Buying a house should always be viewed as an investment. This includes what you do to the house after you purchase it. So when buying an investment the general rule (which the vast majority suck at) buy low, sell high. Put plainly, if you are buying a house or buying shares for the DOW (if your not a day trader) right now, than you are being a financial moron.
The housing market is mainly driven buy two things, wage growth and access to credit, the cheaper that credit can be obtained the bigger the bubble in real estate becomes. So if you are thinking about buying now think again. Over the last 7 years, not just the U.S., but the globe has had the easiest, loosest monetary policy in history. Wells Fargo has recently unveiled another mortgage option requiring only 3% down and a 565 credit score to qualify! This is when you know the housing market is going to crumble and crumble fast!
Vancouver's housing market (which is perhaps the most inflated housing market on the planet, mostly because of foreign investors or as I like to call them foreign money launders) is crashing, quickly. A 20% decline in one month. Manhattan's high end real estate is suffering by a slightly lower margin, with inventory stacking up quickly as buyers dry up. Same thing is occurring in the Hamptons/Long Island.
Area's all over the country are plateauing or beginning the decent in the real estate market.
So what is the right move in this situation. Mainly limit your risk in this sector. If you have a mortgage, make sure you have a fixed rate. Dollars are flying back into this country at an alarming rate from foreign investors and central banks meaning we have to absorb this money coming back into the country. This leads to inflation quickly, which will force the banks to increase interest rates rapidly to fend off hyperinflation. Don't believe hyperinflation can threaten the U.S.? That is fine, which is why reason number two (which happened only a 8 short years ago) is even more concerning. A decline in the housing market always leads to a credit squeeze as banks try to protect themselves from all the garbage debt they lent out. This always leads to lower property value evaluations, increased interests rates as credit tightens, thus many american's again losing their homes under the weight of increased mortgage costs.
Buy hard assets now. Precious metals and even crypto-currencies are great ways to increase your purchasing power while the global debt reset occurs. The coming credit crunch will drastically reduce property costs while vastly boosting PMs. With the coming flip flop in asset prices a $100,000 invest could easily have $1,000,000 in today's purchasing power in a matter of a year or two. With that said, DO NOT have a finite timeline for your property acquiring goals. Never fight the markets and how they move. Position yourself for the inevitability and be patient, there is no room for ADD in central banker interventionist markets that we have today.
Obviously, there is much more detail and care that needs to be taken whenever investing so please visit my previous post for recommended investment guidance by some of the best out there. Do your research!
Happy Investing!
Your argument seems to be partly based on the idea that interest rates will go up... I don't believe this will happen. The government/fed can't possibly raise interest rates or the whole economy will crumble. In my opinion it's much more likel y that we'll see negative interest rates than high ones.
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We will definitely see lower, possibly negative rates for the short term. But a credit crunch is still coming regardless, drastically reducing home prices. The problem lies in that the LIBOR rates which are starting to increase which suggests that some of the money printing that has been hidden from the main economy is making it's way in. This is a further sign that despite non-stop money printing since 2009 that liquidity remains a serious concern for banks. At this same time we have no net purchasers of treasuries outside of the federal reserve itself. At some point in the mid-term the only way we will be able to absorb this debt is to quickly raise rates (at least based upon history and Alan Greenspan). To your point though, until the market breaks and everything begins to implode, the interest rates will remain near, at or below rock bottom.
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I live in Phoenix AZ, our prices are still going up on the lower priced homes. It's pretty flat in the higher priced and once you go above 2 million it's going down. If hyper inflation does hit soo. and you bought with a fixed rate you should be fine because hyper inflation will eventually wipe out your mortgage. If you owe 100,000 dollars and the dollars aren't worth anything then you don't owe anything. And even if rates go up an they hold off hyper inflation your cost of you already own a home at a fixed rate is wont change. You beggin to see a lot of wrap type financing and assuming other people's loans. And doubt they will be able to hold off hyper inflation...I'd say if you are renting and aren't planning on leaving the country now is still a good time to buy. Mainly because here mortgage payments are cheaper than rent..
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I agree that traditionally buying when rents are this high is a better idea. But again this is a short term outlook and my opinion is not based on mortgage rates that you will face later, purely on increasing your purchasing power in the future so you have no mortgage. Housing prices will crash below 2008 levels. Remember as well that hyperinflation does NOT increase those assets that are mainly driven by credit, rather it is deflationary for these assets. This is because credit is impossible to obtain during a hyper inflationary scenario. Food, gas, household products skyrocket as people lose confidence in cash. Also, the vast majority of people will not see wage increases so their traditional purchasing power disappears, with this comes major limitations on bank withdraws as banks seek liquidity through depositors funds. This slippery slope will continue until all faith and confidence is lost in the system (which is backed by only faith and confidence), at this time people will be thankful they purchased PM's and some crypto-currencies. My point being if you have 100,000 left on your mortgage and need to pay it off, you need to be able to access said $100,000 and it wont be through the banks or your bank account. Though I understand your stance, I believe this will be the end game for the USD as the world reserve currency which means we need to understand what that ultimately means for the USD and our current debt filled credit market. Then again maybe all debts will be forgiven during the reset! Who knows, but I rather try and leverage investments so that no mortgage is necessary if that is possible. Thanks again for commenting!
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