Stories May Cost You $
Stories May Cost You – $
I often draw parallels between money and real estate. Buying real estate is about the use of your money and your use of money will dictate how you live now and in the future. The information below suggests to millennial’s that they should begin making good decisions now.
Your first decision is whether to rent or buy a home. (Average rents nationwide rose 4.6% in 2015 according to Reis Inc.) Because so few people have the discipline to save, the decision you make at an early age on whether you rent or buy can affect how you will live in the future.
If you plan on remaining in an area for 4+ years, I recommend home ownership. But I only recommend that if the home is purchased correctly. Absent that, you put your money at risk. The goal is to limit risk so that you live well now…and in the future.
I was struck by a January 3, 2016 New York Times editorial. If you are a millennial take note. If you are a boomer, share this with your millennial children and friends. The editorial noted:
1. 65% of retirees rely on Social Security for more than half of their income.
2. The average monthly benefit is $1,300.
3. 52% of American households with someone 55 or older have nothing saved for retirement.
4. For those ages 55 to 64 with retirement savings, the median amount is barely six figures.
In general terms this means that 65% of retiree’s are living on $28,000 a year. Some have an additional $100,000 in savings. Using a 4% withdrawal rate they could take another $4,000 annually from their $100,000 savings. They are now living on $32,000 a year.
If they rented and did not save money, life will be hard. If they purchased a home wisely, life will be a bit easier. Buying wisely is not easy in the traditional real estate system. The system is stacked against you.
I’m reading Robert Shiller’s book, “Phishing for Phools” and was struck by a comment he made about how investors can minimize being fished for a fool. Substitute the words “homebuyer” for “investor”, “home” for “asset” and “housing for “financial” and then read Shiller’s quote:
They investors/homebuyers should bear in mind that asset/home prices reflect the stories being told about those assets/homes. Those stories do not reflect economic fundamentals. Significant parts of the stories are generated by those whose livelihood depends on making a sale. For this basic reason financial/housing markets are filled with phishing for phools.
The stories told about real estate: value, appreciation, owning vs. renting, are stories generated by the real estate industry whose livelihood depends upon making the sale.
Homebuyer Associates takes the boring, methodical approach to home buying. That approach leads to buying a home wisely – from a position of information not emotion.
Seek advice, opinion and expertise when money is involved… not stories generated by those whose livelihood depends upon making a sale.
To be added to the mailing list have them type “add to newsletter” and send to:
homebuyeba@gmail.com
Thanks for reading,
Michael D. Holloway