| Are you becoming wealthy on your house? Is | | | | Along with this home builders were building |
| your home your best performing investment? Is | | | | scads of homes and selling them at these high |
| your house the only area that of your | | | | sale prices. Mortgage lenders and banks were |
| investments in which you are making money? | | | | facilitating the process by selling and |
| | | | marketing low priced mortgages called |
| Red danger signals should be appearing in | | | | "subprime" mortgages which offered an initial |
| your mind. The housing market has gone up, up | | | | period of lower rates, the rate charged |
| and up. Many people believe that they "have | | | | reverted to regular rates after the |
| made x dollars from their house". Is this | | | | introductory period. |
| true? Is this realistic? Will they ever be | | | | |
| able to see or use their new found wealth? | | | | The key to all of this was that prices kept |
| | | | going up, up and up. There was no end in |
| It is true that. Even in 2004 it was said | | | | site. Not only that but what fueled the boom |
| that housing prices had risen the most in | | | | further was the fear that if you did not get |
| 2004 in the past 25 years - that the OFHEO | | | | in that you would be locked out in the |
| price increase was 13.4 %. Prices have been | | | | future. The same house had risen from say $ |
| double digit and seemed to be able to go up | | | | 200,000 a number of years ago to $ 400,000 to |
| and up forever. Indeed the price run-up from | | | | $ 500,000 in one year, if I do not get in the |
| 1997 to 2006 was the largest in history. | | | | market now; the reasoning went that home |
| | | | could be $ 600,000 or $ 750,000 next year. By |
| What fueled this seemingly endless run-up in | | | | getting in now I will get equity and be in |
| housing prices? The answer in 3 words was | | | | the game. If I stay out - my family and I may |
| "low interest rates. China it seems wanted to | | | | be locked out of owning a home ever. |
| maintain high employment figures for | | | | |
| political and economic reasons. In order to | | | | So went the logic. As well it seemed that the |
| maintain high employment levels the price of | | | | only place the family could make money in |
| Chinese goods - at Wal-Mart or wherever had | | | | their investments was in the value of their |
| to remain low. If the Chinese currency | | | | home. One could not seem to "make money "in |
| remained low relative to the U.S. dollar or | | | | other traditional investments such as the |
| if the U.S. dollar remained at relatively | | | | stock market or their retirement plans. |
| high levels in relation to the Chinese | | | | |
| currency this would be accomplished. It | | | | Which brings us to the basic question? How is |
| amazing that in our small global world | | | | money being made? Can you ever spend this |
| decisions made by someone or a group of | | | | money for enjoyment or other goods? At coffee |
| people in China can affect yours and mine | | | | a Mr. Brown may tell you "I made $ 250,000 on |
| economic position and future so greatly. | | | | my house." It is true that profits on the |
| | | | sale of your home are treated different and |
| As a result China chose to pump money back | | | | better than other moneys made but the |
| into the U.S. buying U.S. treasury bills | | | | question is how did Brown come out ahead? He |
| enmasse. The Amerian dollar remained high , | | | | will be purchasing another property in the |
| the Chinese currency low. You could buy | | | | same market. As is said you "have to live |
| Chinese made goods cheaply at Walmart or | | | | somewhere". If your house sold for a good |
| Target stores. And interest and mortgage | | | | dollar, that it was desirable, and was a nice |
| interest rates were at historically low | | | | home located in a nice neighborhood. It is |
| levels. | | | | highly unlikely that you are going to move to |
| | | | a much less desirable, more dangerous |
| As a result you could now purchase a house , | | | | neighborhood where housing is much cheaper. |
| upgrade your house or purchase a much larger | | | | You may be going to downsize somewhat but you |
| and expensive house than you could of | | | | are not going to move to a slum after |
| previously. Your banker or mortgage lender | | | | enjoying luxury. So it goes this is not |
| was only too happy to loan you the money for | | | | liquid profit that you can easily cash out. |
| the mortgage - after all the loan , or | | | | Even if you or wife decides that it is now |
| mortgage was secured by good old fashioned | | | | time to sell the house since you can get a |
| real estate as collateral. | | | | good price and "We can live in an apartment. |
| | | | So what!" you may well find out in a year |
| The housing market soared. People who could | | | | that apartment living is not all it is |
| never of afforded to buy a home , condo or | | | | cracked up to be. It was no accident in the |
| land could now afford one. So many new and | | | | past that you scrimped and saved to buy a |
| additional buyers were entering the real | | | | house and move away from that noisy small, |
| estate market that not only did the demand | | | | cramped apartment to a house. So it goes that |
| for homes and other real estate increase but | | | | after being reminded of your lesson that you |
| there were bidding wars for properties and | | | | find out that being out of the house and into |
| sale and the supply for more and more houses | | | | an apartment for a year that it will cost you |
| and other forms of real estate diminished and | | | | substantially for being out of your home for |
| housing prices soared. You may well of heard | | | | a year. |
| stories of people putting the proverbaial | | | | |
| shingle on their home one morning and having | | | | This all brings us back to our first |
| it sold for unbelievable sale prices by the | | | | question. Are you becoming wealthy on your |
| end of the day. | | | | house? |
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