Thursday, August 12, 2010

A Tale of Two Graphs (Part Two)

So, Since I haven't gotten too much in the way of corrections, I am going to continue with the thoughts that I have concerning this graph.

I was never interested in buying property.  Never had a mortgage.  Never will.  The thought of being bonded in place, paying for a 1/4 acre chunk of an old pasture in suburbia always made me nearly physically ill.

But there were plenty of folks out there wanting to live the dream.

Now, lately we have been telling everyone who will listen what a bunch of fuckers the banks were.  We were right about this.  But let's not forget for a moment the stupid friggin' pukes on the other side of the bargain.   They all knew that they didn't have the money.  They just thought that they had to have the dream.  So they went out and bought too much.

So basically we have liars selling to thieves and both sides screaming about "moral hazard".

1 comment:

russell1200 said...

Most of the evidence of people walking away from their primary residence is more anecdotal than real. The real collapse in prime mortgages came with the economize downturn.

Do people walk away? Of course. But most of the more egregious examples you see are of flippers -investors. When you had $13/hour plumber's apprentice owning 5 homes, it is was always likely to end up being a sad story.

Nothing wrong with renting. But it is an investment decision as well. If you go through the very long course of history, there are times when the renters did well, and their were times they did poorly. The advantage of owning (when priced reasonably) is that hopefully you have paid off your loan before you retire, so that your fixed costs go down at the time you are looking at going onto a fixed income.

In the context of SHTF scenarios, you have (grossly simplifying) two ways to go. If you own, you can make improvements to the property if you are planning a stay in place strategy: can't build a root cellar in a rented third floor walk-up.

If you rent, you look to keep maximize current cash income used to buy (presumably portable) gear, and as a cash buffer for the many SHTF scenarios where it is a slow burn: there is still an economy, but you need mobility to take best advantage of the minimal opportunities out there.

The biggest disadvantage of the mobile strategy (IMOP) is not that you cannot build a root cellar, but that you are likely never to build up a supporting local network of people.