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I took the Hook; and what I read was nonsense! May 5, 2008

Posted by shaferfinancial in Uncategorized.
Tags: , , ,

Sunday, Parade magazine had a St. Petersburg couple on their cover talking about Real Estate, so I tooked the hook and actually read it.  Usually, I ignore this bit of mass media because it has little of interest to me.  But, what a surprise.  I know that the mass media is fundamentally flawed when trying to discuss complex issues, but sometimes I still get slammed in the face with the reality of the nonsense they print. 

The title of the edition was “As the mortgage crisis lingers, Can You Still Find Your Dream Home?  A promising title, so I took the hook!  The third paragraph started with “At the center of the crisis are Americans who bought homes during the five-year housing boom that ended in 2006 and are now struggling to keep them….”  Hmmm…..what does this have to do with finding your dream home?  And of course exhibit #1 is variable rate loans.  What nonsense, variable rate loans resetting account for less than 2% of the foreclosures.  What follows this is fear-mongering.  Except for 1 short paragraph about the appreciation if you had bought a home in Los Angeles in the year 2000, the rest is about folks who bought at the height of the market and have significant losses.  Then the kicker is a ending quote from a Countrywide executive about  their willingness to offer assistance to their mortgage holders.  This is the company that caused more than their share of heartache that would have gone under if Bank of America didn’t buy it out and they are quoted as helping the consumer?

Finally, they end this series of articles with “Great Reasons to Rent.”  Among them listed is stocks have done better over the last 45 years (A Fidelity Investments study), what about leverage????  How did that help folks and if stocks did so well why do folks have so much more money in their homes, than in the stock market?  And the tax deductions are overstated argument, using the fact that half of home owners don’t get the break and not telling folks that 43% of homeowners own their homes mortgage free thereby not having any mortgage interest to deduct.  And the final stab at reality, stating that in order to overcome initial costs you need you home to appreciate 10% in order to recoup all the costs including sales costs when you sell your home, which “typically takes about five years.”  Five years to appreciate 10%?????  1.8% per year????  The average for the country over the last 100 years is 4.7%.

Folks, there was so much hooey in those articles, that it was impossible to parse out the occasional good advice.  Another hatchet job against Real Estate ownership and fear mongering at its worst.

Folks, don’t take the hook.  Long term real estate ownership is the only investment that has worked for the middle class. 



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