muses of the moment

May 19, 2011

Update from John Williams

Filed under: Good Debt Bad Debt, Housing Market — totallygroovygirlfriday @ 1:56 am

John Williams released an update on housing starts and production stats. You pay the detail:

Housing Starts Under Downside Pressure
April Production Stalled Amid Hefty Negative Revisions

Revisions, revisions. Housing starts lowest since the 1940’s. We have a major oversupply of housing here in the US created from first, cheap credit and then, no-income loans. Housing prices will continue to fall for the next 2 decades. Keep this in mind when buying or selling.

A house is a place to live, not an investment. With a 30-year mortgage you will end up paying at least 2 to 3 times the original price of your home. And that’s when the housing market was going up. (Which gg always thought was the biggest scam that no one ever acknowledged.) Now, with the housing market going down, you will have negative equity and pay 3 to 5 times the worth of your house in interest.

In groovygirl’s mind there is only a few reasons to buy a house in this decline:

as a positive cashflow investment for 20 plus years with very little or no mortgage

as a house to live in for 20 plus years paid with cash that you can modify or is built as a sustainable living system with such features as gardens, fruit trees, solar/wind power, hydro power, passive solar design, water catchment/recycle systems, etc.

Keep in mind that the underlying investment will still lose money even if you pay cash, but it may be countered over a 20+ year period in energy and water savings or investment cashflow. It would be a wash. Basically, you are laying out cash now to save on rising future expenses or creating a cashflow income to pay for rising future expenses.

If you need to leave an area to find a job, but can’t sell your house, one option is house swapping. Trading houses for a period of time with another person that wants to move to your area. This will become more and more popular with upper scale and middle-income homes with more support via the internet. If renting doesn’t work, try this.

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