the only real problem here is your expectation and wants. You are housed. You have a nice place. It suits you fine. You just want more.
Well, you can't get more without working harder. Buck up. You will survive this. And your husband knows you can survive this and so he is doing the right thing owning the debt. You wanting to dump it is really irresponsible since you can afford it; it just isn't what you want.

    Bookmark   March 22, 2012 at 4:31PM
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I hear your pain. We bought more than we Really wanted as we were building new custom at the height of the market, and interest rates were rising over 6%. We jumped in and have stayed afloat even though salary also decreased due to recession. We want to sell to get out from under just like you. I kick myself when I realize we could have an almost paid off home vs. starting 15 years ago. But, that's life and we will go with it. Don't worry about a loss now. you are both young enough and without kids to take your lumps and start again. Hang in there.Make a plan and just do it.

    Bookmark   March 22, 2012 at 11:28PM
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"Personally I would rather foreclose and then get a loan myself off of just my salary but he won't go for that."

You would rather default on a loan than pay off your legally obligated debt?
You're screwed all right but not in the manner to which you refer.

It sounds to me as if you just want a different place and you want it now, responsibilities and consequences be damned.
Too bad. Your gratification will be delayed and you will live.
First world problem, LOL.

If your husband drives a gas guzzling beast of a vehicle and does not need to, trade that sucker for something practical. $500 a month is not chump change that can be overlooked- it is an unnecessary financial drain.
A buck here and a buck there- it all adds up. Plug up the holes and get busy saving.

As far as kids go- if you wait until everything is perfect you will wait forever.
Life will never be perfect. There will always be obstacles, but obstacles can be overcome by hard work and giving up certain immediate wants in deference to a long term goal.
If your goal is a single family home then it sounds as if you have a couple of years of delaying that gratification and digging yourselves out of your current hole.

As has been said you have a home and a lovely one.
It could be WAY worse.

    Bookmark   March 23, 2012 at 8:46AM
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You've gotten some good advice already. I'll just chime in to say that at least you are still young. Imagine being in this boat and being unable to save for retirement ... when you're over 50.

We (DH & I) lost a HUGE amount of money on the last house we sold - we'd bought in 2007 & sold in 2010 (both due to corporate relocations). We wound up buying a less-than-great house in our new location and are pouring money into it now ... paycheck by paycheck.

So you aren't alone and although it is tempting to walk away from the mortgage debt you should consult a lawyer before doing so. If you live in a non-recourse state the bank is limited in how hard they can go after you, but otherwise they can pursue a judgement to make you repay the amount you skip out on. It's not as easy as mailing in the keys and saying, "Sorry, it's your problem now!"

Think of it this way - there are countless people with over $50k in student loan debt that they can't pay because they can't get a job even remotely related to their field of study. LOTS of people hit potholes on the financial path in life.

    Bookmark   March 23, 2012 at 12:33PM
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You've got a lovely home, nicely appointed, and easily affordable even with a significant loss of income over the last few years. What is there to be aggravated about?

I don't understand how some people can have the world, but still only be able to focus on what they don't have instead of what they do.

I'm also concerned about the tone in your post--filled with resentment, judgment, and even possibly ridicule and belittlement for your husband's choices. If the real estate market wouldn't have crashed, his mature and responsible entry into real estate would have been your chance at tens of thousands of dollars of appreciated equity and a chance to move up into nicer, more expensive real estate that without his early investment you would not have been able to afford.

But guess what--the real estate market crashed and long with it the entire global economy. It has been the first time this has happened in you and your husband's lifetime, and yet you somehow expected your husband to have "known better"? He only did what every single American was urged to do--"work hard, buy a home, don't waste money on rent when you can make money on real estate."

You're in the same situation as millions of americans, only far better off than most. I got married and my one bedroom home was no longer suitable for a family of 4, so we rented a house to live in for 3 years and rented my home out. Then, I was able to claim rental income to offset my debt on the rented home and was approved for a loan to buy a nicer house in a better school district.

