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Housing should be a long term investment. I'm not going to panic if my stocks drop 5% one year. Over the long run history is pretty clear. Lots of people don't get a 15 year or put 20% down.
Then we have to make laws that prevent corporate types from transfering people all over the country all the time. And we have to stop doing the same thing to military families as well. These are the people who were hit hardest -- people who were simply ordered to move at the worst possible moment. They didn't have the luxury of taking this "long-term" view of things.
A long-term view takes the likely duration of ownership into consideration when making a buy-or-rent decision.
Many military families understand that they are subject to frequent transfer, and often rent rather than buy. Fayetteville, North Carolina, for example, is full of rental property for this reason, as is Jacksonville.
On the other hand, corporate types who are subject to frequent transfer have often disregarded this consideration and have bought rather than rented under the assumption that either (a) house prices will always go up and a house can always be sold, or (b) the corporation will pick up ownership of the house as part of the transfer package. This last time around, corporate types lost the bet.
Edit -- Fayetteville is home to Ft. Bragg (Army), and Jacksonville to Camp Lejeune (Marines).
Last edited by Hamish Forbes; 07-10-2013 at 06:07 AM..
Meant to add not putting 20% down or getting a 15 year can put you in a risky position.
This is a way to maximize costs. Making the smallest down-payment you can and taking the longest available maturity will minimize your costs, allowing you to put the difference to other and potentially more productive and profitable purposes.
Then we have to make laws that prevent corporate types from transfering people all over the country all the time. And we have to stop doing the same thing to military families as well. These are the people who were hit hardest -- people who were simply ordered to move at the worst possible moment. They didn't have the luxury of taking this "long-term" view of things.
When they buy they just need to be aware of the added risk.
This is a way to maximize costs. Making the smallest down-payment you can and taking the longest available maturity will minimize your costs, allowing you to put the difference to other and potentially more productive and profitable purposes.
In reality for most Americans all that does is over leverage them.
Meant to add not putting 20% down or getting a 15 year can put you in a risky position.
Putting less downis less risk for the buyer. If you put 3.5% down and the home drops 10% when you need to sell then you can do a short sale or foreclose. If you put 20% down and it drops 20% then you're SOL and that money is gone. It is the banks who wear the risk when the buyer puts less down.
When they buy they just need to be aware of the added risk.
So we're creating a separate and disadvantaged class of consumer when it comes to the purchase of primary residential services. Is that what you intend to see?
In reality for most Americans all that does is over leverage them.
In the view of some Americans, ANY leverage is over-leverage. Leverage is an essential tool when it comes to wealth building. People who walk away from leverage have better chances than most of one day thanking their lucky stars for Social Security.
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