Housing Market - Let's Take a Walk

Trying to sell, refinance or take out an equity loan on your home? It doesn't take a world-class economist to see the signs that are all around us - literally.  In today's world of gas prices at an all-time high and a general feeling of financial instability in the middle class due to outsourcing, a shrinking job market and higher than ever household debt levels, adding a stumbling housing market to the mix probably won't help matters much.

During the housing boom, many homeowners took on financial obligations that they simply could not afford after the special introductory rate or fancy financing deals ran out - usually after only a year or two.  Now, many people that were feeling the squeeze but just barely making ends meet are no longer able to keep up, possibly due to a combination of stagnant earnings coupled with increased expenses and debt service.  A job loss without a substantial amount of savings can cause some or all of the family income to disappear virtually overnight, leaving many people only a few paychecks away from being homeless.

It is no secret that credit issuing companies have been bombarding citizens and companies - many of which are simply not creditworthy - with low interest consumer debt; simply open your mail and the courtesy checks, pre-approved credit cards and refinancing offers are abundant.  Per the terms outlined in your six page small-print contract, the low interest rate offered initially, suddenly becomes the highest interest rate allowable by your state's usury laws the instantyou make your first late payment.   Certainly there are grace periods that allow for extra time beyond the due date but they are not required by law, and a job loss can put your debt on-hold for months, not weeks.

As the price of gas increases, so does the cost of doing business, and the added expense is always passed along to the consumer in order to maintain profitability.  Not only does it cost you more to drive to and from your work each day, but it also costs you more to repair your car when it breaks down.  A trip to the store means an increase in your grocery bill, and a trip to the doctor reveals that your insurance premiums, co-pay and deductible may have all gone up; and if they haven't yet, they surely will.

All of this makes for many interesting opportunities for personal and professional growth.  Continuing education continues to be a great way to learn a new skill, or to improve an existing one.  The more you know, the more difficult it may be to replace you, and the more marketable you are if you happen to be replaced and find yourself in the job market again.  Delayed gratification brought upon by actually saving money for those large purchases might be just what the doctor ordered, and an increased sense of frugality might be a useful counterbalance to the bigger, faster, better, newer culture we live in.  Rather than replacing our homes every five years, stay in them and fix them up when they need maintenance.  The pressure to focus on the purchasing of new computers, cell phones and other consumer goodson a regular basis, rather than enjoying what we have, tends to fuel an on-going, never saitable urge to spend, spend, spend.  Until we own everything - and have to buy it all over again to continue to be fashionable - or until we're so deeply in debt, we can no longer afford to make the minimum payments each month.

The answer is simple: make more, spend less.  By taking time out for self-improvement, you are giving yourself more opportunities to help yourself, and fewer chances that you will be drawn into a purchase you really did not need to make. Spend time enjoying what you have, consider scaling back those products and services you don't really need, and put that money directly into paying off debt as quickly as possible; which includes your home mortgage.  For those who are concerned about the tax advantage pushed by the housing industry, consider this: if you were unemployed today, would you rather have a mortgage with a tax break, or no mortgage at all?  The secret, of course, is to do the opposite of what everyone else is doing.  Unfortunately, that's just not a fashionable option.