I didn’t mean to criticize anyone for their personal decisions. Each family has a different situation.
If we had a “normal” market where housing appreciates at 2%-4% per year like it did since 1890, then we wouldn’t feel the need to get into heavy debt and rush out and buy. We would take our time to save and to decide what is best for our families.
If you look at housing in historical terms, housing as a proportion of purchasing power has generally remained the same. But for that same piece of the pie we have better houses. That’s how our generation can afford to live in larger better houses than our grandparents and that’s how we, as a society, increase our standards of living.
The new financial instruments (and govt intervention) caused such a boom in housing in the last 10 years, that housing took up an increasing share of income.
But that is not meant to last.
Think about it. If housing keep on consuming an increasing portion of our income pie, we’d have less to spend on everything else. That will eventually cause a decrease in standards of living because our kids would have to spend a larger percent of their income on housing.
I’m positive about our future, we will continue to improve our living standards. I believe that market forces will cause a realignment that’s beginning to take place right now.
I think it’s useful to think of our total income as 100% to be divided up into portions — 25% for housing 10% food, 10% education, 10% savings, etc…
