‘How Are You And Your Spouse Preparing For The Crash?’
One reader wants to know how you are getting ready for a cooler housing market. “How about a thread on how each of us, or someone we know, is specifically preparing for the housing crash, or in many of our opinions, a recession? As for preparations, my wife and I have been downshifting into a lower consumption lifestyle as fast as two small children will allow.”
“A couple weeks ago, I sold my second car while keeping an older car as my daily driver. We used some of the proceeds from the car sale to retire a little debt that we had accumulated, leaving us with our mortgage as the only debt we have. We’ve also put some money into making our home much more energy efficient. We are hoping to stay put until the kids are gone, so we’re playing for the long term.”
Another sees a disagreement on the home front. “How do you keep your spouse from dragging you to the marriage counselor because she’s threatening divorce because you don’t want to buy an overpriced house and she does (I am assuming that is the typical case; maybe in some unions the female is the bearish one)? Any relationship counselors out there who are also renters? I think you are very needed!”
Then came the replies, “No couselor here, just observation. I find a high correlation between people (both men and women) who have poor spending habits and those who are not paying the bills. If your spouse understands math, then make sure that they are involved in the family finances.”
“My wife is excellent in math, but I ended up with the finances in the division of labor. I find that a monthly plot of net worth and a discussion of what it would take to retire early is quite effective. Now if your spouse doesn’t understand math, then you have quite a problem.”
“The husband and I talk about RE a lot and both read this blog, and we are very much in agreement that we don’t want to buy an overpriced house. One thing I would really appreciate is a more gender-neutral approach to this discussion. I’m getting a little tired of seeing women get cracked on for making irrational housing decisions. Is there any hard data to indicate that this is, in fact, frequently the case?”
“Actually the only research I have seen about gender and investing suggests that men are more prone to make stupid investing mistakes (and my wife would probably concur!). You may be misled by real estate industry propaganda which stereotypes the smart wife who knows now is the right time to buy a home and the dumb husband she is trying to convince. My wife and I had no trouble agreeing that 1996 was the right time to buy a home in CA, and that now is not.”
“I’m not buying that propaganda, but I see that attitude reflected a fair bit here and elsewhere. I’m sure it’s just a reflection of the old stereotype that women are irresponsible with money and like to shop. For some reason that persists even though women are often, now as in the past, the ones who end up managing family finances. Still, as cereal pointed out, both the mister and the missus have to sign the loan papers, and I have a hard time believing that there are that many henpecked hubbies out there.”
“I’m not sure why that assumption is here. The only time the spouse HAS to sign is when 2 incomes are needed to make the mortgage payment. Otherwise it has more to do with ownership (divorce, inheritance) issues.”
“The husband and I talk about RE a lot and both read this blog, and we are very much in agreement that we don’t want to buy an overpriced house. One thing I would really appreciate is a more gender-neutral approach to this discussion. I’m getting a little tired of seeing women get cracked on for making irrational housing decisions. Is there any hard data to indicate that this is, in fact, frequently the case?”
Hard evidence located here:
Link
Priceless….LOL!!!
I’m very much about gender equality and not “bashing” either way, but I confess I chuckled at that.
You’re all about gender equity. So I assume you would have chuckled if the roles had been reversed.
I’m not perfect, but at least I’m big enough to admit I’m not perfect. Sheesh. Lighten up, dude.
Hey, I’m light. I just chuckled at the mixed message in your post. No offense meant. We should all be able to laugh at ourselves. We’re all imperfect.
But some of us are more or less imperfect than other.
“I’m getting a little tired of seeing women get cracked on for making irrational housing decisions.”
I don’t think you should worry your pretty little head about things like that, sweetheart.
“my wife and I have been downshifting into a lower consumption lifestyle”
It’s good to see that some actually grasp this…..
We’ve been doing that for years. Still have the bedroom set I had in college. I just don’t care what people think, never have.
I remember in 1990 seeing a cover of Newsweek, “The New Austerity” I’m sure we’ll see something similar in the years to come.
Ever read, “Your Money or Your Life?” Great book.
I hope you have new pillows and a new mattress since college. You don’t want springs to be poking you when you sleep or jump on the bed
New pillows, yes. Mattress is circa 1994.
Got ya’ beat ~ I’m still using the bedroom furniture (sans bed) I got in 8th grade (I’m now 40). We moved into a new (used) home that year and I got stuck with the smallest bedroom so I got the new furniture. It’s moved back and forth to Chicago twice (in my late 20s/early 30s). Been repainted (it’s white furniture) several times. Am now using it in my son’s bedroom (was good nursery furniture - plan on repainting another color and/or using decals as he gets older). Queen of frugality here!
Hey, I can one up you. I have a bedroom set from the 1930s that I got for free when I graduated from college (came with the wire springs and a grey striped mattress), AND I have my folks 1950s bedroom set, and their dining room set they bought used (circa 1925), which is totally groovy.
“Actually the only research I have seen about gender and investing suggests that men are more prone to make stupid investing mistakes (and my wife would probably concur!).
We sure can tell who is wearing the panties in your house.
There are good papers from some of the business schools to indicate that women are better stock traders than men. I’ve personally seen a lot of men crash and burn because they can’t get their ego out of the picture.
Q1. Are you differentiating between trading and investing here?
Q2. Were the papers talking about average performance or extreme performance?
I have read material indicating that men have a lower average performance than women in a whole host of areas, but also a far higher standard deviation so they dominate the outliers at both ends. Women in general also tolerate less risk.
If you put those theories together, they suggest that women would be better investors, especially over the long term, but that most of the top traders would be men.
“We sure can tell who is wearing the panties in your house.”
Don’t both men of the house wear panties in NJ and NYC?
Edible underbritches are really in I hear
Ya mean men don’t usually wear panties? Damn, not again.
