The Real Estate Market is HOT!

In case anyone is wondering about real estate - the market today is hot. Anytime, is a good time to buy real estate.

I bought my first home in 1982. The interest rate was around 16%! I got in with an ARM at 13.25%. I was happy to have a home. I could afford the payments.

The difference between then and now? Back then mortgage rates were dropping from a high of 18% or so. In two years I refinanced with a fixed 10% rate which locked my payment in at $535 PITI.

As many of you know, the late 1980's were horrible real estate years. Like now, there were for sale signs up and down the block. Did I care? Not in the least. Why? Because I didn't have to sell. I held that property until 1999, when I sold it for $168K. I still owed $50K on the note!

The key is to not listen to the bankers when they tell you to 'refinance your home' and to 'use that equity...it's just sitting there doing nothing!' The rule is never take money out on a refi unless you are putting it back into the home. Upgrade, or install, a kitchen or bath. That's the smart thing to do.

As inflation occurs...and it will occur, you will reap the benefit in the long run. Do not live beyond your means. That's what got all these folks in foreclosure. They foolishly refinanced, took out money and spent it on junk: Vacations, cars, paid off credit cards (...lived beyond their means!) etc.

The bankers were not your friend in this process. They offered you monthly payments on a sheet of paper: $1200, $1000, $800, $600, $400, $200 etc. "You choose". If you picked the lower amounts, or if you were buying too much house, guess what? You got an ARM!

What is an ARM? An ARM is an Adjustable Rate Mortgage. Whatever goes up, must come down and vis versa. It locks you into a severe prepayment penalty (i.e., refinance) for 2 or 3 years. If rates happen to rise, so do your monthly payments. Some had a 1 year lock before 'adjusting' to the next level.

Once the rates began to rise, so did the monthly payment. If folks were living beyond their means, i.e., credit card balances, vacations, new fancy car leases etc. there was no 'extra' cash to pay for the increase in mortgage payment. God forbid if a medical emergency arose. Something had to give. Eat, or pay for the mortgage? The choice is yours.

All could have been avoided by following smart sensible conservative values regarding money. Live within your means. Understand the legal ramifications of any documents you sign. If you do not, then you shouldn't be signing them.

Caveat Emptor: YOU have a duty to Do your OWN Due Diligence. It's no one's fault but your own.