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Excerpted from a Times Magazine article by Dan Kadlec.
Famed Money Manager Peter Lynch recently proposed this gem: Ignore the headlines.
That's no easy thing. How do you tune out news of recession, housing, subprime woes, the credit crunch, rogue traders, $100 oil and nukes in Iran? It's enough to make you sit on your thumbs. But what, exactly, are you waiting for? Throughout history, there are generally times when you could scare yourself into doing nothing.
However, as Lynch observed nearly 20 years ago, "in spite of all the great and minor calamities that have occurred . . . the thousands of reasons that the world might be coming to an end, owning stocks has continued to be twice as rewarding as owning bonds."
A top reason to not buy stocks, in Lynch's view, is if you don't already own a home - in which case, make that your first investment, since an owner-occupied home is nearly always profitable . . . housing debacle and all.
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The number of houses listed for sale in Marin have DECLINED every year since 2002 thereby limiting supply and contributing to higher prices. Our inventory is smaller today than ever and California is still experiencing significant growth - it is expected to have a higher growth than any other state in the Union during the next decade; this will add to upward price pressure. |
When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset. But those who do pull the trigger excel in the long run. As John D. Rockefeller said, "The way to make money is to buy when blood is running in the streets." And the streets are stained crimson starting with stocks and fears of a recession . . . which we may be half-way through already, or we may avoid one altogether. You just never know.
As for housing, certainly some skepticism is in order. Formerly sizzling markets probably haven't seen the worst headlines, though they may well be close. And "jumbo" mortgages, those more than $417,000 (which is typical of the San Francisco Bay Area) are likely to remain artificially high for a few more months while banks work through their credit issues.
But let's say you are ready to be a homeowner, have good credit, plan to stay put for five or more years and have been waiting for the perfect entry point. It's time to get serious--before an inevitable rise in interest rates wipes out your advantage . . . Anything you gain by a further drop in prices might be offset by rising financing costs.
You risk rising interest rates if you wait. So while you may be able to buy a home for a lower price in six months or a year, if interest climbs from, say, today's rate of 5.5% to 6.5% on a 30-year-fixed mortgage, your monthly payments will climb and you won't have saved anything. Also it's conceivable that home prices might steady, sellers might become less willing to negotiate, and you might have spent a year living somewhere you don't want to be while waiting for a more advantageous time.
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