Why I’m Waiting Until After 2012 To Buy A Home

The real estate and mortgage industries are trying hard to convince us that NOW is a good time to buy a home. They use low mortgage interest rates and the soon to expire First-time Homebuyer Tax Credit program (which I qualify for since I’ve purposely been a renter for the last 6 years) as their rationale.

Don’t expect unbiased advice from salespeople! What most won’t fess up to is that if I (or you) buy a home now, we’ll likely be throwing our precious money away because home prices are still under great pressure. I’ll wait until the knife stops falling, thank you very much.

We are done with subprime resets but… pay attention… there is a second wave of mortgage resets to endure. What is a mortgage reset? It’s when the homeowner, who bought a house with a low “teaser rate” and planned to refinance when the house price went up, gets a new payment that is far higher (not always, but usually). Many homeowners can’t afford these resets, especially with unemployment and underemployment rates at these levels. Lenders are cautious and tightening their underwriting guidelines so refinancing may not even be possible for many borrowers.

The first wave of resets was subprime. The subprime wave is over. Whew! That hurt! But Alt-A and Option ARM resets aren’t over and combined, they represent a much larger category of mortgages than subprime. Most of these mortgages are already underwater: the home has negative equity; the home is worth less than the mortgage owed. The combination of resets plus the underwater status will likely add fuel to defaults and foreclosures, putting yet more downward pressure on home prices.

Some argue that the problem with adjustable rate mortgages resetting to higher payments isn’t as important now because many of those loans defaulted early. Even so, we still face the major problem of shadow inventory: distressed mortgages facing foreclosure and bank-repossessed properties that have not yet reached the market. At the current rate of sales, it could take almost 9 YEARS to sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years (according to LPS Applied Analytics).

Another knife that has the potential of slashing home prices further is the increasing prevalence of walkaways (strategic defaults): the decision by the borrower to stop making payments on a mortgage despite having the financial ability to make the payments. Walkaways happen after a substantial drop in the house’s price. The borrower is underwater so she decides to free herself from the burden of mortgage debt. Once free of the mortgage, she is free to use her income for other expenditures. The borrower, after deciding to not make payments any more, can live free of the costs of mortgage payments until the lender forecloses — which may take the lender from several months to years!

A study in September 2009 from the credit reporting agency Experian and consulting outfit Oliver Wyman estimated that close to a fifth of troubled mortgages in the U.S. involved borrowers who were strategically defaulting. While I haven’t looked for a more recent statistic, I can only guess that this number will climb as more homeowners get mad at Wall Street and as walkaways become less morally and ethically charged.

I’ve been told by countless Realtors that I should buy a home NOW because having been a renter for the past 6 years, I qualify for the First-Time Homebuyer’s Tax Credit. But what do you think will happen to house prices once the tax credit incentive expires? I’d say houses will not sell as well as they have lately (with the credit artificially propping the market up) which will increase the supply of homes on the market… and push down on prices.

I’ve also been told by Realtors that I should buy a home NOW because mortgage interest rates are so low. But I don’t worry about rates because I have the cash to purchase our next home outright if the interest rates move up. Even if I did need a loan it wouldn’t change my mind because as Patrick Killelea astutely points out,

It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.

  • Your property taxes will be lower with a low purchase price.
  • A low price gives you the ability to pay it all off instead of being a debt-slave for the rest of your life.
  • As interest rates fall from high to low, house prices increase.
  • Paying a high price now may trap you “under water”, meaning you’ll have a mortgage larger than the value of the house. Then you will not be able to refinance because there you’ll have no equity, and will not be able to sell without a loss. Even if you get a long-term fixed rate mortgage, when rates inevitably go up the value of your property will go down. Paying a low price minimizes your damage.

Additionally, if interest rates rise, the number of borrowers who can qualify for a higher mortgage payment will drop. Less qualified buyers in the market means… you got it… more downward pressure on home prices.

