House poor – First-time home buyers should buy

House poor – firs time home buyers should buy, James Stewart, the awesome writer responsible for some of the best non-fiction books about Wall Street, has written an article about the housing “bubble” and why it shouldn’t matter to first-time homebuyers.  Worth a read.

By James B Stewart, Smart Money

(A)ll of this prompts an important question for first-time home buyers, people who aren’t speculators or investors, and just want a decent place to live and some security for their families…

…I know the feeling. I remember vividly trying to save the money for a down payment on a New York apartment during the early- and mid-1980s, another period of fast-rising real estate prices. The more I saved, the more I fell behind. Everyone else seemed to have self-satisfied anecdotes: how they got an “insider’s” price when their building went co-op, or how a six-room apartment overlooking Central Park in the San Remo went for $40,000 in 1976, the year I moved to New York. But I didn’t have $40,000, or even $10,000 back then, and I was never an insider.

Finally, after 10 years of renting, I landed a book advance that, along with all my savings, became the down-payment on a modest apartment. I was convinced I was buying at the top. New York real estate prices did plunge, but not until 1991, and they never got as low as the price I paid.

So despite my own concerns about high real estate prices, my advice to first-time buyers, for whom the home they want to purchase is their primary residence, and who can manage the down payment and monthly mortgage payments, is to ignore all this talk about an overheated real estate and the likelihood of a coming collapse in prices. Think of real estate less as an investment, and more as a consumer durable

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Updated: December 2017

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