Where there's a will there's a way, but I am so very glad that my family is far more supportive of our struggles than you seem to be. Quit looking at the past, stop obsessing about what "might have been" and work out a plan for dealing with the present to get you where you want to be in the future.

And I also echo the others' comments about kids and dogs. When my family was renting a home while saving to buy again, we had two elementary school kids, 3 dogs, and 2 cats living together in a 700sq ft 2 bedroom 1 bath house with no basement and only an eat-in kitchen.

    Bookmark   March 23, 2012 at 2:30PM
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Not sure why this is turning into a "pile on" session for the OP. Of course it stinks! You do everything "right" and still end up 50k in debt. It's a really unfortunate way to start a marriage.

On that topic - it's fine to blow off a little steam on the internet. Just don't linger on it and let the negativity impact your new marriage and general outlook on life. This is a bump in the road, not a mountain. You just need to make some short term sacrifices to get over it.

    Bookmark   March 23, 2012 at 2:53PM
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Mick Mick

Did you not know this going into the marriage?

Well, I believe that a majority of folks are underwater in their mortgage. I am not so much worried about the value of my home right now because I am not going to sell for a few years.

Is it possible to refinance your home? There are refinance programs called the Harp and Harp 2.0 for Fannie Mae loans. If you have an adjustable mortage, then you should consider refinancing now.

I was able to refinance my home to a lower rate and a shorter term. So, when I am ready to sell (in 3-4 years), I will be in a better situation than I am now.

    Bookmark   March 24, 2012 at 6:51AM
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You used "aggravated", "depress", "hurts", as if your husband has committed crime, but all he has done was purchased a house trying to invest and save instead of blowing money away. It is commendable he did that when he was only 22 while working and going to school.

Since market turned to wrong direction, he received pay cut, but he has been working hard trying to make up, and being very responsible holding his mortgage commitment, unlike some people like you, wanting to walk away from obligation without real financial hardship.

If the market has been going up since your husband purchased the place, would you think he is a genius? If he did not buy then, would you complain that he did not buy while he made good money?

You are irritated because you see your husband's mortgage as a burden that takes away his income to fulfill your dream.

You are screwed by your "wants" and immaturity.

What should you do? Be a grown up, leave your husband's mortgage and income alone. Go out to find a 2nd job so that you could afford your dream place on your own income.

    Bookmark   March 24, 2012 at 7:24AM
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Please, please, please do not have any children while you have so much resentment and disprespect for your husband.

    Bookmark   March 24, 2012 at 2:34PM
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"has all of the bells and whistles - stone fireplace, hardwood floor, cherry cabinets, spa shower etc. It's a beautiful home but,....................."

You and your husband are spring chickens. It was a bitter pill to swallow (buying at the top of the market), but life goes on. You make mistakes. You have to take the good with the bad. Thats what life (and relationships) are about. Accept that you may have to stay put for a few years before you can buy what you both want.

Life will get better if you both work hard and keep supporting each other.

    Bookmark   March 25, 2012 at 10:20PM
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And unlike a lot of folks seem t think, you do NOT always make money on real estate.

Down markets happen.

Either wait out the market or lose some money and move on.

I started out renovating and restoring old houses.
Often purchased from an estate, or when the surviving spouse had to move out and into a care facility (often the wife, thus the non-PC nickname of 'old lady houses').

I made money on most, broke even on a few, and ended up having to hold and rent a few houses when repairs cost more than anticipated.

Some of the houses are now throwing off lots of rental income, and it is nice.

It only took about 20 years though.

    Bookmark   March 26, 2012 at 10:38AM
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I'm still not understanding how such a house prevents dogs and/or a child. Our house is slightly under 700sq ft (with just under 700sq ft for the unfinished basement) and we have a 9 year old and two dogs. We don't even have a fully fenced in yard so that means they must go out on leash several times a day. While there are some days I'd enjoy another couple hundred square feet, the more square feet, the more to clean and the more space to "grow" clutter.