In summary, I see no rational or compelling reason to buy a home right now. 2012 or after? We’ll see!

Note: This post was featured in the most creative Carnival of Personal Finance I’ve ever read — check it out! The Origin of the Piggy Bank by Well-Heeled Blog

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Pay Mortgage Early? Financial Freedom Definition? How To Land A Job? It’s Q and A Time!

Wow. Thanks for all the curious/concerned emails lately asking, Where are you? All okay? It feels awesome to be missed :>) I’m fine; just took a blogging break. Actually, I’ve been writing a quite a bit lately, just not here… forums, media inquiry replies and interviews, a book proposal and outline, coaching followups, storybooks with my kiddo… Frankly, my backside couldn’t bear another minute sitting in front of the keyboard! It hasn’t been all writing though — I’ve been having tons of fun too: several house guests, Chinese New Year parties, homeschooling with my voracious little learner, raising and training ten baby parakeets (my hubby calls it our 4-H-in-the-condo project). But I have missed my blogging friends! So without further ado, I will pull some interesting questions from my inbox and respond to them here. Identifying details have been changed or removed. Feel free to add your suggestions in the comments as I’m sure these folks would appreciate alternate viewpoints.

Q: Carolyn asks, “For the past two years I have enjoyed your emails. My savings has grown from an average $1,500 to $35,000. I have committed to saving a set amount but also some unexpected money has come my way which I have saved all of it. I think changing your mindset along with action and education has contributed to my money growth. My next step is to pay my mortgage off early. Any suggestions?”

A: Awesome progress, Carolyn. Congratulations! While I don’t know all of the pertinent details about your financial situation, I feel compelled to share this: In my opinion, paying a mortgage off early is one of the very last steps most should take in their financial life. Why? Because there are many other money matters that take a higher priority. As a general rule of thumb, here’s the order of financial steps I typically recommend:

First: Pay off “toxic debt”: start with credit cards and loans that charge the highest interest rates (because you’ll save money), and those with account balances that hover closest to maximum credit limits (because it’ll improve your credit score). Raise quick cash immediately by selling stuff you no longer need, want or use.

Second: After you’ve paid off all debt balances with interest rates over 8-10%, start saving at least 15% of every dollar earned to build an emergency fund equal to 6-12 months of take-home income.

Third: Once your emergency fund is complete, start investing AT LEAST 10% of your monthly gross income in a diversified portfolio of no-load mutual funds, ETF’s, stocks, bonds. Start with your tax-advantaged retirement account(s).

Fourth: Get cracking on any remaining lower-interest rate (below 8-10%) debt balances.

Finally: Paying off the mortgage would be the last financial task on my list, especially if the mortgage rate is reasonable. Better yet, if I had a home with a mortgage and I was seriously in debt, I’d sell my home to pay off my debt with the equity. Besides, renting is often cheaper than buying!

Q: These days, simply being a (one) millionaire is not enough to be financially free, depending on ones age. Unless universal healthcare is achieved and unless I learn to cut back on expenditures, I think I would need 2.5 million to be financially free. At least. I don’t see that happening unless 1) we inherit a bunch of money or 2) my husband works another 15 years (minimum) AND the stock market behaves. He has a good job, we have a nice, recently remodeled home plus a small vacation cabin, and we have an emergency cash stash. I don’t want to have to buy a new car for a few years because we pay cash for cars and I don’t want to see the emergency fund take a nosedive. Good thing I love my 10 yr. old minivan! Anyway, how much do you think it takes to be financially free? ~K

A: You’re concerned about how many digits sit in front of your six $0’s and how the stock market behaves. Your husband is employed, you have two homes, a car and an emergency fund in place. In many people’s eyes, you already have financial freedom!