Thongs for men are the new thing.
Maybe if you live in Europe. I was driving along the beach here and a man stepped right out in front of me to cross the road. I could tell he wasn’t from around here by the speedos he was sportin. I think I was more horrified than he was.
I’m a man and I wear thongs, but thongs are not panties.
“I’m a man and I wear thongs, but thongs are not panties.”
You must be from NJ or NYC.
New Jersey or New York? What a strange thing to say. I’m from Oregon, and they have thong underwear at Wal-Mart here, so I doubt I’m the only one.
I wear them so my wife can’t complain about wearing them.
Either way HD 74 Man…
People get their panties in a bundle when it comes to discussing housing bubble talk.
Actually my comments had nothing to do with my own household, but simply reflected some academic research that showed that women were smarter at investing than men. I would offer you a citation, but you are presumably too stupid to understand it, so I won’t bother…
Careful what you say to him Stucco. He’ll beat you with his purse.
I am eliminating all debt, buying gold and accumulating cash.
Do you (or others) have any good suggestions for insuring cash against the long-term risk of a return to 1970s-style inflation? (There is some risk we are already there, but the currency has not fully priced it in at this point…)
“insuring”? Well, there’s no gaurantees out there, that’s for sure. Anyone who tells you different is either lying or doing something illegal, or both.
Also, if you live next to hd74man, invest in Kevlar.
Don’t forget your AK-47’s.
Romanian models can be had for $400.00.
I just bought a half dozen Czech mfg.’er with American barrels and receivers for $588.00 each.
Prices will triple or quadruple when the ban goes back on.
Prices will go to nothing when Hillary gets in and bans all semi-auto “assault rifles.”
what ban? you mean the ban right after hillary’s coronation and the Constitution burning ceremony?
You mean there’s going to be something left of the Constitution in 2008?
Are you like the survivalists in “Tremors”?
My wife and I put our money where our mouths are. We sold our house and now rent. We talk through our money decisions until we both agree on a course of action.
http://www.fortwayne.com/mld/journalgazette/business/14301684.htm
Single women stake claim as homebuyers in market
By Emma Downs
The Journal Gazette
Clint Keller/The Journal Gazette
Carmen Palacios is in the process of buying a larger home with the help of her real estate agent, Scott Pressler. “I want my boys to have their own rooms,” she said.
Before becoming a homeowner, Mary Payne was a faithful renter. Month after month, she opened her checkbook – ballpoint pen clenched tightly in her fist – and, with a grimace, signed a hefty chunk of her bank account over to her landlord.
“Month after month,” she says. “For 20 years.”
It wasn’t until two years ago that Payne, a single mother of an adopted 4-year-old girl, realized how much money she’d actually spent on rent – and only rent – over the years.
“I added it up and was just appalled,” Payne says. “I was a renter for two decades. That’s a long time. The numbers add up quickly.”
So in September 2004, Payne, a local pediatric speech therapist, did what more than a million single women did last year: She bought her own home.
“And after I’d finished the paperwork – when it was all done – I felt this great sense of accomplishment,” she says. “It was as if I could say, ‘I did this. I actually, finally did it.’ ”
According to the National Association of Realtors, single women (like Payne) bought 1.5 million homes last year. That’s 21 percent of the nation’s homebuyers and nearly double the amount of single male homebuyers, says Pat Vredevoogd, president-elect of the National Association of Realtors and a Realtor based in Grand Rapids, Mich.
“It caught me off guard when I saw those numbers,” Vredevoogd says. “But then I realized that in my own practice, I’ve been working with a lot of single women lately; young women just out of college, widows wanting to downsize, divorced women who are starting over. So, I see no reason why this trend shouldn’t continue.”
Neither does the national government. Fannie Mae (the Federal National Mortgage Association) estimates 31 million single women will be homeowners by 2010. The growing trend is caused – at least in part – by recent social and economic changes for women in society, says Carmen Palacios, 29, a mortgage broker at Freedom Financial Mortgage Corp. in Fort Wayne.
“Women are waiting longer to get married,” she says. “Women are going to college and establishing careers. Single-parent homes are on the rise, and there are a lot of empowered single moms out there who are ready to make the dream of home ownership come true.”
Palacios, a single mother of three, bought her first home at the age of 24. Overwhelmed by the paperwork involved in buying the three-bedroom house, she asked her mother – also a homeowner – to accompany her to the closing.
“When you make a large investment like that, you need support,” she says. “I was lucky. I had a great Realtor and my parents on my side.”
Palacios is in the market to upgrade to a larger house, she says.
“I want my boys to have their own rooms,” she says. “My life has changed so much since I bought my first home, I’m ready to move forward. And because I’ve done this before – and so many other women are also doing it – it’s not as intimidating this time.”
The increase of single women home uyers comes after years of discrimination by banks and real estate agents. Before the Fair Housing Act was amended in 1974 to include gender discrimination, women’s incomes were often discounted when applying for a mortgage loan, says Marlene Schultz, a Realtor with Re/Max Results.
“When I wanted to buy my first home, (the lender) asked me what kind of birth control I was using,” she says. “I was astounded. This was the 1970s. The bank wanted to know how reliable my income was, even though I had a degree and was a teacher at the time. They expected me to stay home and raise my kids, no matter what.”
Since becoming a Realtor 21 years ago, Schultz has cultivated a reputation as a Realtor who works with single female clients.
“I have always had my share and more of single women buyers,” she says. “Having been single most of my career, I understand what they need and what they’re comfortable with.”
Locally, Schultz says most of her single female clients are recent college graduates, but not single mothers.
“Many single mothers aren’t aware of what’s out there to help them financially,” she says. “They wouldn’t think of going to a lender to find out what kinds of programs are available to them. But I think that’s going to change soon. There are so many government assistance and first-time homebuyers programs out there. And they all lend themselves well to single women homebuyers, with and without children. Single women are definitely a market for banks, home builders and real estate firms now.”
