Mortgage Rate News

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I read a rather interesting post today from Ramit Sethi’s blog, I Will Teach You To Be Rich. It is about home prices — and how we are kind of backward in our assumption that home prices should always go up. What about getting a good deal? The fact that home prices are lower right now offers a number of opportunities for those who want to buy. And, of course, this rule applies to a number of markets. I, for instance, upped my retirement account contributions during the stock market decline because everything was on sale. Sethi points this out about markets — including the housing market:

For young people, every time the market goes down, you should be cheering for your own individual finances. You can acquire investments at lower prices and you have a long time for the market to grow.

Yet, paradoxically, lower housing prices do represent a clear risk to the American financial system, whose growth is predicated on consumer spending, which is in turn strongly influenced by housing prices. That’s why this crisis is so serious and confusing. …

Just because virtually every media presentation decries the “rapid decline” in housing values doesn’t mean that applies to you. “Higher house prices = good” is a cultural assumption.

Of course, if I were to try to sell my house now, lower home prices really would be a bad thing. But I’m not. And even if I did sell now, we’re not far enough in that it would represent much of a problem. But I’m a little more sanguine than others I know about the whole house thing because I never bought into the idea that a primary residence is an investment. Whenever the real estate agent told us we were looking for an investment, I just smiled wanly, and reminded my husband later that it actually isn’t.

You should almost always think of your primary residence as a large purchase. A large purchase that you make with debt, no less. Sure, the interest is tax deductible, and sure you might sell for more than you paid. But the interest you pay, property taxes and maintenance costs pretty much sap the returns you might get.

Yes, I like having a home. But I don’t think of my home as a financial investment (maybe an emotional investment), I don’t necessarily expect to make a great deal from it. This attitude helps a lot when it comes to overcoming feelings of distress about the housing market.