There is no one-fits-all magic financial freedom number. To some $50,000 sounds like a dream come true and to others 50 million wouldn’t be enough. To lots of people I’ve come across, simply breaking free from their paycheck to paycheck existence, or the shackles of debt repayment, or sleeping well at night because they have an emergency fund and a contingency plan in place is enough to make them feel financially free. Personal finance is called personal because it is so, well, personal.

Traditionally, many define financial freedom as having enough passive income that you no longer need to work; your passive income covers your living expenses. Funny thing with this definition is that there are so many variables contained within: What do you consider passive? Is it investing in CD’s, stocks, or a business? How about getting paid for “work” that you love so much that you would do it even if you didn’t get paid? What are your living expenses? Can they be reduced substantially? Can some be eliminated entirely? What if you sold your home(s), invested the equity, and moved to Mexico or Thailand or somewhere else where living expenses are dramatically less than in the US? Again, so much of this is personally defined.

My husband and I consider ourselves financially free because our family hasn’t set an alarm clock in years. Whether it be work, parenting or play, we wake with the sun, eager to spend each new day doing whatever we choose. This definition affords us the flexibility we value, therefore, regardless of the exact numbers on our net worth statement, we have “enough”.

Q: CarA writes, “I love your entire story! You’ve made some great moves throughout your life. I’m curious, how hard (or was it all hard) to talk your husband into selling your home? Did he just have complete faith in you? Or was it a joint effort? Just curious because you said so many around you were skeptical of selling your home to rent.”

A: Ha! It was INCREDIBLY difficult for my husband to jump on board with my plan. I’d crunch the numbers, craft reams of brilliant spreadsheets and grinning from ear to ear, I’d enthusiastically share my financial freedom plan. He’d remark (skeptically), “If it’s really that easy, why isn’t EVERYONE doing it, Jen?” I think the biggest obstacle for him was getting over what everyone else would think about our choice to rent. We sold when the market was hot and everyone thought real estate was THE best place to invest. Remember the days when the mantra was “real estate prices may flatten but they never go down”? Our friends and family questioned my logic. Fortunately I’m not easily deterred and my husband trusts me. But it took a lot of effort on my part to show him the numbers in such a way that he got it, too. And he had to get over his concern about what others thought about it. I gave him the time and space to deal with those issues and I reminded him that renting didn’t need to be a permanent choice.

Today he recommends renting to all his friends. I think he loves looking so smart for getting out before the market crashed :>)

Q: I follow your blog and love all the insight you share with us. Lately, there has been a lot of talk about inflation and hyperinflation heading our way in 2010. Can you offer us some insight, tips to prepare for this? Angeli

A: I wrote about this topic in June 2009 here: Hyperinflation or Prolonged Deflation? Coping and Investing Strategies For Either Scenario. The market is being so manipulated that it’s anyone’s guess what will happen, but I still think that inflation is a ways off; deflation is our first concern. Also, check my Resources page for links to web sites that focus on the economy. I follow many of these debates and only one thing is clear to me — no one really knows how to get us out of this mess. My primary goal at this point is my personal capital preservation.

Q: This spring, I will be a new college graduate. Like thousands of others, I’ll be facing a brutal job market. Any tips? Lisa

A: Get your foot in the door, Lisa. Work to get noticed rather than to get paid. Ideally you do this while pursuing your degree — if not, start now:

  • Shadow those who are doing what you want to do so that you see first hand what is involved in your chosen field.
  • Hook up with a mentor who can show you the ropes and introduce you to others who can hook you up with a job.
  • Get noticed by those in your field: volunteer
  • Negotiate an unpaid apprenticeship: offer your services in exchange for hands-on learning experiences. This is how I learned how to train dogs, teach classes, and became a professional dog training instructor and business owner.
  • Get creative: find a problem, see it as an opportunity, and present the solution. Create your own job or business!
  • Take the time to brainstorm, journal, and bounce ideas off of supportive “can-do” people.
  • Take an honest look at your lifestyle and eliminate or cut back on anything that is superfluous. Create some financial breathing room.