So in September 2004, Payne, a local pediatric speech therapist, did what more than a million single women did last year: She bought her own home.
“And after I’d finished the paperwork – when it was all done – I felt this great sense of accomplishment,” she says. “It was as if I could say, ‘I did this. I actually, finally did
Like uh, goodie for you (snicker)…
One more FB…
Goes to show how far removed from the street the stupid reporters are, to throw it out the fact that there’s a million women who have bought at the absolute top of the market.
Like this is something you want to crow about?
Course when it all goes in the shitter, the spin will be that it’s all those “male” mortgage O’s fault who took advantage of a woman’s naivete and non-sophistication.
Nothin’ like burnin’ both ends of the candle.
Just wait till 30 years or so from now she adds up how much INTEREST she’s paid.
It’s really unfortunate that 20 years ago she didn’t buy, because that was a great time to do so. I guess we’ll see if the next 20 years are the same or different.
I’m preparing for the crash by a saving more money each month into an Ingdirect account and hedging my bets against by trading Forex (foreign currency exchange).
David
http://bubblemeter.blogspot.com
Good heavens! What are you hedging against? What are you trading? Beware leveraged gambling young man.
yes, i have my crash helmet on awaiting further instructions. let the fun begin!
Here’s what we are doing:
1. We own and are staying in our house - our mortgage debt is only 25% of the home’s current estimated value.
2. We are going to have our basement finished if we can get a reasonable estimate. We simply want the space and can actually put it to good use.
3. We are looking for land prices to drop in northern Maine - we’d like to buy 50-100 acres for about $500 an acre and one day build a cabin there - we love the outdoors and would get a good amount of use from it.
4. We are thinking about moving some money out of the stock market. We’re in our 50’s have over $1,000,000 in 401K’s and its currently 80% stocks. This is starting to bother me.
5. I’m planning on consulting until I’m 70. We thought we’d have more money saved by now, but then the stock market tanked starting in 2000. So I’m resigned to consulting, which I don’t mind and sort of enjoy sometimes. I basically don’t want to touch our savings, so I’ll work longer than expected.
Northern Maine? You better be a pretty hardcore outdoorsman if you’re seriously considering that! (Your spouse should be, too)
. We are thinking about moving some money out of the stock market. We’re in our 50’s have over $1,000,000 in 401K’s…
Don’t ever brag up this kind of info to the locals. You’ll return from a vacation sometime and find your cabin burned down.
Hard-core Mainer’s don’t like success too much.
BINGO. Or you’ll find yourself looking down a romanian AK.
“Hard-core Mainer’s don’t like success too much.”
Guess you don’t count the seacoast. Your comment is only true if you hang out with the unsuccessful ones. (Former gf of ME boy and friend of many ME-iacs)
My wife and I recently moved from Texas to Seattle (a job transfer). We didn’t know the neighborhoods here and naively found “affordable homes” on the internet. However, after we got here we were shocked to find the “affordable homes” were all in bad areas of town and that prices for a comparable home in Texas were out of reach for us. At first we were devestated. I make a 6 figure income and we have plenty of money for a down payment but I am a financial conservative and was simply not going to pay more than 2.5 x my salary for a home using a 20% down 30 year fixed rate loan. Then we discovered this blog and realized it was not us who had been “left behind” by some sort of “new economy” or something, it was a speculative mania where folks who just want a house got swept along into making foolish loan decisions because flippers have bought up so much of the available inventory.
Anyway, we realize now what the right thing to do is and we are in our second rental and have downsized tremendously (CDs/DVDs/Books to Half Price Books, applicances/furniture/clothes to goodwill or given away, and our motto is “portable and light” for anything new we buy. We have about 1/3 the “stuff” we had in Texas and we plan on staying “light”.
While my wife would like her own home, she grudgingly agrees buying at the top is dumb and is adjusting to being a renter. Frankly, I don’t miss the house repairs, taxes, yardwork, and being tied to a location. It sort of feels nice to know I could pack and go with little or no pain.
Still working (at 71+) part time for myself, playing golf (Scotland and Myrtle) and trout fishing (season opens 4-29). Making more money for grandchildren and the widow pismobear to waste but that’s ok. Great grandchild in hopper. Been in RE since ‘68. Survived Carter and Voelker on my resume. Disposing of some assets. Price it right and they will buy. Sellers are upset and still in denial. Telling my old customers not to buy for now, or perhaps 2-3 years. Shills like newspapers, re agents, and lenders still lying to the sheeple.
Pismobear;…trout fishing (season opens 4-29).
Maybe we could trade info…Just sold my drift boat and bought potoon’s instead..I am stoked…Going opening day on the Truckee, May 19th for shad on the Sac, Late June for Smallmouth on the John Day (OR.), and back on the Sac 9/19 & 20 for trout…
Good luck scdave - Tahoe is highest in years. Water at beginning of Truckee is roaring out of the lake. It’s snowing right now 2″ per hour at Donner. Hope you don’t have muddy water for your fishing as the snow melts. Many feet of the white stuff (not as much as in 1846). I think I’ll go above Cachuma on the Santa Ynez below Gibralter this week. It’s open all year.
Hey SeattleMoose,
Good to hear your story. My wife and I moved here from Texas as well in late 2004. Similar experience, and currently renting in Bellevue. Most fascinating to me is how rents here are only marginally higher than in Texas. Sitting tight, and we’ll see where this takes us. Good luck to you and your wife!
The wife and I will rent for 1 or 2 more years, even though we are well qualified to buy, and have VA loan eligibility. We have 1 car and 1 motorcycle, it makes sense since the bike gets 55mpg, and is cheap to maintain.
I will probably purchase a hybid or diesel as my next purchase, depending on value vs. environmental impact and intended use.
