A Bubble Ready to
|No Money Down
|This property is a steal
A storm is on the horizon.
Just because it’s another hurricane season, the tempest ready to engulf will not be tracked by eyes in the skies. A forecast for this whirlwind won’t be made on the weather channel or by a meteorologist. The climate that triggers this downpour is financial.
The causes for this calamity have been brewing for decades. The major
fronts that push the airstreams toward disaster are well known. Balance of trade
deficits, federal debt financed by foreigners, soaring government liabilities, loss of viable wages for domestic employment
and offshore exodus of any job that improves the bottom line of transnational corporations.
But have you heard of the other gusts that will blow your house down?
The actual net worth of ordinary Americans is
sliding into a sinkhole. Don’t allow yourself to be confused, net worth
is not simply what is left after you subtract your debt from what you own. The
real value of your financial worth is the purchasing price power available in the marketplace after you liquidate all your
worldly possessions. Forget about your borrowing abilities, the sky is the
limit is a major contributing factor to this tornado. It just doesn’t
add up. Factor in the underlying underreported inflation, look at your after
tax (from all jurisdictions) income and, if you are honest with yourself, ask if you can afford to buy your own house?
Oh, the heaven of low interest rates –
pray that they be eternal! Speculation on pre-construction real estate makes
every condo a castle. Leverage and turn over the contract to the next investor
is the latest rage – rags to riches and prosperity. Hot spots won’t
cause melanoma sun spots, just tanning hues of that universal green – federal reserve notes. The more you make the bigger your next re-invest. Defer and
push off into the future those capital gains, trade up get affluent the old fashion way by earring it . . .
Now if you are one of these neophytes and late
coming to the party, the building sector is booming. Only a Neanderthal wants
to pay off their home and stay there forever. But in the slight possibility that
you might one day want to fall into this Paleolithic clan, will you be able to have enough money to pay the bills and stay
in your own abode? Real Estate taxes far out pace that non-existent inflation. Replacement cost insurance climbs higher than a gable roof or the price of boarding
up all those windows. Just rebuild if you take a hit. As we all know, they aren’t making ocean view land anymore.
|Buy now before it goes up tomorrow
|Real Estate is different from other markets - RIGHT?
Just look at all your passive income –
bank savings, bonds and stock dividends – they are just rolling in, surely this income will pay for the cost of holding
and carrying all that expensive real estate? Hey, this isn’t the South
Seas, its America and the only bubble that attaches to the siding is used up gum. The
safest place in the world is your own home, so why worry about paying it off or affording the upkeep, your seasonal rental
investments will cover any shortfalls.
Banks know how secure all those mortgages and
equity loans are, that’s why they love to package them for resale. Those
new bankruptcy laws just mean you will need to sell off a couple of condos to
keep funding you’re your own primary fun house. No problem, the bazaar
of sizzling sale prices covers all sins. This market is different from those
risky internet stocks, they weren’t making a profit. So what if you have
a little shortfall on rental fees, you chose not to lease but to own! Your wealthy,
just look at your financial statement . . .
So let’s pose the big question. Are you able to buy your own house at current asking prices? Are
you able to afford the new assessment in property tax on the higher selling price? Can
you pay the elevated cost of homeowner insurance? You know that those 80% minimum
value full replacement coverage clauses with their 70% content coverage translates into kingly sums to pay for possessions
that you don’t even own. Hey, that’s the American way, stay ahead
of the curve mandate the coverage before you borrow more money to buy the contents.
It’s OK, you are now successful and numbered among the newborn rich.
If by your own blunder you reside in a section
of the country that isn’t experiencing this boomtown prosperity, you can become a prospector. Fools gold won’t be found in the fields of estate planning - Trump style. Time sharing is for the holiday pleasure seeker, you are a home owner, be proud pay those accelerated bills. Fuel, electric, phone, cable, DSL escalate but you are secure as long as the ADT bill
Don’t worry about a bubble, the fizz still
flows through the straw. Suck it up and enjoy the refreshment. Bread lines all serve croissants and you don’t need to tip the illegal waiters. You are living the dream and there is little risk of a repossession nightmare. You can always buy back your house at auction. Ditech your
life - keep the hope alive!
SARTRE – June 13, 2005