Readers, I welcome your viewpoints and advice in the comments. Please send me your questions, too, and I’ll respond to more. Thanks!


Why We Need To Exercise Both Sides of Our Brain for Optimal Success

There is a common misconception that most people are either right-brained (creative, intuitive) OR left-brained (logical, analytical). But this isn’t true. We are born with two brain hemispheres. It’s just that our society tends to place a higher value on left-brain skills such as language, logic and math. Unfortunately, this left-brained focus can squash our creative, right-brained attributes and limit our success in life.

Experiments show that most children are highly creative (a right brain function) before entering school. But only ten percent of these same children rank highly creative by age seven. By the time we are adults, high creativity remains in only two percent of the population.

What a shame.

We require BOTH brain functions to optimally succeed. It’s not an either/or thing. Take Albert Einstein for example: most would assume that Einstein was genius because of his left-brained reasoning. However, an examination of his notebooks finds that he credited his greatest scientific insights not to left-brained logic, but to his right-brained creative daydreaming instead.

How can we innovate enough new products or services and create enough new startups to achieve economic expansion if our society, our schools, continue to curb our imagination and punish our daydreaming? Creativity is the fuel that the left-brain needs to power the necessary actions. The right brain gives us the “why” and the left brain gives us the “how.”

Those who cease to daydream can’t see opportunities even when they’re right in front of their nose. You’ve heard me say this before and I’ll repeat it again: Big changes start with a thought, not an action.

Take a look at the following list of brain functions. Can you see how success is limited when only 50% of our brain gets regular exercise?

Left brain functions: Right brain functions:
Logic Emotions, intuition
Forms strategies Presents possibilities
Sees the parts, specifics, details Sees the big picture – relationships among the parts
Breaking apart Putting together
Present and Past Present and Future
Time-bound Time-free
Safety Takes risks
Analytical Creative, Holistic
Numbers, Written language Pictures, Insight
Reasoning Imagination
Scientific skills Awareness
Sequential Simultaneous
Literal Contextual, Pragmatic

Do you dislike your job? Are you feeling stuck in a rut and powerless to do anything about it? Perhaps you know what you want to do but your big but problem gets in your way. Is your logical left side telling you “this will never work”? If so, remember that analysis and judgment (left brain functions) can get in the way of creativity, insight and imagination. That’s why when you brainstorm, it’s crucial that you suspend judgment while generating ideas.

I urge you to join me and re-ignite your imagination. Here are a few ways to give your oft-neglected right hemisphere a little love:

A toast! To our right brains!


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Cash For Clunkers Ends Monday: Here’s Why I’m Keeping My Clunker

Quick and sloppy post here — I have timely news and advice but only 10 minutes to share…

The Cash for Clunkers program ends on Monday, but I won’t be spending my weekend tramping through car dealerships. Here’s why:

  • My clunker is worth more $ now because so many cheap cars have been destroyed. I won’t have any trouble selling it for a nice price, by owner, later.
  • It’s no deal to buy a brand new car … then pay for the instant depreciation that occurs as soon as you drive it off the parking lot. For the best deal, I buy my cars when they’re 1-2 years used, still under warranty, after the original owner has paid for the initial depreciation hit.
  • Yes, it’s a gas guzzler, but we drive only 10,000 miles annually. It would take a loooong time to hit the breakeven point between the gas savings and the extra expenses associated with buying a new car: purchase price, increased registration fees, higher insurance premiums, etc.
  • Like everything else we own, we have taken excellent care of our clunker. It’s clean, reliable, comfortable and still looks great. Frankly, I couldn’t bear to think of it being destroyed!
  • Once the Cash for Clunkers program is over, new car prices will likely come down for other reasons — namely, lack of buyers. Therefore, I’m not worried about missing out on a “good thing”. New car prices going DOWN due to lack of buyers AND used car prices going UP due to lack of cheap cars = A BETTER DEAL LATER.

