“Why are you throwing away your money on rent?” we were often asked between 2004 and 2006. “You could be making a killing right now if you were buy a house.”
Long-suffering readers know that their Whiskey editor opted to stock up on silver instead of real estate in those critical years. It was clear to us that silver was ridiculously undervalued. We greedily bought up the shiny metal at bargain single-digit prices.
Meanwhile the whole housing thing seemed awfully frothy. Manic even. And we understood that some very non-free market forces were driving real estate higher and higher. We opted to sit it out. Especially when we realized that it was cheaper to rent a place than buy a comparable property. Combine that with the near-inevitability of a painful bust and we were only too happy to look like fools for sitting out and just renting our living space.
But now the tide has turned. The Fed-induced fever has run its course in the housing market. Prices have fallen drastically. Owning has become cheaper than renting again. Which is as it should be. A landlord should be able to rent out his property at a profit after all.
So if you (wisely) rented while the real estate bubble expanded and popped, now may be a very good time to stop renting and look into buying a home.
We recently rented in a “transitional” Minneapolis neighborhood at what we thought was a screaming bargain. We had it in mind buying would be a good move soon now that the real estate bubble has popped, but we wanted to test the area out first.
After deciding that the neighborhood was just fine — and a hidden bargain in the Twin Cities — we started monitoring prices. Lo and behold it turns out that we could buy a bigger, nicer house in the same neighborhood and our monthly payment would be almost half what we are paying for rent now!
How could this be? Well, we have to thank the Fed once again. They generated this latest boom-bust cycle which has shoved real estate prices so far down. Meanwhile, the Fed has also kept interest rates far below where the markets would have put them at this point in the game.
The real estate market itself is full of foreclosures and desperate sellers. We’ve been tracking the sales prices and yearly assessments of properties in a few cities across the land (including our own Minneapolis). 2011 seems to be the year when reality came knocking. That was the year the assessments dropped about 25% (often more) and owners started selling accepting as much as 50% less than they’d paid prior to 2006 around the height of the bubble.
The upshot is that anyone with halfway decent credit can now borrow over 90% of the cost of homes which are already going at firesale prices. Not only that, but you can borrow very cheaply.
This past Thursday, June 7, 2012 Bankrate.com reported:
“Mortgage rates dropped again, reaching record lows this week as the European debt crisis deepens.“The 30-year fixed-rate mortgage fell 2 basis points to 3.92 percent. A basis point is one-hundredth of 1 percentage point.“The 15-year fixed-rate mortgage rose 1 basis point to 3.16 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, fell 4 basis points to 4.46 percent.”Source
“Mortgage rates dropped again, reaching record lows this week as the European debt crisis deepens.
“The 30-year fixed-rate mortgage fell 2 basis points to 3.92 percent. A basis point is one-hundredth of 1 percentage point.
“The 15-year fixed-rate mortgage rose 1 basis point to 3.16 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, fell 4 basis points to 4.46 percent.”
We never thought we’d try to buy a house. After all, home ownership is largely an illusion (stop paying your tax-rent to the local government and quickly find out who really owns the property) whose financial appeal for the past century is largely a result of government interference.
But right now borrowing to buy a home is simply a smart financial move. These conditions are so unusual. The homes are cheap, yet so is the borrowing cost to get the money to buy the home! Even after adding in taxes, we would be paying less than ⅔ what rent costs us now.
Sure you have to come up with a down payment. But it can be as little as 5% of the total purchasing costs. (It could be as little as 3.5% if you can get a loan insured by the Federal Housing Administration. Or even 0% under certain first time homebuyer programs. But getting a hand from the federal agencies isn’t something we can really endorse at the Whiskey Bar…)
Furthermore, we can almost guarantee that the Federal Reserve will lower the already lightened, low cost burden of borrowing. By inflating the supply of the money, the Federal Reserve will make sure that the dollars you pay back to your lender are worth less than the ones your lender gave you in the first place.
So a taking out a mortgage doesn’t just lower your monthly housing costs below rent…It also acts as an inflation hedge!
And here may we suggest another inflation hedge to invest in with all that money you save…an inflation hedge that also works as the perfect deflation hedge…
We speak or course of the humble nickel. Nickels are a form of lawful currency and will buy more based on face value in the event that things get cheaper in dollar terms…
But nickels are also 75% copper and 25% nickel and their metal content is close to — and sometimes more than — face value. This isn’t of any use now, but in the event of a dollar collapse, nickels will trade at a much higher metal value on the bullion market…just like “junk” pre-1964 90% silver coins do today.
Buy a house, good patron, then fill your new basement with nickels.
That’s what we’re doing anyway. We’ve already been socking away boxes of nickels in the basement of the house we’ve been renting. After we mortgage a new (bigger, slightly nicer) home, we’ll have even more money with which to get more nickels!
Getting a mortgage will increase our living standard slightly (with a nicer home) while freeing up a lot of cash over renting. We can store that freed up cash in a form of money that could be used at face value to pay the mortgage down later on…
…Or which could be used to pay the mortgage off a lot faster based on the intrinsic metal value in the event that central bank action leads to a much weaker dollar…and a higher intrinsic value for the nickels based on their metal content.
