#TBT 2007 Newsletter Volume 55

We like our house, but we were ready for a change. Our lifestyle is different now, and we wanted a house to match. No longer did we need all those empty rooms and their accompanying cobwebs. No longer did we have to worry about school systems.

So, we began spending Sundays perusing the real estate section and trooping through open houses. We hit an impasse, though. Every house I liked, he didn't. Every house he wanted, I said no. We decided this must be a sign that we should stay where we were until a slot opened at the retirement home.

Then, one Sunday afternoon, we wandered into a house that changed our minds. It just fit us.

We made an offer and found ourselves with an extra house on our hands. While we faced a buyer's market on the new purchase, which made us happy, we faced the same market with our existing house. Could this have been a dumb move?

The answer was a resounding no. While everyone else was relentlessly pursuing bigger and better in real estate, we decided to simplify. Coming home never seemed so right!

The real estate market has been reeling. For a while there, it seemed prices could only go up.

For most people, their home is their biggest asset. Real estate can be a great investment, but like most investments, it requires patience and a contrarian nature. When everyone else is buying, it's time to sell and vice versa.

We've always made money on real estate, but most came with longevity. Real estate requires time to build up equity. Only once have we gotten lucky with real estate, and it was pure luck. We bought at the bottom and saw prices soar within a year, but that scenario is rare.

Real estate is "real." You can put your hands on it, grab a fist full of dirt, and declare "mine." Stocks and bonds are pieces of paper with no promise of physical assets.

Of course, I can sell stocks and bonds at the drop of a hat. Not so with real estate. It's illiquid, and it can't be divided (normally). I can't sell $1,000 of my house to pay my bills, but I can sell $1,000 of a mutual fund to generate cash.

For those buyers who got caught in a declining real estate market and a rising interest rate market, the lesson is clear. Stop chasing bigger and better. Limit the size of your mortgage and the size of your mortgage payment. And be patient. Coming home shouldn't be a nightmare.

--Nancy's New Perspectives Newsletter, Volume 55, July, August 2007


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