Buyers Tip for Aug-if you want to DO the RE Boogie, prepare to Get (some) Down (payment, that is...)

My Buyers Tip For This Month: Down Payments are back, so prepared!

And I hate to admit it (well, actually, I'm perfectly happy to admit it), but I'm glad.

If you're an investor, you should actually have some risk in your investment. That's what keeps old Mr. Smith's Invisible Hand working in the market place. As investors, we should take risks that are commensurate with returns. Without that, prices rise with no basis, people jump in and out of the market for no good reason but quick returns, bubbles get created, economies crash, and suddenly schools in Scandinavia are struggling because of mortgage defaults in small towns in the US. As Bill Murray says in Ghostbusters, "DOGS AND CATS, LIVING TOGETHER!!! MASS HYSTERIA!! " Unbelievable.



And you're looking for a home for your family versus a flip or a rental property, I think it's good news too. When down payments are required, you only buy the amount of house you can actually afford over time. And, there's less of a tendency to treat your house as a giant ATM machine. So people tend to keep expectations rational and prices tend to stay more realistic (I don't think a 2-bedroom condo would have hit $600K in most Bay Area cities if people had to have $120,000 in cash to get one...)



So get ready for it, Buyers, because having a decent credit score and unlimited optimism about the market is a thing of the past (for now). Investors should be thinking about 25%-35% down, and a retail buyer should be thinking around 20%. Believe me, we'll all be better off for it!

Rebelliously,

Larry