Comments on: Too Many (Nest) Eggs in the Housing Basket?

By: Cindy Allen

Cindy Allen — Wed, 02 Jul 2008 22:03:23 +0000

Christopher, thanks for sharing your story. I’m sure you could speak at length about the peace of mind you have because of your sacrifices and discipline. That is worth more than any BMW or other fancy “thing” you could acquire. Bravo! Congratulations.

I think what really helped me early on was a subscription to Money magazine. I learned about how a 401(k) could grow over time and about the importance of consistent savings starting at an early age. I also came from a frugal family, so that probably helped, too. Being in debt always made me very anxious.

By: Christopher

Christopher — Wed, 02 Jul 2008 21:56:56 +0000

Cindy, your last paragraph pretty much sums up the approach to personal finance that my wife and I have taken over the years. We got married at age 26 and had probably $1,000 between us. We went without a car for the next 6 years (riding the bus and subway), spent frugally and put money into our mutual funds whenever we could. We bought out first house at age 36 for $247,500 (the year was 1997, at the bottom of the last real estate cycle). We have remodeled our kitchen and a bathroom, paying cash each time from money we saved. We drive 10 year old cars that we bought used. Our friends who drive new, leased cars and live in big houses which they thought would never stop appreciating in value are financially vulnerable. As for us, we have 700K in equity in our home, 500K in savings and no debts. We did not get here by flipping houses, by playing the lottery or pulling down high salaries. We did it by “living within our means, saving money and investing it wisely, and using debt conservatively if at all.” It’s as simple as that.

By: Cindy Allen

Cindy Allen — Tue, 01 Jul 2008 14:34:03 +0000

Alicia, please show us the report or story that says that renters are STATISTICALLY deeper in credit-card debt than homeowners. I frankly think it’s much more likely that homeowners have more debt, because they have more access to credit, and they tap their home equity for consumer purchases.

By: Alicia

Alicia — Tue, 01 Jul 2008 02:12:50 +0000

Maybe this corresponds with the high percentage of people who are in credit card debt. People who rent STATISTICALLY (yes, I know your credit score is 850 and you have billions in an account) are deep in credit card debt. People I know who are not stuggling financially right now are people who are not transients. They tend to buy a house, raise a family, which anchors them to a community. Once children are in school moving really becomes unattractive.

By: Cindy Allen

Cindy Allen — Tue, 01 Jul 2008 01:25:16 +0000

Alicia, thank you for making my point for me. The length of time people live in their homes makes real estate a lousy deal for many. Americans on average move every five years. (Here’s a link: http://transcripts.cnn.com/TRANSCRIPTS/0108/05/sun.10.html. That’s different from our parents and grandparents, who tended to stay put and in the same job for their entire adult lives. For them, a home purchase makes sense. That’s why buying is often a bad deal for the average person, who moves every five years or so.

So by your definition, we are a nation of flippers, and we should all rent.

By: Alicia

Alicia — Tue, 01 Jul 2008 00:09:32 +0000

I do think that is a flipper. A little over 4 years PER house? The commission alone is 6%. Just to recoup your original money a house would have to appreciate 6%? You sound like a person that you critize; a person who wants to use their house to make money. If your life is that unstable then renting certainly a better option for you.

By: Cindy Allen

Cindy Allen — Mon, 30 Jun 2008 21:42:31 +0000

Alicia, I owned six homes CONSECUTIVELY, over a 25-year period. Not a flipper.

By: Brad

Brad — Mon, 30 Jun 2008 20:45:09 +0000

Thats right Ron! Let’s take these comment threads back for people who want to use them to have a discussion rather than for people like Andrew who are just trying to shill…

By: ron

ron — Mon, 30 Jun 2008 20:16:59 +0000

Andrew, although posting an ad hominem attack is much easier than constructing a real argument, the effect tends to be to destroy your own credibility rather than the person or group that you are attacking.

You seem to bring cash on cash returns up a lot. Leverage has the same effect of magnifying outcomes on the downside that it does on the upside. I am sure that many of your readers are experiencing the “magic” of leverage as we speak.

HTH

By: Alicia

Alicia — Mon, 30 Jun 2008 19:49:21 +0000

Owning six homes is something a flipper would do.