Yes, the Fed can manipulate rates for a long, long time. But what if rates were to go up?
I’m also thinking in terms of speculators/investors who’ve paid cash, like so many have done over the past few years. You’re more of a “mom and pop” kind of guy who is probably looking for ways to produce cash flow in retirement. What about the investors who have no emotional or other ties to the homes or areas? I think they would dump quickly if they thought that housing prices were going to decline and other investments were paying much higher returns (plus more opportunities for cap gains).[/quote]
I find that planning around too many extreme “what if’s” at the macro level is just hazardous to one’s financial health, because most of the what if’s end up not really being the case, because the end up being borderline extreme scenarios. And if they did actually happen, whether you held on to a home or didn’t buy or didn’t sell doesn’t really matter, because that borderline doomsday scenario, everyone is screwed more or less in the same way, so it won’t matter.
It’s really no different than the “what if scenario” of the entire CA state falling into the ocean because of an earthquake, and you’re trying to plan for that scenario to be safe, despite still living in CA. If you live in CA, no amount of planning will make you any more safer than anyone else living in the state when the entire state falls into the ocean, unless you’re ultra-wealthy and can maintain a fleet of private pilots that spontaneously airlifts you out of CA at minute’s notice.
Same could be said about the Fed. If we get to the point that the Fed cannot (as some of you say) “manipulate” the markets to get results, we got much bigger problems at hand, and you are in no better shape than anyone else in this country (unless you are ultra-rich perhaps with those nice parachutes). So it’s meaningless to plan for these catastrophic what-if scenarios, because for almost all of us, we’re equally screwed.
Mom and pop retirees aren’t going to be buying $1million+ homes as “investments” to earn 4-5%. Show me many $1million+ homes that cash flows well…. Chances are, if they are buying $1million+ homes, it’s either for personal enjoyment (for which they have the money) or for their John or Janny child that can’t afford to buy her own home (again, which, they have the money), so they’ll buy it for them.
And I’d even most retirees don’t have the patience or time to start being a landlord if they’ve never done it before. In fact, as a retiree, if one’s done their financially planning right, they shouldn’t be going after that maximum return anyway. They should be in their wealth preservation stage and try their best not to lose money.
