Attacking Conventional Wisdom

The truth is that few people make wise financial decisions consistently. The reason is conventional wisdom, that is popular at the time, is usually wrong. Here is a housing market example based on our advice over the past 8 years.

Time period: 2003-2007

Conventional wisdom: Buy a home now because if you wait until tomorrow you will not be able to afford it. Prices will always go up.

Our advice to customers in 2003-2007: If you have to purchase now you must buy less than your lender says you "qualify" for. This seems counterintuitive for a builder to advise, since it reduces our revenues, but we understood the dangers to the the large scale economy as well as to the individual's financial situation. Our track record is spotless. Not one of our customers has lost their home to foreclosure!

Time period: 2010-2011

Conventional wisdom: Wait to buy a home since prices are still falling. We have also seen articles that say "Rent for life rather than buy" gaining favor among so called financial experts. This is pure silliness. Advice to rent was good in 2003-2007. It is rotten advice now.

Our advice to customers in 2010-2011: If you can qualify to buy now do not wait. Prices may fall further but they may not. No one can time the market exactly. It is certain you will buy closer to, if not at, the bottom now rather than a few years ago. The advice to rent is incredibly poor advice. It does help individuals, that listened to conventional wisdom in 2003-2007, feel better about their situation since they cannot qualify to buy at this time. If more potential buyers choose to rent, investors will move in even faster to buy real estate and rent it out. Rents will increase as demand increases. This will make investors willing to pay more for the homes they buy in order to rent out and home prices will increase as rents increase. So either way home prices will increase in most areas....more renters will bring more investors into real estate and/or the cyclical nature of home demand will return.

Our advice at all times: Buy new for energy efficiency and minimal operating costs. I built my home in 2003 and have not spent a penny 0n maintenance. The exterior of my home is maintenance free and we use tried and tested materials and appliances on the interior. I installed the materials from our basic package including carpet, vinyl, and laminate countertops. My kids love carpet and we have always been able to prepare food, just as well as on granite, on our laminate countertops. My friends who bought existing homes or foreclosures have spent a small fortune on repairs and maintenance but at least they are on target to have no mortgage payments in 15-30 years or less.