Basic Housing Economics

Posted on October 18, 2011 by

1.  The Basic Premise of Home Ownership – That Homes Increase in Value Over Time – Is Sound

Basic Housing EconomicsThe housing bubble was created by an irrational, widespread belief that home prices would continue to go up and up — an extreme corruption of a generally valid premise. “It’s a totally sound premise that houses will become worth more over time because the dollar is becoming worth less as the financial landscape worsens.”

2. Buy Low (And Now Would Be a Good Time for That)

Now would be a sensible time to buy a home, in light of record-high affordability: “Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.”

3. But Don’t Wait Too Long To Take Advantage of Low Prices

When conditions make an investment — in stocks or in a home — particularly advantageous, but do not hesitate too long. There is the likelihood that market prices “will move higher, perhaps substantially so, well before either sentiment or the economy turns up.”

4. The Smart Way to Own a Home Has Three Elements

Those elements are fixed mortgage, affordable payments and long-term hold. Simply to get a meaningful down payment and gear fixed monthly payments to a sensible percentage of income.

5. Buying Your “Dream Home” May Lead to Nightmares

A house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender — often protected by a government guarantee — facilitates his fantasy. Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

Joe ThompsonJoe Thompson is an experienced business and financial consultant with over 28 years experience. Joe is also a sub group leader for the Atlanta REIA weekly Haves and Wants Meeting, Atlanta’s premier networking meeting for Real Estate Investors having facilitated over $120,000,000 in transactions over its 5 year history.

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