My advice? Evaluate your finances and transportation needs carefully. If you were planning to buy a new car regardless of the program (and the expense), fine, go for it. But if you have a good ‘ol clunker like mine, avoid rash decisions.

Is The Recession Over? My Gut-Check Impressions on the Future of Our Economy.

I’ve been receiving emails lately from people asking questions like:

“Is the stock market experiencing a true recovery or is this just a bear market rally?”
“Do you think we’ll see a V, W, U or L shaped recovery?”
“Should we expect deflation or inflation?”
“When will my house be worth as much as I paid for it?”
“How should I invest my money? Stocks, bonds, cash, real estate, gold, or foreign currencies?”
“Is the recession really over?”

Some are saying that I’m prescient (have knowledge of events before they take place). As much as I wish this were true, it isn’t, I promise. I got out of real estate and stocks before many others simply because I stopped listening to mainstream and acknowledged the writing that was already plastered on the proverbial wall.

Like many of you, I hear and read convincing forecasts made by a variety of so called experts who support opposing arguments and recommendations. And each time, I try like hell to take a step back and take a gut check. What seems to make the most sense to me? Is there evidence to support it and if so, who or what is the source? What emotion am I feeling and what does this emotion “want” me to think? What is the worst thing that can happen if a particular forecast comes true? How can I reduce the risks associated with various outcomes? And last but not least, what decisions will allow me to sleep well at night?

I’m hesitant to share my recession outcome opinions with others for a few reasons: 1) I don’t want anyone to make decisions based on my guesses, 2) Discussion of possible outcomes often turns to politics — and political discussion tends to get overheated, 3) Some might take perverse joy from pointing to this post in the future, with a wagging finger, telling me how wrong my guesses ended up.

But I’ve decided that I’m as entitled to guesstimate forecasts as anyone else, so here it goes, for nothing more than entertainment value and for exposing my potential bias. Normally I provide hyperlinks to information, statistics and educated opinions that support my writing, but not today. If you want to read the news or hear what the “experts” are saying about this stuff, use Google, turn on the boob tube, crank the radio or grab any newspaper. There is no shortage of opinions thrown about. Please come to your own conclusions.

Here are my gut-check guesstimates on the future of the economy:

I think the stock market will climb a bit more, then retest the March lows. Minus some funky blips, I think we’re in for a long “L” shaped recovery; or really, one that looks more like a long bathtub:

(March ’09)    /\_____________/    (several years later)

Note: The bottom of my tub diagram should have an overall slow gradual curve to it plus a few wicked and jagged up-down points but I don’t know how to illustrate this with my keyboard. My bathtub edges should look taller, too. If it wasn’t so close to my bedtime, I’d draw you a picture instead…

I think we’ll continue to experience deflationary pressure. I think the Fed will continue to “stimulate” the economy but will face an upward battle trying to make it stick. If and when deflation is curbed, measures will be needed to tighten the money supply to prevent hyperinflation. I think these measures will be taken. From what I understand, it is easier to curb inflation than it is to stop a deflationary spiral.

I think housing prices have further to fall in most areas. Besides the probability of an overcorrection, Baby Boomers are beginning to hit retirement age and because much of their net worth in real estate and stocks has been wiped out, they will be downsizing en masse. McMansions will languish on the market or they’ll be repurposed into multi-family or extended-family units. Commercial property will be hit with a sledgehammer.

I think I will continue to stash most of my cash because with deflation, cash is king. When I do buy ETFs (only the ones that are experiencing upward momentum), I will keep tight stop losses in place. I will take a look at the currency market (certainly not my area of expertise) to see whether or not it’s a good fit for me. Overall, during this extremely volatile market, my main focus is capital preservation. This keeps me sleeping as snug as a bug in a rug.

In this economy, I think one of the best places to invest is in one’s own skills and education. I think vocational schools will see an increase in enrollment while universities see a marked decrease.

