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Living The Unexpected

What a day it has been already. I woke up knowing I was going to write and address the family here at CrushTheStreet.com and I really thought I knew what I wanted to write about. Then I woke up and saw the foothills on fire close to where I live in Southern California near Los Angeles. In fact, the town I grew up in literally has homes burning right now due to a forest fire. This is consuming my thoughts at the moment thinking about friends and family I know in the area that have homes in the line of danger of that fire.

It really was just one of those ‘step back and think’ moments where you realize what is important in life. In this sort of days for me I almost forgot all about work and expenses and chores that needed to be done because there was a community that I was a part of that was being threatened… For many, they are living in the unexpected right now and the normally everyday cares of life don’t matter.

Obviously a home is a material possession, but people are emotionally attached to their homes because of memories and life experiences that they had at their homes. I know because I feel the same way. My heart goes out to those being impacted by the fires in the foothills this morning. I’m hoping for minimal damage as possible until the fire is 100% contained…

No homes of anyone I know of personally have been destroyed, but the danger is still there and winds are expected to be strong today. Thank you for allowing me to just share that with everyone as it brought a little mental peace to share it with our audience…

On To Something About Money!!!

Speaking of real estate…I was recently chat-chitting to a subscriber who wanted to know if now was the best time to purchase a home in Southern California to live. My thought was the last four years would have been better considering the price jumps but I didn’t come out and just say that. The concern of course is that we’ve seen prices in some areas go up as much as 30% in the last 12 months and if I thought prices were going to continue to rise or if I thought there would be a correction in the market and wait for a pullback.

My response was this… Markets tend to do irrational things that no one is going to be able to predict for the short-term. What might even seem short-term for a market might seem like a lifetime to an individual’s ability to stay liquid and sustain themselves through the irrational moves of the market. All of the signs are indicative of a correction in the housing market considering the dramatic price increases that we’ve seen but that still doesn’t mean the market won’t continue to climb for another couple years before it pulls back.

The housing market would collapse if banks flooded the market with all of their available inventory of homes from individuals who lost them to foreclosures. There are still people left and right living in their homes for over two years without making a mortgage payment. The banks literally have so much on their plate that they barely bother evicting homeowners in a reasonable time frame. This is not to mention mortgage rates going up. We are still at historically low interest rates and the effects of rising rates could potentially crush the housing sector.

I say all of this to point to the instability of the rising prices we’ve seen in the housing market. In my opinion it is very artificial and unstable.

What matters more than the price of the home is your current situation. Are you paying more right now in rent than you would be on a mortgage for that home at current prices? (Depreciation and interest on your mortgage is a tax offset to your payment) If so, that might be a reason to buy and not concern yourself with prices over the next year or two. Rent is expensive and can add up really quick. For a modest family home in the suburbs of Los Angeles in an area you aren’t going to get killed in, you are looking at $2,000-$2,500 a month in rent.  Over the course of two years, you are looking at forking over anywhere between $45,000-$60,000 in rent to a landlord paying their mortgage.
 
This was the more pressing issue that I felt this person should consider. If their monthly payments would be dropping $600-$900 per month and they planned on owning for at least five years, trying to find the most optimal entry point shouldn’t be their main concern.
 
For the many other people out their who are considering to buy or holdout, consider your own personal situation and evaluate what would be best and make that logical decision to put your family in that best situation.
 

I know it’s a challenge trying to get in and out of an artificially sustained government ran market, but being logical and thoughtful about how you play your cards will benefit you in the long-run regardless.
 
Look for our weekly wrap-up tomorrow!
 
Have a great rest of the day,
 
Kenneth Ameduri
Chief Editor at CrushTheStreet.com

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