Easing your house-hunting stress
Do the math and remember location is key
Do you want affordable housing? If you’re young and can’t quite afford a house, you’ll probably say, “Heck yes!”
But if you already own your dream home, you’ll more likely say, “OK, just not near me.”
These opposing attitudes are among the top national problems troubling our housing market.
Lower-income, first-time buyers clamor for the construction of affordable homes. But most existing homeowners want their homes to rise in value. They lobby their communities against construction, becoming NIMBY (Not in My Backyard) neighbors.
City councils usually cave to NIMBY demands, blocking development, particularly at the lower-cost end – jacking up home prices. Homeowners love it. Would-be, low-end buyers seethe. So do property owners seeking to sell to real estate developers.
Politicians’ main desire is re-election. Their voter and campaign funder base? Homeowners. So they mostly side with NIMBYs, which makes it tough for teachers, police officers, nurses and other service workers to buy in the communities they serve. In California, things are so bad that state legislators tried limiting local councils’ avenues to block construction. Approvals have finally started trickling in. But so have opponents’ lawsuits.
The frustrating truth: Affordable housing and appreciating home values are in natural opposition. So don’t wait for politicians to deliver the impossible. Whether you own or are hunting, weigh these steps now.
Aiming to buy?
Calculate what you can afford. Start by determining a monthly payment that easily fits your budget. Mortgage lenders will reverse-calculate this into a targeted home price range. Don’t stretch like so many did in 2005, speculating they’d sell at a profit in a few years. Housing isn’t a short-term play. Besides, while I anticipate stocks and the economy doing well for the next few years, when they eventually tank, home prices will almost surely follow.
Location is key
Ignore today’s trendy neighborhoods. Instead, envision neighborhoods owners will increasingly covet in decades ahead. Prefer up-and-coming neighborhoods to posh, established ones. Choose those with natural or legal barriers to development. That restricted supply will help your home’s value.
If you already own in an ultra-posh neighborhood, consider selling to rebuy in an up-and-coming region millennials will crave when they’re middle-aged and paunchy. Also, refinance, especially if your rate is adjustable. Current 30year rates average around 3.55% – which is near record lows. Figure how much you can save by locking in these low rates. Then shop for the best mortgage deal.
Ignore outdated thinking
Ignore the many conventional, wisesounding but wrong voices of yesteryear still arguing you should send in extra payments to pay down your mortgage faster. If your house’s long-term appreciation rate won’t be faster than today’s ultra-low and income tax-subsidized rates, you shouldn’t be buying it or owning it in the first place. If you should generate extra cash, plug it into liquid savings, like stocks and bonds.
Lack of liquidity ultimately causes more financial loss and mortgage default dilemmas than carrying a mortgage slightly longer.
Ken Fisher is founder and executive chairman of Fisher Investments, author of 11 books, four of which were New York Times bestsellers, and is No. 200 on the Forbes 400 list of richest Americans. Follow him on Twitter: @KennethLFisher
The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.