No more big V8s for us. Also we are getting lean in our possessions, so we can live in a smaller space. 1200-1500sq/ft tops. No McMansion in our future. We don’t have kids, and have no plans to, so our need for space is mitigated.
We are looking at buying a multi-unit and living in one, while renting the others out. We will have to buy it right, near the bottom of the market…so I figure the 2 year mark. I may not hit it perfect, but so long as I can get in a position where the mortgage is met by the tenants, its a good idea. Many variables there, but that is the plan we have today.
Veritas;……We are looking at buying a multi-unit and living in one, while renting the others out.
Excellent !!!….Much better than buying a condo or townhome…Make sure the numbers work and you have sufficiant reserves for vacancy exposure…
Would love a motorcycle for commuting, but that’ll get you killed on LA freeways. Too bad… the weather usually’s conducive.
I started my shift in allocation in the summer of 2003 anticipating trouble (Lessons learned from (1974-1976, 1981-1984, 1991-1995)….May have been slightly early but thats better than being slightly late…
Have reduced my leverage on ALL assets to roughly 20% and increased cash to equal the leverage (20%)…
Had to take a step back (own less now than in 03 & paid some heafty capital gains) but the decrease in leverage and the increase in cash have had the triple wammy effect of increaseing my net cash flow 3 fold…
I’ve gone back to work. (I was a stay at home mom for 12 years) Of couse the age of my children has more to do with that than a housing crash (youngest is 5). All of my income is going into savings (minus daycare). We are used to living on one income anyway. My husband works for the Nevada State Legislator & it would literally take them closing down his department for him to lose he job (due to layoff). My new job is in a hospital, so our jobs are relativity safe (but never say never)
I don’t know if we will have a recession, depression or what. I think it will be veryulgy tho.
I think what people tend to forget (especially in a run-up like we’ve had the last 4 years), is that historically, houses only go up 1 percentage point more than inflation per year. That’s not something people want to hear nowadays when I mention it. The big money in real estate is made is due to the fact that people tend to buy their houses on huge leverage. Leverage can really hurt you in today’s market.
As for you goldbugs, I tend to think you’re even crazier than the housing bubble people. Buy your gold if you must, but please not leveraged. Better than gold would be a basket of commodities. I prefer sugar. There’s a lot of gold out there that governments have. They are dribbling it out as prices increase. The other commodities have real shortages. I’m in Jim Roger’s camp here. Gold can certainly move around, but long term it’s not nearly as good as the others.
>>I think what people tend to forget (especially in a run-up like we’ve had the last 4 years), is that historically, houses only go up 1 percentage point more than inflation per year.
Well, I did that wrong.
Even at 1% at some point don’t you get into trouble? For example, over 100 years at 1% housing costs (in real terms) double. Is that not unaffordable?
It usually reverts to the mean of keeping track with inflation. But these are ups and down, peaks and valleys. I think it will over correct and when it does, it’s time to have your cash handy because it’s time to buy!
Exactly, 1% over inflation is an average. In order to come back down to that, something has to happen. One thing that could happen is that housing could stay where it is in nominal terms for many years as inflation pushes down the value.
By the way, it doesn’t take 100 years of 1% to make a double. I think it’s more like 72 years.
It’s exactly 72 years. Either way, immaterial. After all, in the long run…..
Nope. Exact is log(2)/log(1.01) … approx 69.66 years.
Yeah, never say “exactly” when using the rule of 72. It’s an approximation that works well for common values.
Even at 1% at some point don’t you get into trouble? For example, over 100 years at 1% housing costs (in real terms) double.
I think you are correct (except for the compounding, it doubles in close to 70 years.) I think that’s why Shiller @ yale keeps pointing out that housing increases are commensurate with (real) wage increases.
So what stops the increases? Is it when people make the decision to rent rather than buy? A lot of us agree that it has to end, but what is the catalyst for it ending?
When people stop making money. When housing is not a good investment anymore, like now. Eventually the fundamentals catch up and take hold. Rising rates (like we are starting to see now), risk yield (pricing in risk, again bumps up interest rate), massive foreclosures, rising inventory, picky buyers all equals prices dropping. The builders were also making massive profits. They will continue to build until it is profitable no longer, which could be some time.
Michael - “many agree” that it has to end, yes. It WILL end. You’re asking what the catalyst will be - absolutely no one knows, and Jim Rogers would be the first to admit he doesn’t know.
A smart old man (Rogers, maybe?) once pointed out there are three kinds of folks, with respect to bubbles. The ones who honestly just don’t know any better, those who know better but think they’re smart enough to get out just in time, ahead of the crowd, and those who run for cover when they begin to sense, early, that something is wrong in unjustified price increases. The old man, who said, when asked how he got rich, “I always sold too early,” is in the last camp. Dunno ’bout you but that’s where I wanna be too.
Sugar is one of my favorite commodities too. I try to always have a strong position in sugar, as well as butter, cream, chocolate, vanilla, and coffee.
Unfortunately, I tend to eat my losses.
Coffee-based Rum-n-Raisin for me, from my own little no-ice electric churn.
Mmmmmmmmmm :D.
Incomes have more than doubled during that time.
Has anyone else seen this commercial. Makes me glad that I married a wife with similar financial goals and disposition!
Yup. Look at thread 463.
We’ve been getting our finances in order since we got remarried in 2003 - paid down debt and started a “nest egg” that we’ve been adding to every month. When we owned our first house in the mid-1990’s we got our financing through a “special program” for first-time buyers that allowed us to get a 30-year fixed mortgage with only 5% down. Even that was a bit of a stretch for us, plus we had some consumer debt and the monthly payments were on the outer limit of what we could afford at that time. It was extremely stressful, and left us determined to start out with a bigger down-payment (more real equity) the next time we buy.
