Friday, January 04, 2008

Belling's Advice

If you did everything "they" told you to do, if you scrimped and saved and put your money into your house and now expect that house to help finance your retirement, Mark Bellowing has some advice.

"Go run up an alley and holler, "Fish!""
While the Wall Street sharks who bought up billions of dollars worth of
subprime loans may be screaming that we are in a crisis, there are a lot of
aspects to the housing slump that are positive.
The huge run-up in housing
earlier this decade indeed fueled consumer spending but it also drove home
prices beyond the reach of a lot of Americans. The current price drop will give
the folks who missed the boom another chance to jump in.
Just take your medicine and shut up.


Jib said...

Umm, grumps, I hope your financial adviser didn't give you the advice to put all of your money into the house you live in in order to fund your retirement. If so, he was a piss poor financial adviser. The house you reside in is at best a savings account, not an investment. In fact, over time a savings account might give you a better return than that house, depending on your down payment, how long it took to pay the mortgage off, your interest rate, your taxes, and how much money you had to put back into the house.

I realize you are playing the "woe to the little guy" card here, but come on. You don't need to be so reflexively anti-Belling that it makes you look silly. I know you're smarter than that.

grumps said...
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grumps said...

I've not sunk all of my eggs into the one basket, Jib. You'll not catch me in, "oy, vey is mir."

There are a lot of people for whom there life savings are tied up in a paid off home and who were hoping to be able to sell it and take their appreciation. For Belling to tell them to suck it up because a bunch of lenders got greedy seems to be another example of EDD.

Jib said...

In the instance you are describing, those individuals have 15 to 30 years to realize an appreciation on their homes (although it is still a bad idea). A market correction in the here and now is not going to change that. Home prices may stagnate for a while, but they are not going to drop forever.

I'll give you an example. My parents bought their first and only house in 1985. It appreciated approximately 200% since they bought it. The current correction may drop them under 200%. In the big scheme of things, not a big deal financially, and only temporary unless they were to panic and dump it.

I appreciate your clarifying comment, but I'm afraid your point makes even less sense now. Unless of course you think that housing prices are going to fall to the ranges they were from 1978 to 1993, which is rather absurd. If that were to happen, there are going to be bigger worries than someone's retirement.

Nathan said...

I remember a NYTimes article where one of the main points was that house prices, nationally, have appreciated about 2% a year for the last 100 years. Even given tax benefits, you probably could do better in the stock market, or even bonds.

Sorry Grumps, but I believe that a person's lifestyle should reflect their means ... and I count their dwelling as a component of 'lifestyle'. Pouring more money than you can afford to lose into a house (or any asset) is a-courtin' trouble.

Houses are for living in, not selling!