Entrepreneurs most likely to succeed will be the ones who bootstrap, sell low-priced necessity items, entertainment or services and keep overhead extremely low. Most of them will operate from in-home offices.

Because I think prices will continue to fall, I will continue to put off large purchases.

And finally, as painful as the process is likely to be, I think the Great Recession will ultimately be the Great Shake Up our society and planet needs to get on the financially and ecologically sustainable track. (Wow, that’s a mouthful.)

Okay, now it’s your turn. What do YOU see in your magic crystal ball? Please share your opinions and guesstimates in the comments. Have fun and play nice.

Relevant Post: Hyperinflation or Prolonged Deflation? Coping and Investing Strategies For Either Scenario

Mailbox: Outsourcing Edition

“When the economy tanked, I was forced to come out of retirement and work as a taxi driver.”

Photo: Visit Puppies Are Prozac for a dose of adorable, funny animal photos to chase the grumpies away.

Readers’ Questions Answered:

“You mentioned being better at the business side of things, but what did you do to help your husband make more money in the same, or less, time? ~Gregg

My husband is a third-generation construction tradesman. During his twenties, my husband worked as an employee for hourly wages, earning $20,000 to $35,000 annually. Meanwhile, his boss made several times as much revenue off of my husband’s efforts.

At age 30, my husband quit his job, affixed a rooftop rack onto an old Econoline van and became his own boss. After a year or two, his annual net income climbed to $60,000 before leveling off. He was on the right track, but for the hours he worked, he wasn’t earning what he could.

I had spent my twenties bootstrapping a couple of small businesses. I loved the creative process, the networking, the number crunching. After selling my businesses, I reviewed his business operations and found inefficiencies. My husband is an excellent tradesman with fantastic people skills; however, the math and minutiae of business management wasn’t his strong suit. Thankfully that’s where I shine so we joined forces and doubled the plumbing business’ annual net income to $120,000 the following year.

My husband is awesome with mechanical problem-solving and people; I have a talent for brainstorming ideas, analytical problem-solving, and implementing a sound plan. My husband and I both have different strengths that we bring to the table and together, we make a great team.

Statistically, the majority of millionaires are self-employed business owners. But it’s difficult for one entrepreneur to wear all the hats. Stick to what you’re best at doing and get help with the rest.

I’ve been outsourcing various tasks since I was 14 years old. My two siblings and I hated spending our weekends off from school cleaning the house, so the three of us pitched in equal shares from the money we earned from babysitting / paper-routes / dog-walking to hire a weekly housecleaner. Since we were better at our after-school jobs than we were at cleaning house, it made sense for us to do so.

I still use a housecleaner; I have a bookkeeper who comes to our home weekly to pay our bills, balance our checking accounts, file papers and send correspondence; and I just hired a personal assistant to help me tackle other tasks I’m not good at or don’t enjoy doing myself. When we’re really pressed for time (like after we returned home from China with our new daughter), we hire someone to stock our freezer with ready-to-cook meals. We hire subcontractors to do the work we aren’t good at — or don’t want to do — for our various businesses, too.

Outsourcing allows my husband and I to wear the hat that fits us best. As a result, we make more money AND have more free time to enjoy it!

You can read more of my tips (and others’) on outsourcing in a recent interview by US News and World Report.

“What are your favorite personal finance books?” ~Kelly

Here are my top 3 all-time favorite books:

  1. Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century
  2. Wishcraft: How to Get What You Really Want
  3. The Millionaire Next Door: The Surprising Secrets Of Americas Wealthy

Click on the following categorized lists to view more books I like:

Books That Changed My Life (Highly Recommended)
Building Wealth
Millionaire Mindset
Personal Finance Software
Raising Money-Savvy Kids
Self-Employment, Small Business
Simple Living, Saving Money, Frugality

These titles are offered at Amazon but many of the titles can be found at your local library, too. Shop at Amazon.com from my store link and I’ll use my referral fees to help small businesses operated by working, impoverished women through Kiva.org.