After finding out about all of the hidden issues that the previous owner covered up but didn't fix, in a perfect world, I'd either have the money to throw at it to fix it or move, but this is Michigan and it's worth probably 1/6th what we paid for it, especially since we found out the problems.

Be happy and appreciate what you have. It could be so much worse.

    Bookmark   March 27, 2012 at 12:23PM
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I know some perfectly normal people who grew up in a small townhouse in Virginia.
They even had a dog. :)

    Bookmark   March 27, 2012 at 10:11PM
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Well to me it sounds like you have a darned nice home for $200k! Around here (San Francisco bay area), that would not buy you a cardboard box let alone a nice townhome with a spa shower etc.

If you can afford to make the payments, my advice would be to put some money on the principal so you have 20% equity then you can refinance at a nice low interest rate. Eventually your home will be worth more again, you'll have lots of equity in it, and then you could sell and get your equity back out.

In the meantime, enjoy your beautiful townhouse!

    Bookmark   March 28, 2012 at 12:27AM
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Our first home was about 900 square feet with:
- one bathroom: an eight foot by eight foot bump-out on the side of the house.

- three bedrooms, (no closets in two of these knee-walled rooms)

- and a small eat-in kitchen. Late Husband took a utility knife and cut through the wall paper and tossed a square into the dishpan. There were twelve layers of wall paper on the wall.

The only "closet" was in the seller's bedroom: built out from the wall surrounding the chimney. The other two bedrooms had big nails driven into the wall, I guess to hang a pressed outfit.

There were ceiling lights in the bedrooms, but no outlets.

The seller and her husband raised six children there.

    Bookmark   March 28, 2012 at 8:15AM
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Are 'we' screwed? No, I think your husband is.

I can't believe you are blaming him for purchasing a nice townhouse when he was 22 and making good money, some of it from over-time. Real estate was considered a safe investment at the time. He did something mature with his money, of course not knowing that the real estate bubble was about to burst.

You said, and I quote,"why buy a house at 22 when you're making good money...ugh"

I suppose you would have bought designer purses and shoes, right? Well time to put on your big girl panties and prioritize and budget. Your feelings aren't "silly" they're downright obnoxious.

    Bookmark   March 29, 2012 at 5:33PM
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We sold a house in the northeast june/july 2007 and there were very clear signs that the real estate market was having problems. Your husband like many others, too young to remember other drops in the RE market, probably believed the line about RE can only go up. You win some and you lose some ... luckily you are young enough to weather this negative impact on your finances.

    Bookmark   March 29, 2012 at 8:46PM
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You may scoff at this, but I'll tell ya anyway. And I'm young and married too.

We had our first daughter literally nine months after our wedding day. We were renting a one bedroom apartment in downtown Minneapolis at the time. It wasn't ideal I guess (based on American standards of ideal) but we were happy. The smallness was actually really nice, since I like things clean and when we had our daughter, my need for stuff to be clean tripled, and the small space made it easy for this new mom. The bassinet was in our room to begin with right after she was born, and the crib was simply pushed into the living room when she was older. There were great little parks everywhere within walking distance. When she was old enough, we spent so much time walking around the city enjoying the "less than ideal" baby living space. It was awesome actually.

But, we're really odd people for our age. We don't need a lot and make do without much. The husband and I both grew up not knowing any different, so I guess it's what you're used to.

Oh, and we had a German shepherd too at the time. He was a really old man when we adopted him, so sitting around the apartment all day was fine with him, and the meandering walks were even better. A lot of our neighbors had small dogs that lived fine in small apartments.

    Bookmark   March 30, 2012 at 1:47PM
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Well, the OP can count out winning the $640 Million dollar Lotto... because I am!