So we’re saving up for that, and I’m hopeful that if we can keep saving at roughly our current rate and housing prices correct, we’ll have enough for a 20% down-payment with cash left over for reserves/upgrades/repairs, and hopefully a little to invest. We’re reading up on finances and investing, and I’m liking this value investing stuff. If we can remain steadily employed with a reasonable cash flow, I’m hoping we’ll be in a position to start finding investment opportunities “at the bottom”.
Meanwhile, we’re also giving a lot of thought to what sort of home we ought to be looking for, what would be a good balance between size and energy efficiency. (We remember what it’s like to pay for heating in New England.) At the moment we’re living in a 500 s.f. “two bedroom” apartment in Brooklyn, and we would LOVE to have more space, but we have to be careful not to get greedy. We’d also like to have as much of a “low-impact” lifestyle as possible, so we’re reading and thinking about that. I guess this is not really just in anticipation of a downturn but for what we see as a more sustainable lifestyle in the long term.
My wife and I married in 2002, while renting a tiny house in West LA. We actually split the house into two, with a partition enclosing off a nice little studio with kitchen and garage that we sublease out to make the rent much less. We actually lived in that studio for three years while we were in graduate school, and only a couple years back moved into the house side of the house. It’s small, but we like the area and rent is seriously 25% of what it would cost to buy. The house next street over sold last week for $1M.
We were pretty upset when we couldn’t find a single house where we wanted to live (between our two jobs) for what we could afford with a 15-year fixed. That’s when I started looking online to see why the 95th percentile income earner family couldn’t legitimately afford a 0th percentile house. We’ve resigned to renting a while longer!
We both have great jobs now and are retiring some debt that got us through a tough time last year due to a long job search. After this May we will have about $100k in school loans, and they are at a very (
hmm, some of my comments died!
(from above)…low interest rate, about 3% fixed. This is all we owe, and it’s expensive but it enabled our careers. We’re young and are used to living a graduate student lifestyle–so we try to not consume commensurate with our incomes. We’re saving about 4k / month, rolling 4-week t-bills over and over. Once we hit a certain mark, to be determined, I think I might hedge vs. dollar declines by opening foreign currency accounts. But perhaps by then housing will be low enough for us to buy. One can hope!
I don’t want to buy into gold. I got burned 10 years ago buying at $450 and watching it drop to $200. It was just one coin, but it taught me a lesson–don’t invest in risky things when you don’t have enough income to ride out the loss. I had to sell that coin to help pay tuition. Until we owe nothing and live in our own home (free and clear) and have a huge nest egg, we won’t be doing anything risky.
>>Until we owe nothing and live in our own home (free and clear) and have a huge nest egg, we won’t be doing anything risky.
You’re young. That’s when it makes sense to take risks. Get into a variety of investments that have a history of high long-term rates of return and don’t sweat the ups and downs.
I remember the relief I felt when my spouse and I realized that it wasn’t just us and that we really hadn’t been “left behind,” but that the market had been taken over by speculation and exotic financing. Congrats on some wise financial decisions and best of luck to us all!
“I don’t want to buy into gold. I got burned 10 years ago buying at $450 and watching it drop to $200. It was just one coin, but it taught me a lesson–don’t invest in risky things when you don’t have enough income to ride out the loss. ”
What are you, a paperboy? And what kind of coin did you buy too high and sell too low? The low price for an oz of gold was $252, so I’m not clear on how someone conned you out of yours for $200. Oh, and that same coin is now worth north of $600. But I suppose you’d rather have a greenback backed by…um, NOTHING, than precious metals, which are the ONLY financial instruments that do not represent someone else’s debt.
Are you living in a group home for people with “special needs”? Do you sit on the porch with a placid smile on your moonlike face, waving bye-bye at the passing cars?
Precious metals aren’t “financial instruments.” They’re just metals. Gold is only worth what people believe it is worth–I’m not entirely sure why it’s supposed to make me feel better that the government has some piled up in a vault somewhere.
“I would rather be without it,” he said, “for there is queer small utility in it. You cannot eat it or drink it or smoke it in your pipe, it does not keep the rain out and it is a poor armful in the dark if you strip it and take it to bed with you after a night of porter when you are shivering with the red passion. It is a great mistake and a thing better done without, like bed-jars and foreign bacon.”–Flann O’Brien, The Third Policeman
Moopheus> Gold is only worth what people believe it is worth–I’m not entirely sure why
Maybe because alchemy is still impractical, after several thousand years of trying?
I would look at it the other way, it’s not what “gold is worth”. Gold just “is”. The relevant question is, what’s Government-issued paper worth, in ounces of gold. There is essentially no limit to how much paper money that can be printed - our very own Fed chief Ben Bernanke said so. In contrast, all of the gold and silver mines in current production can increase above-ground supply by maybe 1% annually. And that’s if they’re really cranking.
Money is just what people agree money is. Shells. Wampum. Beads. Whatever. No matter what it is, it’s the same–an agreement on how to exchange goods and services.
Money is what you can pay your taxes with - try to send the IRS a gold coin. I am not opposed to buying commodities that have a use, e.g. platinum, but gold is too much an instruments of speculation; jewelery use, even in getting rich India, doesn’t absorb enough gold. Gamble with gold, if you like, but don’t leverage.
The IRS would probably take a government-issued gold coin as payment—at face value, which would presumably be much less than it’s gold-at-market-rate value.
I know goldbugs like to pretend there’s still some relation between the value of gold and money, but the actual demand for gold is still largely driven by the jewelry industry. The price may go up in the short term, but there’s nothing to keep it from coming down again.
If one were to retrace the issuance of paper money he would find gold at the origin. I personally don’t know why gold is considered a store of wealth but on the other hand I don’t understand how electricity works either so I don’t feel I need to ponder this at great length. I do know that cultures outside of the U.S. (India, China, etc) believe gold to be very important. I take that as a hint as to where the price of gold is heading.
