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