Mortgage Future Now, Have One Later

ddtuttle at 23:51 2008-08-25 said:

We are all waking up to the fact that the American Dream was just that, a dream. And using the $1.2T in 401k balances to prop up an illusion is more of the same nonsense that got us into this mess. It's simply case of throwing good money after bad.

There was a very interesting post on ml-implode over the weekend, that it could take 17 years for the San Diego market to stop going down in real terms (after inflation). It would then take another few years to get back to par (just keeping up with inflation).

We are talking about 20 years where real estate is not an investment at all, but just a place to live! The entire boomer generation could loose the cornerstone of their retirement plan. This would be a cataclysmic generational shift. Loosing your 401k on top of that is unimaginable.

Even if 20 years turns out to be an over estimate, this has happened before. My grandfather lost his home, an apartment building and his stocks in the 1929 crash. He never bought another piece of real estate again. He wasn't alone.

Of course if you bought your house many years ago, and prudently avoided taking out too much cash in a refi, then you'll probably still have equity to tap. But in that case there's no need to tap your 401k.

Keep your eye on the inflation adjusted case-schiller. It's not all that far from the 1989 highs and still falling. Put another 20 years on that and you get 39 years of no real gain in real estate! Now that I think about it, an investment that keeps up with inflation might look pretty good. Permalink