Nickel-hoarding was already a “can’t lose” play. If you managed to “keep your powder dry” by staying on the sidelines during the housing bubble and bust, then now is a good time to jump in with both feet and scoop up a home at a bargain. Use the current low home prices and artificially low cost of borrowing to take even greater advantage of the nickel strategy. We certainly will.
Gary Gibson is the managing editor for Whiskey and Gunpowder. He joins the Whiskey staff as a long-time fan and reader of both Whiskey and Gunpowder and the Daily Reckoning. A graduate of Fordham University, Gary now spends his days reading about and writing on limited government, sound money, personal responsibility and resource investing.
Pingback: Buy A House and Put Nickels In It « Financial Survival Network
I just can’t see myself collecting nickels when I would rather use that money to collect silver.
Nickles will at least always be worth something. One thing about a home is it is a major cost to upkeep – both time and money in the form of mowing lawn, painting, electrical/plumbing/heating/cooling etc issues that will crop up from time to time. Also, not so easy to walk away from if need be due to change of job or disaster. A house is also an excellent target for government confiscation.
Or, you could done even better by buying raw land out in the country and putting an older mobile home on it like I did. This enabled me to much more rapidly build up my savings so that I can build my own low cost house next year because I’m neither paying rent nor mortgage. Granted, my method isn’t for everyone, I have handyman skills that most people lack, and I prefer living in a rural area to living in an urban area.
Another alternative method of rapidly building up your savings by avoiding rent and mortgage payments is to live in your vehicle for awhile. Then you can move to a high income state without paying the higher living costs that most locals pay. If this interests you, then search ‘ van living ‘, ‘ car living ‘, ‘ caretaker gazette ‘ , and so forth. There has actually been a book that was written about car-living. If you live in a van that looks like a delivery van, then you can park in many public places over night without attracting attention if you are careful.
Pingback: Buy A House and Put Nickels In It « Silver For The People – The Blog
Everyone’s in debt, and now the word on the street is to buy a home?
You need money to buy a house. Get a loan+interest? Go into more debt?
Pay Cash? Do you even have cash?! You can’t legally move more than 5,000 at a time, so how are you doing this?
This country has problems, and the problems come directly from government.
What kind of house do you expect to get? Can you fix fences, cement, carpentry, electrical, drywall, finishing, roofing, joist and sheeting, do you have your own tools? Maybe buy tools instead. Where is it located? Will your tools be there if you take a leak? If you replace the windows will they have bullet holes?
This stuff happened because the US Constitution has been flushed down the toilet.
We are out of money because of banksters, and their enablers
Others claim they are out of money but won’t audit their CAFR’s.
We don’t need this insanity, a lot of us are not able to have the skills to buy, fix or defend a home. It doesn’t mean you give up, but it also means don’t be stupid. I am talking to those who even have any money to do it.
The article doesn’t seem to mention risk.
People who don’t have money, only find the worst loans.
They take risk to the next level failure. Failure can ruin a life
You risk your life when one of these loans fail.
With everything being tied together electronically, it’s possibilities for exploit become even more powerful.
You can’t pay a loan back when your spiritual, home and work life are tied together and being exploited electronically. TV, Radio, electronic voting each exploit your decisions, mood, financial security, health. The people feeding on you have no such rules or barriers.
Pingback: makia julpo
Pingback: buy instagram followers
Pingback: jalia parsnip
Pingback: mark mania
Pingback: chase online logon
Pingback: chase online
Pingback: universal remote
Pingback: law videos
Pingback: handyortung kostenlos
Pingback: chase online banking
Pingback: Insurance Money Information
Pingback: see here
Pingback: view video
Pingback: click to watch
Pingback: Damaris Grasman
Pingback: РњРµСЃС‚РѕРїРѕР»РѕР¶РµРЅРёРµ kaif РІ hidden oasis - РљР°Рє РЅР°Р№С‚Рё С‡РµР»РѕРІРµРєР° РІ РїРµСЂРµРґР°С‡Рµ Р¶РґРё РјРµРЅСЏ - Nitedpayfe.xpg.com.br
