Housing must be nearing a bottom..
August 23, 2010
– Comments (23)
Because now I'm starting to see more articles about how housing is a lousy investment and no one should buy a house. Anyone who's been paying attention knows that this statement is just a wrong as home ownership is always better than renting. Both statements are just flat out wrong. But that doesnt stop the pundits.
Case in point. I saw this article posted by one of my friends on Facebook this morning:
Seven Reasons Not to Buy a Home
See full article from DailyFinance: http://srph.it/9l2X2O
The writer starts the article off with:
After the fall that housing has suffered, I think that that, as an asset class, housing will probably be a decent investment going forward. But nobody should ever consider owning a home.
I just commented on someone else's blog about the use of "absolutes" in giving advice: Always, never, only, every, nobody, everybody, so on and so forth. Blanket statements like that ruin your credibility. Simple fact is homeownership isn't for everybody. But that doesnt mean NO ONE should own a home. The article goes on to explain the downsides of homeownership. Yes there are some cons to homeownership but there are also cons to renting. As with any financial decision you must weigh the pro and cons before entering into any transaction.
Then theres this article by the well respected NY Times (sarcasm intended).
Housing Fades as a Means to Build Wealth, Analysts Say
"There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow.
Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.
Really Mr. Humphries? Really. And how many years did it take you to figure that out? My understanding is, up until the housing bubble, housing generally increased at the rate of inflation unless something extraordinary happened at the local level.
But thankfully there is some sanity out there. This Yahoo Tech Ticker echoes my sentiment on the current and future housing market.
Now They Tell Us: Experts Say Housing Is A Lousy Investment And Always Will Be
But wait. Just a few years ago, weren't the experts saying that housing was always a great investment? That house prices would always go up? Yes, they were. [My sentiments exactly]
One thing you can be sure of with respect to market punditry is that experts will extrapolate recent trends into the hereafter. As will most people, actually. That's why, no matter how many times markets overshoot, people get burned.
But are the experts right this time? Will housing always be a lousy investment?
Of course not
At some point, house prices will fall far enough that housing will become a very attractive investment, just as it was in the early 1990s, before the great housing boom began.
At that point, housing will probably be one of the greatest investments ever because it will actually be cheap. In many areas homeownership will actually be cheaper than renting. (Currently in my area it is not.)
The key to buying a home is, was, and always will be
1. Location
2. Don't overpay (either through price or interest rate) and
3. Buy what you can reasonably afford.
Don't worry about the house appreciating in price. Its a place to live for crying out loud. If the price does appreciate then wonderful. But we need to get out of this mentality that we need to trade houses like stock.
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