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Best Financial and Real Estate Moves For Post 2008
By admin | November 12, 2008
What Are The Best Financial and Real Estate Moves For Post 2008
This post comes after lots of thought about the financial crisis we have been going through, the bail out of huge financial institutions and now the impending bail out of GM, Ford, and Chrysler. From everything I have heard so far the United States government is spending more than a trillion dollars on all of these bail outs. Will all of this work? We don’t know yet, I am very hopeful that it will, but what is the likely outcome of all this?
The government is spending money that it does not have. The government is printing lots of new money and forcing it into circulation. What normally happens when the government does such things? Inflation, that’s right INFLATION!! Am I talking about 4% inflation, or 6% inflation, or even 8 - 10% inflation, at this point I don’t know, but it seems clear that in the near future we are going to see inflation much higher than we have been used to.
What happens when we see inflation at rates like 6 - 8%? Normally we see things like food, gas, electricity, clothing, and all the other every day items you and I need day to day, going up in price 6 - 8% a year. You also see building materials, and all the raw materials needed to keep the countries economy going, going up in price as well. Eventually you see peoples wages going up at 6 - 8% as well.
What does this mean for the people of New Jersey? It means if you are renting, you are likely to see your rents going up much faster than you have been used to. Rent increases will likely match the rate of inflation which means year in and year out you could see your rent going up 6 - 8%. What does that look like if you are paying $2,000 a month in rent? After the first year your rent moves up to $2160 then the next year too $2330 then the next year too $2520.
Say you buy a home with a 30 year fixed rate mortgage and your mortgage payment is $2000 a month. In the coming years, with rents going up 6% - 8% a year, your mortgage payment stays at $2000 year in and year out. All the time you are paying off your mortgage with cheaper and cheaper money, because after all your money is losing 6% to 8% of its value every year in that situation. Also in a situation such as this, your home is likely staying the same value or going up in value.
What will you see your financial investments doing? If the 1970’s are any guide, you will likely have a great deal of difficulty investing your money and getting a return after taxes and inflation that means anything.
So what is the likely best move for an economy that likely will be dealing with inflation problems for years to come? Invest your money where you live. A home will pay you back over time, many times over. Not only will your payment for the mortgage remain the same over time, you will get a large tax deduction on the interest you pay, and likely over time your home will start appreciating close to the rate of inflation or at the rate of inflation.
All of this is my opinion of course, but if the 1970’s are any guide I think that this situation is more than likely.
James Boyer REALTOR, working the Morristown NJ Real Estate market as well as the Madison NJ Real Estate market, and the Chatham NJ Real Estate market, and the Summit NJ Real Estate. Of course I work the real estate markets of all the surrounding towns as well. If you are thinking of investing your money in a home that will keep your monthly mortgage payment the same no matter what, visit the New Jersey MLS Search where I am sure you will find some very good deals on New Jersey homes for sale.
Category: Chatham, Madison, Morristown, Summit |
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