Pingback: Adam Golida
Pingback: GranuFlo recall
Pingback: Tommy Retamar
Pingback: online marketing los angeles
Pingback: Naisparinwi.comuv.com РСЃС‚РѕСЂРёСЏ С„Р°РјРёР»РёРё РўРµСЂРєРёРЅ ... РђСЂС…РёРІ РїСЂРѕРёСЃС…РѕР¶РґРµРЅРёСЏ С„Р°РјРёР»РёР№ РЅР° Р±СѓРєРІСѓ С…
Pingback: РџРѕСЃС‚РЅР°СЏ РґРёРµС‚Р°РєСѓР»РёРЅР°СЂРёСЏ. Р’СЃРµРіРѕ РЅР°Р№РґРµРЅРѕ - 176
Pingback: Luther Sermons
Pingback: Leonel Abend
Pingback: online backup
Pingback: Raleigh Shisler
Pingback: Waldo Etters
Pingback: Signe Vidler
Pingback: Dallas wedding videographer
Pingback: deezer gratuit
Pingback: План побега фильм 2013 торрент Змо
Pingback: смотреть фильм Давай сделаем ребенка онлайн
Pingback: Одинокий рейнджер смотреть фильм онлайн на русском
Pingback: Мачете убивает онлайн hd ЮМр
Pingback: смотреть онлайн фильм Притворись моим парнем 2013
Pingback: Джастин и рыцари доблести смотреть онлайн фильм на русском
Pingback: Мы – Миллеры премьеры 2013 смотреть онлайн лучшее качество
Pingback: смотреть фильм Майор онлайн
Pingback: Тор 2: Царство тьмы скачать торрент Ярщ
Pingback: Тёмный мир: Равновесие hd онлайн цЕЛ
Pingback: vigrx directions
Pingback: Бойфренд из будущего худ фильм ЮЁж
Pingback: Капитан Филлипс скачать торрент в хорошем качестве тшЭ
Pingback: Убойный уикенд смотреть онлайн ёЫП
Pingback: canada goose jacket
Pingback: С„РёР»СЊРј РЈР±РѕР№РЅС‹Р№ СѓРёРєРµРЅРґ СЃРјРѕС‚СЂРµС‚СЊ РѕРЅР»Р°Р№РЅ РћРџСЌ
Pingback: Игра Эндера трейлер 2013 ТГЪ
Pingback: youtube partner
Pingback: РЎС‚СЂР°СЃС‚Рё Р”РѕРЅ Р–СѓР°РЅР° hd РѕРЅР»Р°Р№РЅ Р—РСѓ
Pingback: РўСЂРё РјСѓС€РєРµС‚РµСЂР° СЃРјРѕС‚СЂРµС‚СЊ РѕРЅР»Р°Р№РЅ Р©РЁС…
Pingback: фильм Быстрее, чем кролики трейлер ДКЕ
Pingback: Малавита трейлер на русском нъз
Pingback: Иван Царевич и Серый Волк 2 фильм трейлер аюн
Pingback: buy garcinia cambogia
Pingback: KM DP276 Black
Pingback: Друзья друзей ЫбС
Pingback: I only spend under 2 cent per click on Facebook ads
Pingback: Невероятная жизнь Уолтера Митти уЕс
Pingback: seed bank
Pingback: Payday Loans
Pingback: Website maintenance
Pingback: Website plans pricing
Pingback: website valuations
Pingback: кино 47 ронинов 2013 смотреть онлайн яЁЪ
Pingback: Хоббит: Пустошь Смауга трейлер 2013 мМс
Pingback: lon rosen los angeles dodgers
Pingback: get your ex back
Pingback: social bookmarking
Pingback: silver hoop earrings
Pingback: С„РёР»СЊРј РќРµСЃРЅРѕСЃРЅС‹Р№ РґРµРґ С‚СЂРµР№Р»РµСЂ РђС‰Рє
Pingback: Р’РЅСѓС‚СЂРё Р›СЊСЋРёРЅР° Р”СЌРІРёСЃР° 2013 С†Р’СЏ
Pingback: СЃРјРѕС‚СЂРµС‚СЊ С„РёР»СЊРјС‹ РѕРЅР»Р°Р№РЅ РІ С…РѕСЂРѕС€РµРј РєР°С‡РµСЃС‚РІРµ РҐСЂР°Р±СЂРѕРµ СЃРµСЂРґС†Рµ 2013 С‘С…Рё
Pingback: apple ipad accessories uk
Pingback: garcinia cambogia 1300 reviews
Pingback: фильм Холодное сердце трейлер ВпГ
Pingback: buy vps
Pingback: Геракл: Начало легенды фильм онлайн 2013 ХКЯ
Pingback: Я, Франкенштейн фильм 2013 премьера йЬи
Pingback: Dating Tester
Pingback: Афера по-американски скачать ьжЪ
Pingback: смотреть Забойный реванш 2013 вор
Pingback: Диана: История любви фильм 2013 торрент АШЦ
Pingback: lon rosen dodgers
Pingback: curse youtube partnership
Pingback: фильм Уцелевший трейлер Зтё
Thanks to the tireless efforts of the Federal Reserve, currency in circulation is up $72.5 billion in the last year - which equates to $234 for every man, woman and child in America. And after rifling through his wife's purse yielded fruitless results, The Mogambo Guru has launched an all-out investigation to find his share. Read on...
With so much turmoil and political strife throughout the world, it can be difficult to realize how bright the future of technology is. Luckily, Stephen Petranek hasn't lost sight of that. Today, he describes seven important stories that will shape the future... and how a few savvy investors can make a killing in the process. Read on...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk. John Goodman explains why this is such a dangerous proposition...
The biotech industry has dominated the market so far this year; and early investors in this sector have practically won the lottery. But with such an incredible run up, could this bull market be nearing exhaustion? Greg Guenthner investigates, and offers some sage advice for investors willing to take a chance. Read on...
Generally speaking, gold miners are bad businesses. They bury perfectly good cash in the ground and tend to issue lots of shares just to stay afloat. So when one comes along that actually turns out to be a good business, it's important to take note. Chris Mayer has found just such a company. Read on...