Ok, it is 11:14 on a Sunday night and I should probably go to bed, but I have decided to start blogging for the first time instead of writing emails to people.
I have been wanting to talk about intuition for a while, this time with regard to money, as I find my own intuition has really helped me get by without a crisis so far. Since living in California for ten years, I have come to realize, or to believe, that we, as a people (sounds like the president talking) are on the whole good, with one or two opinions and ego, but we tend to follow mostly what others do around us. In a way, this is a good thing. If we were all totally different, we may live in chaos or out of control. However, people all doing the same thing can also get out of control. Take, for instance what happened when the banks decided to make borrowing a lot less expensive to bolster the economy at the beginning of the century. It was apparently a great idea at the time for everyone to benefit lower rates, but I think the Fed was waiting for an accident to happen. You see, making changes at a Fed level is like navigating a huge ship. Once the decision has been made, the ship follows a course. It takes a long time to play out and if unpredictable, takes a longer and difficult time to correct, sometimes not before the vessel hits something. So after the Fed lowered rates, people realized they could get a lot more without paying so much interest. In fact, at times there was no interest to pay back. People were receiving dozens of 0% credit card offers, 0% 4by4 SUV car deals from dealerships advertising like mad on the television, and for the first time,fantastic rates on mortgages available to lower income families, meaning they could be offered a mortgage for the first time. It is almost as if the gates had been opened. The credit availability to business and everyone allowed people to start making big plans to buy more.
Everyone was feeling optimistic.At this time around 2002, I had already racked up some credit card bills and I didn't have any mortgage. One of the reasons I did not purchase a house is because I felt my rent had been good for a long time ($900) and I was not a resident of the US. The last time I checked with Bank of America in 1999 as a non resident, I had to put down 30% of the capital. After 2003, things must have changed, as every time I went out to meet my friends at the Irish pub, they would say I was crazy for not wanting to buy a house. I kept hearing things like I was losing lots of money. When I defended myself and said I had made some inquiries but was still in the process of improving my credit score, I was told this was ridiculous. Someone offered me their broker who could apparently get just about any mortgage, pay off all my credit cards and raise a second loan for a down payment to my first time house in Los Angeles California. I was told within a month or two, my credit cards would be payed off because the house will have increased. At this time, these words may have been correct, but intuition told me this is just a flash of energy and by the time I try to join in, I will be too late.
Since 2003, I have kept my job and have managed to reduce my credit card dept by 60%.
I have no idea if I would have made a profit or not buying a home in 2003, but looking at a house near me on Zillow.com, I see it is listed as a $734,554 on Sunday 29 July 2007, but it sold last week for only $555,000.
http://www.zillow.com/Charts.htm?chartDuration=10years&zpid=20824390My intuition tells me people are very optimistic when it comes to wishing fortunes, but they tend to believe truths as they grow more exaggerated over time, like how prices of homes will continue to grow 10%+ each year. This is what I mean by people doing the same things can get out of control. I am glad I have taken my time. I keep reading story after story about people not paying their mortgage depts. Having any sort of dept is very stressful and I imagine people put their head in the sand to alleviate stress when ever they can, because stress hurts. I feel very sorry for someone who has followed the crowd and is unable to pay $4000 + a month after their two year introductory ARM rate has raised. I would be interested to know if I would have made a loss if I had bought in 2001 for $320,000 with no deposited and a credit score of 600? My intuition tells me I would be paying a lot more than my current $1350 a month rent now. As a result, spending an extra 2650+ a month now, I would probably have a bigger credit card dept, or my mortgage would have money taken out to re-pay higher rate credit cards.
Good night!
