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Title: The Coming Crash in the Housing Market : 10 Things You Can Do Now to Protect Your Most Valuable Investment by John R. Talbott ISBN: 0-07-142220-X Publisher: McGraw-Hill Trade Pub. Date: 28 April, 2003 Format: Paperback Volumes: 1 List Price(USD): $14.95 |
Average Customer Rating: 3.62 (42 reviews)
Rating: 3
Summary: Maybe more info than we need
Comment: I have read many articles on housing...the pros and cons...the baby-boomers unloading their houses when they retire vs the baby-boomers have to live somewhere when they retire arguements...and so forth.
This book has lots of good statistical information to back up its premises...which seem to boil down to...Buy a home within your means (and he does define how to find that out, which is a good thing if you can't figure it out on your own)...Anticipate that the home market could go down as interest rates rise making your home harder to sell in a pinch (to his credit, he tells you how to avoid that too)...and a few other common sense rules of buying that could be applied to many things. If a person is going to spend 6 figures on anything, you would think that they would take the time to learn what they are doing, but it is obvious to the author and to many other people watchers in the world that too many people just don't put effort into watching where they put their money. So, if you are a person who carefully spends your money without rushing into any purchase, you probably have enough sense to not have to buy this book; and if you are person who is just the opposite, you probably aren't too concerned even now about learning anything about your home purchase, so you aren't even reading this review. Last note: if you were going to buy properties to use for investment purposes, this book could be of assistance. Hope this helps.
Rating: 4
Summary: Do Trees Grow to The Sky?
Comment: In this thoughtful and fact-laden work, John R. Talbott comes out swinging both with a provocative book title and a curious sort of self-help organization to his ideas. Divided into two parts, (I) - Why the housing market will crash and (II) - Ten things one can do about it; The title says it all- housing prices are at an all time high and they will come down, in not just sort of gently floating way, but with a crash. Such a dramatic and unsettling prediction - stated so starkly- screams for a detailed, comprehensive and cool-headed analysis, and in the first part of the book, Talbott wades right in with a whole array of charts, tables and studies to buttress his point. He provides a history of "Similarities to Other Spectacular crashes" to remind us of similar market situations in the past, and he also gives us scenarios on the timing, depth, scale and geography of his predictions. Finally, Talbot takes us deep into the worlds of Fannie Mae and Freddie Mac: two quasi-governmental organizations that bundle and sell after-market mortgages to the tune of 3.7 trillion dollars. As if on cue, the New York Times recently reported that Allen Greenspan publicly warned that "taxpayers would be at risk" were if the highly leveraged positions of these agencies were to be found wanting in the future.
Since most everybody who is an adult (except those who are incarcerated or living at home with their parents) has to deal with housing expenses in one way or another, the second part of the book is logical: So housing prices are going to crash. What do I do now? This part of the book is a bit weaker because of the inevitable diversity of responses that people will have towards falling housing prices. Some will want to consider selling their vacation house now, others will pay down their debt, but I don't foresee a lot of people renting out rooms in their houses or above their garages as Talbott suggests we might need to do. But this is the strange logic with any doom and gloom scenario- If you believe in it, then you would be a fool not to act on its predictions. So at least Talbott is being logically consistent when he advises young couples not to buy a house and that it might be advisable to move out of the big city to a smaller one where the prices are more affordable.
Finally, I must mention Talbott has even thought about the market dynamics associated with such dramatic predictions such as are in this book. Acting on the (somewhat self-aggrandizing) insight that a prediction from a qualified analyst can actually move a market one way or another, He asks if this book might actually be itself be the tipping point and the cause the big long noisy slide downward in the housing market. I guess it is going to be up to the readers whether they drastically change their behavior after finishing this book. As for my wife and I, we plan on paying as much of the principal down as possible on our house when we refinance in a couple of months... but we will be optimistic about housing prices when asked. After all, we are both realtors.
Rating: 3
Summary: No one can predict the future
Comment: I have sold two condos over the last five years. I have been trying to decide whether I should rent or buy again. Having read books and articles from both sides, those who believe there is a housing bubble and those who believe prices will level off but not decrease, I have concluded that both make good arguments but only time will tell. I could come up with arguments to rebut everything said in this book and I could come up with arguments to rebut those who don't believe a housing crash will occur.
Here are the main arguments in support of a bubble:
*Many people are choosing adjustable rate mortgages. The inevitable increase in interest rates will make mortgages unaffordable for many. Many people will choose to sell their homes, creating excess inventory and lower prices.
*Rental vacancies are at records highs. Rent vs. Buy calculations are most likely to favor renting, driving more people out of the housing market.
*There is a huge gap between monthly mortgages and rents. The wider this gap grows the more likely people will choose to rent rather than buy, driving down demand and therefore prices.
*Only 20 percent of families can afford a home in today's high priced market.
Here are the arguments against a bubble:
*While rates will rise in the next few years an improving economy will bring better jobs and pay raises. This means that most homeowners will be able to pay the higher costs of their ARM mortgages. Also, many people who have ARMs can currently afford to pay 30 year rates, but they choose not to, to save money. When they see that rates are rising they can always get in on a good 30 year deal.
*The main reason for the record high rental vacancies is the recession. Many individuals and families have moved back in with parents. An improving economy will drive many of these people into the rental market driving up rents.
*More people entering the rental markets will close the gap between the cost of renting and the cost of a mortgage.
*Based on salaries only 20 percent of families can afford a home. However, for those who currently own a home the high rates of appreciation provide them with huge downpayments if they want or need a new home. So when assets are considered a lot more than 20% of families can afford houses despite the high cost.
Talbott's book is an interesting read but no one can predict what will happen in the future. The author may be right and he may be wrong. We'll have to wait and see what happens. If you have a home and are wondering if you should sell or if you want a home and are not sure you should buy now I would say don't let Talbott's views sway you. Read more arguments and come to a conclusion based on what seems to be going on in your local housing market.
I found a brand new affordable townhouse and I have a large downpayment, so I have decided to go ahead and buy. Even if Talbott is right and the market crashes I can make my monthly payments, which is ultimately what matters. This will be my third purchase and buying sure beats renting.
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