Online articles that captured my attention this week:

What If You Don’t Plan to Retire? Save Anyhow! @ Get Rich Slowly

Why It Could Take Years to Recover @ The Motley Fool

New HGTV show gives homeowners the cold truth @SFGate

(photo by ff137)

Realtors Might Not Have Your Best Interests At Heart

I made contingency-free, cash offers on three different houses this week. I used recent sold comps (comparables) and price-to-rent ratios to calculate a reasonable price.

All three listing Realtors refused to present my offer to their sellers “because my bid wasn’t close enough to their asking price”.

Even though Realtors are legally required to present all offers, sometimes they don’t.  If I was in the mood for it, I’d get stinky and insist upon it. But obviously, I know these Realtors won’t present my offer in a positive way to their clients. I’d be wasting my time. My contingency-free cash offer might be good for their seller, but the lower price would mean a lower commission to the Realtor…

The Realtors in our local market appear to be in denial about the state of our current economy and still have their heads in the sky about house valuation. Houses are getting contracts, then failing to close because they fall short when it comes time for loan appraisal.

During my housing search, I’d ask the listing Realtor how they arrived at their price. What comps (comparable sales) did they use? Most of the Realtors told me they used “active comps” (houses currently for sale) rather than “sold comps” to set their price!

…so what that those overpriced active comps have been languishing on the market month after month…

Their rational went something like this:

“It isn’t fair that appraisers include foreclosures and short-sales in the sold comps. They haven’t walked through those houses to compare interior finishes and condition with the house we are selling.”

Helloooo? Appraisers have NEVER walked through sold house comps to compare finishes and condition. Why should it be different now? Furthermore, appraisers can’t use active comps in their appraisal report.

Here are some of the other ridiculous things we were told:

“It’s not a house, it’s your home. Your daughter needs a home.”

Wherever you share love and laughter is home. Calling a house a “home” is a manipulation of your emotions for their profit. As I’ve said before, whether you pay rent to your landlord or pay interest to your mortgage company, you are buying shelter.

“You can’t paint your walls when you rent.”

Why not? We rent, we paint! If your landlord doesn’t care for the accent colors you’ve chosen, simply paint those walls back to white when you move out. Or use white walls as a backdrop for colorful furnishings.

“Real estate is local. Our local market won’t continue to suffer like the national market is because….. (fill in the blank with an odd assortment of rationales)”

Yes, local markets do vary. But lending is global and loans are harder to get. As long as credit and lending standards are tight and unemployment climbs, house prices will continue to drop everywhere.

“Mortgage rates are low. Hurry! Buy now before interest rates goes up!”

Think about this one: What will happen if/when mortgage interest rates go up? I’ll tell you: Buyers will qualify for smaller loans. This will dampen house prices even further. We can pay cash for our next house so the higher the mortgage rate is, the lower the price, so all the better for us.

“Rents could go up, but your mortgage payment will always stay the same.”

My response to this one could easily fill a whole ‘nother post, but let me just say this for now: Rents are limited by the amount of money people earn — rather than how much they can borrow. Besides, mortgage expenses do increase over time: think maintenance and repairs, property taxes, insurance, HOA fees.

We are renewing our house lease. We will compare our cost of renting versus buying again next year.  If our local Realtors are still playing these silly games, we’ll focus our search to properties listed for-sale-by-owner. Undoubtedly, house prices will have dropped even further by then, making it easier to win a favorable bid. In the meantime, we are happy to be home.

Read more housing crisis articles:

When Should I Buy a Home? Have We Reached Bottom Yet? What Is The Right Price? written by me
Why Downsizing To A Smaller Home Can Make You Happier written by me
Can’t Sell Your Home In Today’s Market? Here Are Some Suggestions written by me
10 Things Your Real Estate Broker Won’t Say by SmartMoney
Housing Crash News from Patrick.net