My Personal Newsletter Post on Buying a House (July 15, 2006)

09May14

Time to Start Thinking about Buying a House
Originally posted July 15, 2006

Assuming you have been watching the signs and have sold at an appropriate time, you probably share my sense of lightness at not having to worry about where your house-buyer will come from – when, as reported today, variable mortgage rates are poised to rise to levels that many homeowners will be unable to afford. Presto! A market filled with foreclosed homes, offered at fire-sale prices.

But let’s move on. Having sold, there’s the question of where to buy next, assuming you’re worried about avoiding tax payments on the proceeds from your sale. I’m not up on the rules; it used to be, and maybe still is, that you have three years to reinvest. But where, and when?

For when, the answer is, not yet. First, there has to be the shakeout; it needs to be determined which markets, if any, will remain strong. And, of course, you want to buy after the market has taken its major hit, when prices will be much improved.

There is also the climate question, and that’s the Where issue. It starts to appear that desertification is underway across the western center of the country. And even if it is not, there is apt to be increasing talk and fear of desertification (i.e., damage to housing prices), if higher temperatures and droughts continue to be the predominant theme out there.

There are lots of articles in Backpacker magazine these days about Glen Canyon National Recreation Area in southern Utah, which on my 2002 Road Atlas is a nice, big lake, but which in reality is now drying up. Backpacker loves it because the drought has exposed all kinds of cool slot canyons and other exploring zones.

But Arizona, southern Utah, and all them other places out there can’t survive in their present form without the Colorado River as we have known it; the Colorado can’t survive very well without Rocky Mountain snowcaps that provide a continuous flow of meltwater on into the warm months; and the snowcaps can’t survive higher temperatures. I’m not expert on this, and I welcome correction; but my take on it is that the Colorado River basin is not a good place to be long-term. And if Great Plains drought trends continue, neither is the Missouri.

What does that leave, for places with long-term water supply? It’s a good question, and the point of this little story is, it’s way too premature to say. My early best bets are on the Pacific Northwest and the Great Lakes watershed. Not that there won’t be lots of other options. We’ll just have to see.

For what it’s worth, I did advise one friend to consider buying a houseboat. I wasn’t sure of the tax implications, but the nice thing about a boat is, you can usually keep it somewhere near water. Also, it’s a nice place to stay if you’re at a point in life when you could pick up and use it to go see the kids, the grandkids, the world, etc.

* * * * *

Follow-Up
Posted November 28, 2006

Excerpts from an article in MSN MoneyCentral

The modest rise in October home resales “is helping build some excitement that we might be seeing a bottom … a settling back down in the housing market, but not really a bubble bursting,” said Marc Pado, chief U.S. market strategist at Cantor Fitzgerald in San Francisco.

But David Blitzer of Standard & Poor’s Corp. told CNBC’s “Street Signs” that the bottom won’t come until mid-2007.

(Note: this item was previously posted in another blog. Originally it was posted in a private newsletter that I distributed to friends.)

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