I was talking to mama about the wedding (as always!), and mom offered me some financial advice. My parents are very, very conservative. They're never had stocks, just savings and bonds. Mom knew my 401(k) is stocks, and she asked how it was doing. I told mom that it was down 4K, but it was no big deal and I had a long investment horizon. Then came the wisdom.
Mama: You know, inflation can eat you for lunch if you have saved all that money. I think we're about to see some serious inflation, like in the 70s. It might be better to lock in your house now, and invest in a couple years.
I don't claim to have the expertise to know if real estate is more inflation proof than stocks. I do know inflation is a huge deal. It's why I hate those stupid stats that Dave Ramsey throws out where every car/boat/college degree costs you a million dollars at retirement. A million dollars at retirement is not close a million today. And if mom is right, it will be even further off.
It's interesting to think that in a world where cash is quickly losing value that land is not. I think there's something to be said for both that logic and for that emotional peace.
9 comments:
You are wrong. Real estate -- land and houses -- can lose their value. As you know, falling real estate prices are a major contributing factor to the whole economic mess the country is in right now. The market may not have bottomed out yet. I'd advise staying a renter for now. You'll have added flexibility and lower overhead in case something happens to your job.
The problems we are experiencing today are the result of everyone's Mom, Dad, friend, preacher, etc. telling anyone with a pulse that they should own a house. No offense to Mom but I wouldn't be taking her advice just yet.
I agree with your mom. Homes have finally come down to reasonable prices. Most people who bought homes in the last 5 years or so did it as an investment. If you're buying for a place to live & start a family, I say go for it. It is a satisfying feeling to own your home.
Right now, yesterday, today, tomorrow and going forward is a good time to buy a house, if you can afford it. The big problem we had, and I'm guilty of it too, is the down payment. Unless you have 20% to put down, the payment isn't more than 25-30% of your take home income, don't even bother. House values will go back up over time and they can go down sometimes. I've seen mine go up and down in value.
I also think a million dollars at retirement could be enough if you have no debt, a paid for house, and the long term health care/insurance in place. Living off a small percentage of it each year should be enough to last roughly the last third of one's lifetime.
If you can buy something, afford it, and plan to hold on to it for a while I think it makes sense. I also think that having peace of mind is huge in times like this.
Why are you buying it? A place to live or an investment?
It can lose money. But buying it to live in because you will stay there is not a huge deal.
I have no illusions of flipping anything. I would buy only if I thought I could live there for five years.
Prices haven't really changed much here ever. No bubbles, just slow and steady.
given our climate I would really weigh what might make a house here extra pricey to maintain vs renting: huge ac bills for most of year/huge water bill to keep lawn growing/lawn mowing/ant fighting/super high property taxes/etc
I disagree with Barb about real estate. Yes, there are downturns in the market which is what we're experiencing. We felt this personally when we were selling our house for nearly what we paid for it 2 years earlier. However, real estate almost always increases in value (unless you're buying in Detroit) eventually. Look, there's no magic bullet or insurance policy for anything related to investing. You research, follow your gut and hope for the best.
Jerry
www.leads4insurance.com
Post a Comment