Sunday, October 07, 2007

Inflation, recession, investment, blah discussion

My significant other and I are constantly discussing the future. Wish we had a crystal ball, but our plan has always been to exit this life much sooner than later. Noooo, not in the Jim Jones drink the Koolaid kind of way, but just to retire early and live in many different places without much but the clothes on our back.

So the discussion lately has been, "Stay in this house in the burbs for 5-10 more years, or buy something different with more character for the 5-10 more years." On the one hand it would be nice to live on some large acreage with a unique house, on the other we could buckle down here and pack away more savings in these 5-10 years before we exit.

It is always a catch-22, if you think the market is headed down, it might be hard to sell your house ... then you get into a house, and the market continues to head down you keep losing home value. If you would have just pretended to have a larger payment and put that money into investments, maybe you would come out better in the long haul. It all depends on how the housing market moves.

The other train of thought is to sell now, in anticipation of a BIG housing market downturn. Downsize everything and move into an apartment or el-cheapo house, and wait for what you think the bottom is. Then you can swoop in and pick up the big houses on sale. But if you have to wait 3-4 years until you think the bottom has hit, why even buy if you are selling in a few more years. Of course this option is hard, it is not the American way. You are ALWAYS supposed to get it bigger, better, faster. Hard to turn back once you move forward. But if you can think of it has not moving back, but investing for something larger, it might work out. Of course I could easily go back to living in a single wide trailer in a mobile home park. It is where I came from, no problem doing it again.

Ohhhhh I wish I had a crystal ball.

What sparked this was an article in today's paper by Scott Burns. It was about the housing market today and the S&L scandal in the 80's. There are some great links to the OFHEO housing index data. You can calculate an index for when you bought your house and the index today, then compare it with inflation to see where you stand. I like it because you do it for your market area. Too much noise pollution about downward housing trends that are on a national level. Who cares about the nation ?? Of course we only care about where we live.

We bought in 1Q-2003, doing the calculations, says we have beat inflation. So I'm not sure what to do, if you are fat and happy I guess you are supposed to do nothing. I'm leaning towards the sell everything approach and live off dog food for 10 years to retire early. But then our savings have to last so much longer, that's an entirely different discussion.

I don't hate poker.