The U.S. dollar was backed by gold (internationally) up until 1979. Please look at M-3 to see the growth (debasement) of the dollar from that time period until now.
Everyone here please note your comments and lets all check back in a year or two in this regard. I think we will see some interesting changes in attitudes.
We moved away from CA when the dotcom’s stock options drove housing out of our reach. We don’t have any revolving debt, just a cheap rural area mortgage, and we are saving about $700/mo. We have noticed inflation in the prices of everything we buy lately, but we are not forced to choose, but we worry about some of our friends. We’ll buy something near the CA coast when prices hit bottom, but we know that this is probably five years away, minimum. We feel certain of one thing; middleclass membership is shrinking.
Visited a friend in OC yesterday. They bought a townhome in Irvine for $575 and the friends wife said to my wife on paper they are $100k up in one year.
They were old time classmate. The other finished college, my wife did masters. She also gave my wife advice on investment, risk taking. suddenly my wife was feeling like a bit foolish, because we refused to buy 2 yrs back. (in OC, Ca)
I hope all goes fine for this couple in then long run. In the same conversation, I heard another friend I know , bought for $730K in San Diego and price now is 10% down.
I told her if she wishes, we can buy in San Diego, in the same place where the price has come down by 10%, and she is not feeling bad anymore!
We are saving and being prepared for any downturn in economy.
Do NOT wish that, not even for a chance to buy house at 30% less!
For a 30% off sale on housing, I’m willing to wish for a downturn in the economy. But what I think is more likely to happen than a downturn is some other asset class (or combination of them) taking off into a new bubble.
Men vs. Women’s Home Buying Behavior
From NYT. For Men, a Fear of Commitment
http://tinyurl.com/lblu9
Still, there seems to be a consensus among brokers and buyers who have witnessed the trend that single men, even those whose college diplomas are yellowed with age, gravitate to a lifestyle not unlike that enjoyed by fraternity brothers: relatively free of commitments and rife with male companionship.
They consider buying a home detrimental to their independence, as it tethers them to one location, squelching any youthful fantasy of a nomadic existence. Indeed, for many single men without children, buying a home is a commitment akin to getting married — and they are content to put it off.
Versus women’s attitude towards buying a house.
Single women on the other hand seem more interested in establishing a sense of security, or “nesting,” as several brokers and buyers put it. They consider buying a home an act of independence. It is an asset, a symbol of their financial strength and proof that they need not wait for a man of means to provide them with the security they crave.
This is not a battle of the sexes. It is a battle of semantics. Both men and women view their decision to buy or not buy as a declaration of independence, though they have cultivated very different definitions of “independence.” And as women have more financial advantages than in the past, they are able to realize their desires — and perhaps make up for lost time.
That’s interesting, and refreshingly evenhanded - men’s “Peter Pan complex” versus women’s “nesting instinct”. But how might this change when a man and a woman get married?
I would guess it greatly depends on the dynamics of the marriage and the personalities of the people involved. But as a generalization, I think as men get older they start to shed the ‘nomadic’ gene and start to focus more on stability in a home, especially when there are children. That whole ‘settle down’ thing. Or you could just realize that she was right in the first place like usual.
Men=Freedom
Women=FB
Can’t polarize more than that.
The male/female relationship dynamic is DOA in this country.
THE SECRET TO MARRIAGE IS TO MAKE SURE YOU (THE MAN) MAKE ALL THE IMPORTANT DECISIONS. I HAVE BEEN MARRIED FOR 15 YEARS and so far there have been no important decisions requiring my input….coming dear!!
That was awsome!!!
Ha!
They consider buying a home detrimental to their independence, as it tethers them to one location, squelching any youthful fantasy of a nomadic existence. Indeed, for many single men without children, buying a home is a commitment akin to getting married — and they are content to put it off.
my sentiments exactly! and I’m a woman. Go figure.
I’m a chick, and I’m somewhere in the middle. When the husband and I had our house the first time around, much as we loved the house the responsibility really was overwhelming. There was this sense that it was this huge anchor, not entirely in a good way. So I can understand some people’s reluctance (or refusal) to own a home. I think “the American dream of home ownership” is highly overrated. On the other hand, I miss having that extra degree of control over my home, knowing that I can demo/paint/upgrade/etc. without having to petition some landlord, even if that means calling contractors and paying for stuff myself. I’m not really the mumsy type, so “the nesting instinct” doesn’t really enter into it for me.
Have you made any trips to Thailand recently?
If you know what I mean, wink wink …
I count myself fortunate that my spouse agrees that now is absolutely the wrong time to buy and also sees the financial implications of a housing slowdown. This didn’t happen by itself, and it took a few months of talking, breaking things down into numbers while ignoring realtor hype and watching the market. We agree that we would both rather rent indefinitely than be financially ca$htrated by buying a ridiculously overvalued house in a declining market.
After we had decided that we would sit tight for a few years instead of buying, the first thing I did was to look into moving into a rental that I knew I wouldn’t mind living in for at least 3 years with almost no chance of it being sold out from under us.
I paid off my car and our second car is an older car with no payments.
I paid off a student loan with a variable rate.
I owe nothing on my credit cards and I pay cash.
I moved closer to work and saved myself a substantial amount in gas costs. I also unknowingly lowered my monthly utility bills by moving.
I asked myself if my job would be secure if things get really ugly.
I looked at the funds offered by my 401K to see which were less likely to be full of MBS or severely affected by a slowdown.
I looked into the overall security of my banking institution and moved my savings elsewhere based on what I found.
I am saving more and rolling money into short term Treasuries.
