Last week in the stock market was a lesson in fear.  This week things don’t seem so bad since the market was up over 900 points on Monday, a one day record unmatched in this century or the last.  Today was pretty non-eventful.  So what does the stock market have to do with real estate?  The stock market drop since the high in October, 2007 has caused the evaporation of trillions of dollars in assets.  Starting in 2006, home equity that homeowners thought would be there for them to borrow against evaporated as well.  Both are long term investments, but we seem to have forgotten that.  The go go market of the past decade in both the stock market and real estate was the only market some people knew.  So people acted as if their homes were bank accounts.  They are finding out very painfully that they weren’t.

 Some lenders and credit card companies took advantage of the “we want it now” mentality that has permeated our culture during this time.  Credit was easy; way too easy to get.  Without financial discipline and boundaries on spending, a lot of people got into trouble.  That’s the other side of the financial equation: greed.  Unfortunately when it comes to money, the two controlling emotions are fear and greed.  What’s the answer?  For some people, the next few years will not be pleasant as they try to dig out from under foreclosure and possibly bankruptcy.  If they are not careful, the mindset that got them there in the first place will put them back there again.  Unbelievably, the credit card companies still will give bankrupt consumers credit cards so “they can create a credit history again”.  Of course, in the meantime, the consumer gets to pay very high interest rates and the credit card companies continue to make a profit.  Everyone else is left holding the bag as the federal government tries to fix all the mistakes made by congress, companies, and consumers alike. 

Although it may not be sexy and showy, being a responsible consumer and working from a spending plan is the fastest way to creating wealth and homeownership that is manageable.  It’s a proven statistic that homeowners create a lot of wealth for themselves (when they do it right) that renters will never see because they are paying their landlord’s mortgage, not their own.  Yes, doing it right is really boring and consumers may have to wait to buy their first home until they have a down payment, stellar FICO scores, and steady income.  They may have to buy a used car instead of a new one.  Their first home may be 20 years old and not as big as they like.  But if people take a measured approach to purchasing the largest asset they will most likely ever have, they will have fun in the process and be comfortable with the outcome instead of living in fear that they may lose that asset.

Have you ever heard the term house poor?  Don’t let your house own you.  Be able to live in your own home and still have money for stuff for the house and for doing the things you enjoy.  If you are unsure how to get there, take a trip to the local library and check out some books on buying homes.  Not the get rich quick flipping houses books, but the realistic books showing you how to take planned steps to homeownership.  Also look for classes in your community that help you understand the process.  The resources are there.  All you have to do is look for them.  And look for professionals to help you.  A reputable realtor and lender are your first line of defense.  Get referrals from people who had a great experience buying.  Buying a house should be a lot of fun and this is an excellent market for the buyer who is prepared to do it right.  Fantastic opportunities are everywhere.  Make sure you have planned well to be able to take advantage of the opportunities before taking that step.