Skeets, I think you have the right idea on real estate, but you may be a bit soon. RE cycles usually take a long time to play out. If rates go up, it will be a huge disaster longer term because not only will the new sales dry up, but the variable rates rising will clean the clocks of those who borrowed more than they should. If rates go down, and there is a huge recession, RE is one of the things that brings it back. That is sort of the valley, peak, valley concept.
However, you have to think of a house as more than an investment. It is also a place to live. So when you think about buying, you also have to consider the alternatives and weigh their attractiveness. Rentals have increased along with RE prices, so you may not be doing yourself a big favor by renting. I consider myself a nomad, so I have always rented, though I do own some raw property in California. The key is how you feel about your job. If you think that raises are on their way, security is in the bag, and that they will never transfer you, then 35 pct. of salary, pre-tax, may not be so onerous.
One other thought many are missing. The new capital gains taxes make RE somewhat less attractive as an investment. One of the big attractions has always been free capital gains on one home. Now, as cap gains decline, that is diminished as an advantage. MB |
