Tomorrow I’m taking a half-day and going to Disney World! (One of the perks of being a government employee is all the days off.) I’m planning on making a full report of everything I spend when I get back.
Have you ever seen CNN’s Millionaire in the Making? It’s a pretty good feature, but I have one pet peeve. Most of their featured millionaire-to-be’s have more than half of their net worth in real estate – and it’s from appreciation. Now, I know that all investments are risky, but a mortgage (even when we’re not in a bubble) has a different kind of risk associated with it than stocks. Unless you buy stock on margin, then the most you can lose on a stock (or bond) purchase is what you paid. Most people would think I was crazy if I said that I was worth $150,000, but all of it was invested in ONE stock. A house ties up a lot of the money you have AND future money (b/c you owe money for it), making diversification hard. What do you think? Are you comfortable with the amount of equity you have tied up in yoru house?
When I get back, I will have happier posts about money.
Also, check out some of the other people’s work towards their goals on my Blog Roll.
I’m not usually a pessimistic person (can you tell from my bubblegum pink background?!), but I don’t have much faith in the housing market right now.
The average home price in my area has risen to such heights in the past 5 years that the people that work in my town actually live more than 30 minutes away. They don’t like the commute, but it’s all they can afford. It’s been working for a while, but I fear our bubble will be popped, soon. It’s currently being squeezed between two factors.
1. Greenspan increasing interest rates. People can no longer play the refinance card to free up some extra cash. This combined with…
2. Rising gas prices. If you live more than 30 miles (1 way) from where you work and you drive a 1985 minivan…
Suffice it to say that something will pop.
And still, many of my educated friends and co-workers are still jumping on homes that come on the market. They fight with each other, getting into bidding wars, creating 50 year old, 1000 sq feet homes “worth” $160,000. These are the same people with Ty Beanie Babiesin their garage that they think are still worth thousands, and got screwed in the tech bubble because they believed that 30+ rates of return were sustainable. They sleep outside to wait for the pre-sale of lots. I’m not saying that no one makes money off of this, but it’s scary when no one around you believes that house prices can’t keep going up.