    Bookmark   March 30, 2012 at 8:28PM
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Lol ncrealestateguy! Winning the lottery is also a part of my plan right now.

    Bookmark   March 30, 2012 at 10:21PM
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I'm glad the OP disappeared. Except for a couple of posts, this thread is the biggest concentration of terrible advice i've seen in a long time. You guys should bottle and sell it.

    Bookmark   March 31, 2012 at 12:38AM
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I thought there were some very good suggestions for the OP in this thread.

You obviously disagree, marcolo, so what's your advice?

    Bookmark   March 31, 2012 at 9:03AM
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"biggest concentration of terrible advice i've seen in a long time"

What do you so vehemently disagree with?

Actually paying your bills?

    Bookmark   March 31, 2012 at 9:10AM
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I can understand the OP's position, because I'm having to listen to my niece-in-law say almost the exact same thing. Except that they bought a million-dollar house in CA at the top of the market, and are now having to relocate due to his job, to the East Coast - specifically Boston, where RE is almost as expensive as it is here.

I think a lot of Millennials have grown up with the expectation they can have everything and win all the time. My NIL was told by several RE agents that they could break-even on their house - they both make good salaries and have paid the mortgage down substantially, so altho underwater on the original purchase price, they are break-even on current market price.

But that's not good enough for her. She wants to quit and be a stay-at-home mom for their two boys, and buy a equally big traditional SFH in Boston. The numbers don't really work, but she won't acknowledge that.

Is it reckless, immature, and selfish? Maybe. Is it risky in today's economy for her to quit (she's got better job prospects than he does, but not if she sits out for 20 yrs)? Yes, probably.

Is it my business? Thankfully, no. When you're young, people telling you you're wrong just 'puts your back up' and you'll stop listening.

We've all made mistakes, and maybe this will be one of the OP's. Money is the #1 issue that breaks up marriages, and always has been. Not necessarily the lack thereof, either - more the handling of it, than anything else. Money's a very personal issue, related closely to how we see ourselves.

We've been underwater on our home, saw it jump in value, then saw it fall again in the recent slump. But ours is paid off, so it really doesn't matter. It's just a place to live....but only time taught us that.

    Bookmark   April 5, 2012 at 1:56PM
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OP please come back and at least acknowledge your thoughts. I would suggest some financial and personal counseling, sitting down together to find out where you are and where you would like to go and be on the same page. Only you two can pull it out,but it does take teamwork. There is good information out there, read and take out what will work for you. Budgets, future dreams etc. You will make it only if you work together!!

    Bookmark   April 5, 2012 at 2:46PM
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Sophie Wheeler

You're back with essentially the same post. Did you never read all of this the first time?

    Bookmark   July 6, 2012 at 2:24PM
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Take a deep breath and read through these posts. Yes, some were worded harshly, but many of them offer solid advice to you that will help you financially and even in your relationship with your husband.

    Bookmark   July 7, 2012 at 10:44PM
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"Kids are out of the question right now."

My husband and I currently live in a 3BR 1500 sqft townhouse with no basement. We have a 9 month old son, and believe me, it is EASIER to have a baby in a small house than a big house. After he is in bed at night and we are hanging out downstairs, we can hear him if he stirs. If he wakes, we can get to him before his crying turns into hysteria.

This fall/winter we are moving to a single family house, but I think it will be at least 3 - 5 years before we will actually take advantage of the additional space and the yard. In the meantime, I anticipate that I will burn a lot more calories carrying a baby around the house and racing to his room when he wakes up in the night. Honestly, for the current stage our son is in, I am dreading moving into a bigger house and I really wish we could move into a smaller single-story house just until my son becomes more mobile and independent.

In my Perfect World, we would stay in our small townhouse until our son is 6 and our planned-for second child is 3ish.

A child's quality of life does not depend on the # of square feet available to him, especially in the early years.

    Bookmark   July 9, 2012 at 11:25PM
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