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« Hillary!'s First Instinct | Main | Mitt's Religion Speech »

A Real Housing Market

...not a bogus one, is what is needed to solve the subprime crisis.

Posted by Rand Simberg at December 11, 2007 07:36 AM
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Comments

While I agree with the sentiment of forcing people to face the consequences of their choices, I have to admit that the "4x income" law sounds a lot like grandpa saying "in my day it was uphill both ways!" and "get off my lawn!"

I'm not certain, of course (what in this life is certain?), but I believe that the cost of capital has truely fallen in the last few decades - and I expect that trend to continue. People are getting richer on average. They have more disposable cash. A percentage of that goes into savings - flooding the savings market, and decreasing the value of cash.

So it could very well be valid to own a house worth a higher multiple of your income. (Of course, my house is also worth only 4x my income - but I am an entrepreneur, which is an extremely high risk job.)

Posted by David Summers at December 11, 2007 08:58 AM

It may be valid, but I'm finding validity in accumulating a large pile of cash instead. My house is worth about 1.1x my income (adding the value of an out-of-state property I also own only brings it to about 1.7x), and I like it that way. YMMV, but my advice would be to buy the smallest, cheapest place you can stand to live in and sock your money away for other stuff (which of course can include a second home or substantial improvements to the first one).

Posted by Jay Manifold at December 11, 2007 09:36 AM


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