Buying a House or Buying an Albatross

June 4th, 2009 at 12:26 pm by under News

A home is the biggest investment you’ll make.  Unfortunately, it is the most emotional one which is never a good ingredient for making a wise money decision.  In any case, it may not matter in Michigan.

Have any of you applied the 6% rule mentioned in my story last night? (your house is suppose to gain 6% in value every year,  2 to 3 percent from plain old inflation, 2% due to normal population growth, and 1 % from other factors like changes in local personal income levels). It can be pretty shocking.

My house should be selling double the price I paid for it 14 years ago.  I’m lucky I could get 27% more than I paid, and I’ve owned the home 14 years.

It’s an big problem if you have to leave the state.   I looked at this issue once before  in 2007 and heard from a former Pfizer executive who moved to California to take a high paying executive job.  Because this person was unable to sell their Kalamazoo home at a break even level (or sell it at all!), this person was renting, paying twice as much as the mortgage payment in Michigan.  This person could make it work because they were getting paid a lot.  Not everyone is in this category, and I’m afraid as more jobs continue to get lost,  people will start seeing their Michigan homes as an albatross.

2 Responses to “Buying a House or Buying an Albatross”

  1. NoWay says:

    This story is wrong in so many ways. This is exactly the kind of media we don’t need. A home is not an investment, it is a place to call your own, a plase to feel safe, a place to raise your family and make wonderful childhood memories. If your house isn’t appreciating right now, so what? It will, history has shown us how it works.

    Owning a home will give you money back on your tax return every year. You can deduct the property taxes and the mortgage interest. This increases your wealth, unlike renting.

    If you have the attitude a home is going to make you rich by appreciating you are exactly the kind of person who has entitlement issues (in my opinion).
    Own a home and pay it off as a part of your retirement plan. Would you rather save enough in a volatile 401K or not have to worry about a mortgage payment? That’s right people, take charge of your future, live smarter and don’t depend on others to save you from an economy such as the one we are in. This economy will improve and your home will appreciate again.

    Interest rates are still very low, housing prices are way down. Wouldn’t you say now is the time to jump on board and become a homeowmer? If you own a house and are upside down, ride it out. The market will come back around. Make your payments and tough it out. Pay it off and stop borrowing all your equity. Your equity is your security and your retirement.

  2. With due respect, you are painfully mistaken. That’s been the problem in the housing industry. Homeowners losing perspective that somehow this huge financial burden is some kind of entitled “dream” and somehow will be paid for with money from heaven. When you have an 80/20 loan I guess it is. A house is a huge financial responsibility. I don’t know why this is so shocking for some people. I’m not talking about getting rich. I’m talking about not going bankrupt. As for retirement, this is the next crisis about to happen. Soon enough, we will start seeing people who are shocked that they can’t make ends meet because they’ve been relying strictly on social security to take them into old age. You don’t buy a house if you can’t afford to save something from your young working years to save for retirement. You don’t buy a house if you don’t have steady employment. You don’t buy a house if you are a student and have no income. You don’t buy a house if you’ve lost confidence in the local economy. It’s this simple – your house will continue to lose money if the state does not stop the exodus of people. Employment in our region has been down or flat for the last 8 years. Those who are secure are the ones who take no purchase for granted and know that patience and providence will pay off.

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