Certainly not. I strongly believe in the value of homeownership if and when the time is right. Homeownership, generally has many benefits such as forced savings (if you don't have a interest only or negative amortization loan), and increased stability in communities. While homeownership is certainly part of the 'American Dream;' In bubble markets it can easily become an American Nightmare. Buying today, in the bubble markets at near peak is financial folly. Be warned!
Given the last quarters' annualized 5.3% GDP growth, how can you continue to predict that a recession is coming soon?
Recent GDP growth has been largely built on an 'empire of debt.' The debt is being created in the form of US Treasury Bonds, mortgage back securities and credit card debt. In May, job growth was just 75,000 which is well below the 150,000 new jobs required per month just to keep up with a growing labor force population. "Outstanding household debt doubled to more then 10 trillion between 1992 and 2004, even adjusted for inflation (Empire of Debt, p 293)". Simply put, there are too many things that are unsustainable in the US economy. As the housing market continues to decline, it will push the US economy over the tipping point and solidly towards a recession. In 2007, the US economy is very likely to be in the midst of a recession.
Who is you least favorite housing 'expert'?
David 'Soft Landing' Lereah who is the chief economist for the National Association of Realtors. Mr.
Some have called you a prophet of doom. Are you?
No. I am not a prophet of doom. I am merely a prophet of upcoming economic gloom. A prophet of doom might say we are headed for a depression. My prediction is for a recession, not a depression. Thus gloom, not doom.
Posts
I dislike the term "home ownership."
ReplyDeleteNot very many people own their homes. The question for most people is not "is it a good time to be a homeowner?" The properly worded question is, "is it a good time to be a home mortgagor?"
People assume taking out a loan for a home is a riskless transaction, a sure thing if you hold on for 10, 20 years or more. It is not. You have to weigh the price of the asset vs. its intrinsic value vs. the terms of the loan. With rising interest rates, the risk of home mortgaging is high -- high asset price cause high interest payment and raises the risk of being upside down on your loan for years to come.
On the other hand, home ownership has few of those risks. Yes, the market price will go up and down but there is no "getting upside-down." So, if you got the cash or the house, enjoy home ownership. If not, be careful taking out that loan.
I have a strong, irrational need to own a little piece of land, and would not be happy renting. I bought a place as soon as I could afford it (with 20% down and fixed rate mortgage, of course...). Rather than rent, I prefer to own a smaller place, where I feel free to make whatever changes appeal to me, and where I can entertain the idea of this, over time, becoming a family home, a reference point for children and some day even grandchildren. That's the dream...
ReplyDeleteHowever I recognize the hassle of maintenance and the fact that I spend more than I should on home improvement projects rather than on myself. And also that nowadays the "family home" image is a powerful ideal but is unlikely to become a reality.
I much prefer to own. I find it satisfying in a way that renting cannot equal. However, I am also very satisfied with the fact that we sold our house and are banking the money until prices decline. I'm living in a house I could never even come close to affording and my rent is the same as my former mortgage. I'll be thrilled when I own my own again.
ReplyDelete