David Sucher asks, How are you personally dealing with the housing bubble?
In fits and starts.
Over the past three years we have planned an addition to our home, then stopped when the construction prices were higher than building a new house; decided to build a new house, and put our house on the market, then took it off when the buyers were offering less than we were willing to accept; engaged an architect to plan an addition to our house, revised the plans again and again as the builders’ rough estimates kept exceeding our budget; and then decided simply to sell our house and buy another existing home. This time we got a buyer, at the same price we were asking last year, so I guess we were over-priced for last year’s market — though you wouldn’t think so from looking at the comparable listings.
There was one thing which kept pointing us back to purchasing another house: the cost of construction. Downstate New York has high construction costs. Labor and materials are both high. The labor because of the location, and the materials because of supply constraints and demand elsewhere as a result of the hurricanes last year and the continuing war in Iraq. And concrete delivery has risen in price because of the cost of diesel fuel.
What made me worry about buying another property is this bubble: I do not think the rate of increase is sustainable. If we were in this for the profit, then maybe renting for a time would be fine. But we’re not in it for the investment: this will be our home. And we expect it to be for some time to come. So while the prices are ridiculous, the mortgage we’ll be carrying will be not unlike our current obligations. If the balloon were to deflate, our home’s value would depreciate as well, so all-in-all, things are even.
You know what the kicker is? Broadband isn’t available there either.