#1 Homes are way to expensive compared to average salaries #2 High unemployment risk. No one wants to buy a house today if they could lose a job tomorrow. #3 Risk of relocation due to layoffs and consolidation of jobs, With the limited liquidity of homes and wide bid/ask prices it would be devistating for someone to buy a house and be forced to relocate and unable to sell. Too many risks. Trying to artificially force housing prices up with tax credits,etc.. is not the solution. We need to let the markets correct naturally and let the bad banks fail.
This advice will help, 1. Don't buy a bigger house than you absolutely need. 2. Live in it until its payed for. 3. Made the house your primary investment. 4. Pay as many principal payments each month to shorten the length of the mortgage. Worked for me. Took me 6 years to buy my first house.
You know I thought like you for a long time. I could pay off my mortgage tomorrow. Here's the problem. 1. Paying off my mortgage would liquidate almost all my liquid net worth. 2. I put down a larger than normal deposit and the house have lost a small amount of money in 6 years. So I could have made more money in a CD. Yes I do know about all the money saved on interest. I have a 15 year note. 3. If I want to move I have to wait until someone wants to buy to get my money. Not liquid at all. Its only fiction, maybe not?, but there was a recent CSI Vegas about a guy whom owned his house free and clear, put all his money in the house and the neighborhood tanked because of the downturn. He was now a prisoner in his home with bars on windows and no way to leave because no one would buy it. So yeah, believe me, I am all about no debt and living frugal, but I just wanted to add some context to your point.
I disagree with all 4 points. (1) Changing houses later is expensive, buying a house that will meet current and expected future requirements is wise as long you don't buy more house than you can reasonably afford. (2) Why? (3) Its a lousy investment (4) Depends on your situation but since fixed mortgage rates are at record lows, mortgage interest is tax deductible and there is a reasonable chance of serious inflation in the future I would advise the opposite - make only the required payments, no extra principle payments. Unless you aren't disciplined enough to save/invest (e.g. if you don't make the extra mortgage payments you will just blow the money) then for many people it makes sense to not accelerate the payoff.
I dont understand the whole buy a home and 80% of your salary go to paying the home and fixing it up,insurance etc.. And live like a prisoner. I would rather rent, travel the world and enjoy life.
I have rented in the past apartments anyway. In the US apartments are made crappy. You can hear almost everything between floors. In Europe they are mainly solid concrete so you can't hear your neighbors. In the US you generally get better neighbors in a housing community with owners. In Europe most rent so you can still find quality neighbors in an apartment building.
I disagree with paying off the house. You could be paying off the house with valuable dollars today than the less valuable ones tomorrow, if inflation were to pick up
Exactly, if you think we are headed towards inflation, having a big fixed rate mortgage is a good thing.
I think house prices will deflate. They have to. The prices reached unrealistic levels. The economy will be better off if homes reach 1999 prices. The only folks who suffer are the banks, this is why the whitehouse is desperately trying to figure out how to reinflate house prices to 2006 levels. Low house prices means more disposable income and more money moving around the economy instead of a large chunk of cash used for servicing a mortgage which ends up in a small group of too big to fail banks.