The title of the attached article is, “Can’t Afford a House? Don’t Buy One.”
Seriously, don’t. I say this as someone who owns a house which is a little bit too small for his family and who would love to have people clamoring at my door with offers so I can in turn get a little bit bigger house. But if you can’t afford a house, if you don’t have a down payment, if your income has been wobbly, if you have a pile of student debt, save yourself the trouble and don’t “buy” a house. It’s just not worth it.
The government has just eased mortgage requirements in the hopes that such a move will improve a flagging housing market. (I wonder if the National Association of Realtors had anything to do with this? Actually I don’t wonder.) It’s a huge mistake. Just don’t get caught up in the mistake yourself.
(From Bloomberg View)
Is there a good public-policy reason to encourage people to make a heavily leveraged bet on continued upward movement in home prices? Presumably, the argument is that many homeowners have done very well out of this over the past 50 years; rising home values sowed the seeds of many a college education and retirement fund.
But there are huge drawbacks to housing, too. Leveraged bets are great when they pay off; when they don’t, they leave you dead broke. Especially a bet on a large, illiquid asset such as a house. Put a homeowner into one of these gambles at the age of 35, send the local housing and job markets south a few years later, and the end result is a broke middle-age person with trashed credit in desperate need of a good rental unit. Which legislators should know, because we seem to have a lot of them around right now.
You also end up with a much more unstable housing market.
The people in Washington have lost it completely I think. There was a time when there appeared to be some modicum of sanity, even if it was power obsessed “sanity.” (And that’s saying a lot as a libertarian.) Now it’s like there isn’t even the slightest bit of competence in DC. It’s just incompetence all the time. In some ways this is actually preferable, but then on occasion we get regulations like the one just handed down by the Federal Finance Housing Agency.
It’s probably best to just get out of the way of these folks and get as far away from the carnage as possible.