“For some reason, people don’t *think* about getting a mortgage anymore. They don’t seriously weigh the issues that could come up. They don’t ask themselves, “What if we have to move and the house doesn’t sell??” “What if I loose my job?” “What if an emergency comes up and I need extra cash?” No. The average person believes that things will always continue as they are today”
That is very true, however, the market, from brokers to real estate agents used full court press propaganda to make everyone feel it was OK to buy anything they could as the market, well, as they say, “Home prices ALWAYS go up”. The funny and sad thing is that the real estate agents and brokers are still saying that propaganda; “Now is the time to buy, prices will only go up from here!”
Today, people are being extremely cautious. Extremely. People that would like to move up, don’t. People that could afford a home, rent. People that could rent stay home with their parents. Some are walking away from large mortgages and are renting. Some are buying smaller homes and then dumping their large mortgages. It seems there is a scramble to economize.
The wife and I knew, as you did, that bad times ahead could mean disaster if we overbought. I bough something 1/3 of what the banks, brokers, and agents said I should buy. It worked out perfectly. We sold last year at a premium price just before that local market collapsed. We are renting and looking at buying. Property prices are in the gutter and washing down the street. Half price on average and still sinking fast. We are finding homes a tad higher than we want to pay, but we’ll wait until the right home at a good price is found.
Now wait a minute - When I'm looking at buying or investing, I do research and homework. When a person is looking at buying a car, do they only listen to the car salesman??
When we were looking at buying a house in Texas, I researched our area for *two years* before we took the plunge. I still keep an eye on comps. (I know that, with $15,000 worth of home improvement, I could put my house on the market for $125,000 and probably get a buyer within 6 months. So I err on the side of caution and project a sale of $110,000 within 18 months and financially plan for the worst-case scenario.)
Americans appear to be eternal optimists and only plan for the best case situations. As a group, we need to take our lumps and learn that we need to cover our butts.