Yes, people have made comments about my old car and my relatives are convinced that I am throwing my money away because I rent. I couldn’t care less. The consensus of opinion among our friends and family is: Why in the world after all those years in school don’t we just buy a nice place and an expensive car with their requisite payments?? Because both of us agree that it makes zero sense right now.
You either pay money to your landlord, your bank, or the government. Once the prospect of further rampant appreciation goes away, renting is the smartest thing you can do given the financial costs of renting.
I used to get the “you’re throwing money away thing”, until I point out the above. Now I don’t get any more such comments.
“Throwing your money away” is another BS phrase to guilt people into buying a house.
My wife and I are renting a main-floor suite in a house in Vancouver for a ridiculously cheap price. It’s a small two-bedroom suite, but it’s all we need. We got rid of a bunch of junk when we moved in, and we’re both happier for it. The house is near new (1.5 yrs old), with a big, fenced-in backyard that we have exclusive use of and which we and our dog and 2 cats enjoy. We have two cars, both paid for, and a motorcycle that I’m still making low-rate payments on, but otherwise are completely debt free.
We’re living fairly frugally - still go out for dinner twice a week, but dine at cheap-but-good restaurants. We pack a lunch for work. And we rent DVDs more and go to movie theatres much less. And for fun, we try to to more outside activities, like hiking, that cost nothing (other than the price of a good pair of hiking boots). That sort of thing. We don’t count pennies and we don’t deny ourselves quality goods or food, but we don’t spend more money than we need to buy them.
We’re currently saving a lot of money every month for when prices come down. At the rate we’re saving, and at the length of time this thing is taking to crash, we’re going to have a nice downpayment when we finally buy.
I’ve been thinking about how to best position myself for the upcoming storm. We already live frugally and save as much as we can. Some people are predicting massive inflation in the coming years, but others are predicting deflation. I’m undecided for now. It’s easy to see how either scenario could play out. There’s a lot of uncertainty in the air… Because of this I’m just going to keep on doing what I’ve been doing and save as much as possible (the only way this could backfire is if inflation skyrocketed).
I think the bursting of this bubble will be the end of the current hyper-consumption economic paradigm. After the dust settles I think New England will be hit very hard. This NIMBY-laden region is going to be one big retirement community and I’m not sticking around to pay the pensions for the assholes who zoned-out affordable family housing.
The next few years will be very interesting, to say the least. I just hope I don’t have stories to tell my grandchildren about hardships of the great depression of the 00’s!
I think the bursting of this bubble will be the end of the current hyper-consumption economic paradigm. After the dust settles I think New England will be hit very hard. This NIMBY-laden region is going to be one big retirement community and I’m not sticking around to pay the pensions for the assholes who zoned-out affordable family housing.
You’re right on the money, NH_R.
Lived my entire half century in New England.
19 years in MA-31 years in ME
The spoiled arrogance which permeates the southern region is sickening. And like a cancer, it has now spread to the north country.
The dreariness and economic rot is definitely palpable.
OK, Mazzholes…the landscapes yours…enjoy yourselves-LMAO…
As soon as the ‘rents pass on, I’ll be right behind you, on the highway west.
Amen hd74man. What is truely breathtaking about MassHoles and NJ/CT/NYC maggots is the “you owe me attitude”. As if any of us natives are gonna snap to attention to grab their luggage.
Thes scumbags are unreal.
New Hampshire, Maine, and Vermont have really changed, you’re right. Southern New Hampshire is now nothing more than Northern Massachusetts. “Live free or die” used to mean something here; nowadays the state motto is considered retrograde and embarrassing. The hardy independence and self-reliance of the region is fading fast.
I laugh when I read articles bemoaning the exodus of the 25-34 demographic out of NE. The politicians just don’t get it. “We have great scenery, restaurants, and universities, who wouldn’t want to live here?” is basically what they say. Yes, the beaches may be beautiful but try raising a family with them. New England may have beautiful scenery and a rich history but it just doesn’t have much opportunity for young people. It sounds like the same thing is happening in California and the Pacific Northwest.
So I’ve been researching where to go. All I want is a place where hard work, intelligence, and thrift will give me a good chance at getting ahead. The Southwest or the Rocky Mountain states sound the best to me so far.
“The hardy independence and self-reliance of the region is fading fast.”
In Vermont this is has occurred because out-of-staters have, in the last decade or two, begun to wrest political control from long-time natives. The state is now in the business of coddling.
The notion of “independent and self-reliant” Vermonters seems to be destined for the history books.
Living simply is a lifestyle. Many people try to ‘downsize’ and are miserable. I will always live simply no matter what our income is. That’s how I was raised. For me there’s nothing better than finding a good deal. I have a friend that thinks of sale items as ‘damaged goods’ and can look at two identical, plain black purses and say that one with the right label is ’simple and elegant’ and sneer at the other one.
So, even though we have 2 kids and I would love for our next move to be our last, we are going to rent when we move back to CA next month. I’m not going to be ‘that person’ that all the long-time neighbors point their fingers at and say, “Can you believe how much they just paid for that dump?”
Other random stuff we are doing to save cash…we have a pay-as-you-go cell phone. Only $15 every 3 months! We just have one car, a 1997 chevy blazer, that we plan to trade in for a new Scion xB, which is inexpensive and has great gas mileage. We’ll do our best to find a cheaper apartment in an area that is safe and has decent schools (my daughter starts K in ‘07) and close enough for me to walk or take public transportation to work (I took the Sunset Blvd bus to work in downtown LA every day when I worked there). Most of my savings are in short-term CDs/notes. We have no cable TV. The list goes on, but I’ll stop now before I bore y’all…
That’s the right attitude. The money can be in your pocket or someone else’s.
“I have a friend that thinks of sale items as ‘damaged goods’ and can look at two identical, plain black purses and say that one with the right label is ’simple and elegant’ and sneer at the other one.”
That is one of the things that fascinated me about moving to California from northern New England (what seems a long time ago).
