muses of the moment

October 9, 2009

Should you buy a house right now?

Filed under: Dollar Crisis, Economic Crisis, Good Debt Bad Debt, Housing Market, Hyperinflationary Depression — totallygroovygirlfriday @ 8:27 am

This is an individual decision, but here are some things to consider. This is only groovygirl’s opinion, you must make your own decision and live with that decision.

Housing prices will go down more, we have not hit bottom. We will not start to hit bottom until at least 2013. So, if you need to sell between now and 2016, put your house on the market.

Housing prices will go down more, we have not hit bottom. I believe we will not start to hit bottom until at least 2013. So, if you want to buy a house, wait.

Will interest rates go up? No, not for houses, the government will keep interest rates low (and create other incentives), especially for housing for many years to come (even after the housing bottom). The housing market is still in free fall, they know that.

Will banks restrict access to mortgages? Yes, they are doing that now, it will continue. I suspect the government will  be more involved in direct lending to home buyers to keep the housing market from complete collapse over the next 5 years. Cash is king when buying a house for the next 25 years. Save money and make a big downpayment…no matter what.

Should I buy right now? No, unemployment will get worse. Do not buy a house and be stuck….not being able to sell and not being able to move to a better employment location. The ability to move with the jobs is a better option than having a house right now. The cheapest house is not cheap, if you can’t make an income in the area. Just ask Ohio and Illinois.

Isn’t a house an investment? NO…it is a liability, especially if you can’t get your money out by selling for the original price paid or at least the loan amount. A house is a place to live. You can make it a home, but it is not an investment anymore.

If I buy now, won’t housing prices rise eventually? No, this is the winter cycle of the K-wave. The number may go up, but the value of the dollar will go down. Real estate will not produce the return it did during the autumn cycle. There are better investment options for the winter cycle.

Do I have to give up the American Dream of owning a house? No, just postpone and save for it. Cash is King and debt is to be avoided like the plague for the next 10 years (at least). Otherwise, you run the risk of getting a house and then losing it plus owing money.

Click here  for more information on the dropping price of rents. This is a general economic stat. Different areas of the country are not impacted the same.

If you do decide to purchase a house right now, make sure you will not have to sell or move (because of a job or any other reason) for at least 10 years. You will lose money otherwise.

This is what the next 10 years look like, the next 5 being the worst:

  • Unemployment will continue to rise.
  • Housing prices will continue to go down.
  • Hyperinflation (collapse of the dollar) will occur.

The bottom line…if you buy a house in the next 5-7 years, wait for the bottom of the housing market, put between 50-100% cash into the deal (but this should only be 35-50% of your total net worth), don’t settle for anything over 3% fixed interest,  and take a lawyer to the closing.

If you are threatened with foreclosure…hire an attorney to demand the note holder face you in court and don’t move until the sheriff shows up.

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