Whether (if I recall when I first arrived out West) it was my sense of “Hollywood culture” everywhere, but it seems the “image” or the “imagined” is preferred or idealized over the “substantive and the real.”
I still see this conflict today - I haven’t been totally brainwashed (yet!).
And yes, in SF I’ve found, it’s hardly any different than down in LA.
I decided to cut out going out to eat as much.
What crash? I don’t think there’s going to be one, at least not here in California.
Fine then. California shall be spared.
Prepare for what? It makes absolutely no difference to me how much my house is worth. It’s a place to live in, not an “ATM”. The value could drop by 50% and I wouldn’t even blink.
O.K., who besides me is secretly thinking about buying 100 acres in the remote wilderness as a backup plan in case things get real ugly?
Oh, it was just me…nevermind then.
Indeed no. I have that fantasy regularly. (Un?)Fortunately I am realistic enough to know I wouldn’t last a month.
We have been living simply for past several years. I think reading and getting as much info as possible makes me feel better about what’s coming.
$6.50 cable (which I pay only cuz we’re on the wrong side of the hill) My inlaws and too many friends pay over $100. Gosh, I hope my life never gets that boring!
We only have one vehicle. We’ll keep it for at least 10 years as we did the last one. (H drives company vehicle on weekdays)
No magazines or newspapers. Internet connection seems to provide it all….or library.
Vacation time spent working on home upkeep. This will be changing as we’ve caught up but vacations will be camping and low cost things.
We bought this unloved home for about 25% less than neighborhood value and have brought it back to looking loved w/sweat equity. If we stayed here we’d be in good shape as nothing would need to be replaced for 20 years. (It was in that bad a shape)
I really worry about what this place is doing to my kids and me. Being value conscious and the type to think name dropping is boorish, we really don’t fit in here. Every once in a while I talk about the old days when I raced sailboats off Marblehead and you can tell people don’t even believe me (I don’t live in the proper home to have lived that lifestyle….they don’t seem to understand that some relationships are formed for the love of a shared experience….not about social climbing) Sigh!
What part of Upstate NY do you live in? I was raised around Syracuse and moved to NH a few years ago. I’m finding the materialistic “keeping up with the Joneses” mindset to be much worse here in New England, especially in the Boston area.
Is not “Upstater” formerly from upstate NY and is now living in Boston-metro Massachusetts?
O.K., who besides me is secretly thinking about buying 100 acres in the remote wilderness as a backup plan in case things get real ugly?
Me! But then, I’ve had that fantasy since I was a kid–long before I started worrying about any of this stuff. So far I haven’t done anything more than take a few edible wild plants courses…
We bought during a dip in the market in 2000. No thought of ‘investing’– just liked the area and planned to stay for awhile. Then prices started shooting up and I got more and more nervous. Finally convinced the husband to sell last spring. (An investor bought it ‘as is’ without it even coming onto the market. After sitting for a couple of months he finally had to lower the rent to just a little over what we were paying in PITI.)
The money is currently sitting in CD’s and Treasuries– and has financed my six month break from work while I got some more IT training. Guess I’ll have to go back to work again soon… *Sigh* When I do, we should be able to save all of the husband’s salary, no sweat. (Don’t know how long his job will last, though, since it’s in construction… One of the reasons I wanted to sell…) The car’s paid off (and we rarely use it anyway, since we’re right by the metro and have bike trails all around) and no debt.
I’m keeping everything as short term and flexible as possible. Seems to me inflation and deflation are about equally possible scenarios and I want to be ready to jump in the right direction.
Since a crash is still not a given, and since timing is always a bugger, we’re just living like a prudent person ought to. We have a lot of savings, more than one bank, a 15 year mortgage, no car payments, a large garden and lots of friends.
…………………………
Plan D is my dad’s farm, but it would take a few months living homeless under a bridge to convince my wife to move anywhere near my dad.
We paid off the mortgage and keep our savings in an Emmigrant Direct account paying 4.5% APR. The car is leased so we won’t be paying that off. We will probably go car free once the lease is up though. The garage payments are a killer (over $400 a month).
We won’t be selling and renting though. We are tired of moving and the rental vacancy rate in Manhattan is 0.75%.
My fiance and I purchased a home for $128K. We have a large lot, almost an acre. Home is 1,300 sq. ft. It does need some work. The drives to work are not bad. Currently we owe $104K on the home. $2K is left on my HELOC which I pretty much paid off instead of keeping a large sum of cash. This is in part due to the rate going toward 10%. We are getting married this summer and she is saving decent money. Once the wedding and honeymoon is over, we plan on paving the driveaway and getting new gutters. The driveway will help the home a lot. This past year I did install a woodstove insert which was $1,800. The only other thing this house needs is a new master bath. The current one was never updated since the home was built in the 60s. We are here for at least 10 years. We are going to try to pay $1,000/month onto the mortgage as I believe it’s the best way to hedge this market. The neighborhood is a mix of mostly 60s/70s construction with newer homes (my neighbors home built in 2004!!). Most of these retired folks are likely here for at least 10 years as well, so I hope the area doesn’t turn into a ghetto. If in 10 years we decide we want to stay, I have plenty of land to expand the house for a little more room. The economy will decide if we get a larger home or stay put. Main goal is to just get the mortgage down as low as possible so that if either of us suffers job lose, we can re-fi say $50-$60K for 30 years and have a nice lower monthly payment.
As a renter, I’m not doing much other than keeping good amounts of cash on hand, and holding more and more investments in foreign countries.
I’ve found, however, that the best way to keep my wife and I happy together, and not making stupid home buying decisions is to rent a great place. Every time we look at a house in our price range, we ask if we want to pay twice (or more, AFTER the tax benefit) per month and lock up our down payment for the same or worse digs.
Makes the decision easy, and unanimous.