Some people buy, not for investment, but to get shelter in an asset they can pay off before they retire. They aren’t planning on selling, so increase in value doesn’t matter to them. They can afford the payment and have either sufficient savings or job security that they are not worried about losing their jobs. They found a house that is a good match for their lifestyle and family.
I put myself in that category. I bought in early 2003 – and saw my house appreciate on paper to a stupid price, then revert back to a somewhat obscene price, IMO. (It’s a 45 year old tract home – it would cost about $500k less than we paid if it were in the midwest or south.) But it suits our family’s needs. So much so that we built a granny flat for my in-laws to live in. It is so customized to our needs that it would take a nuclear blast to get us out of here. I don’t plan on cashing out any paper profits if the housing market goes up… I don’t plan on walking away from my mortgage if the housing market goes down. And I’ve got the resources to pay the mortgage if my job goes away.
If the buyer is on the edge, financialy – buying more than they can comfortably afford – your points are valid. If the buyer is buying for strictly investment purposes – like buying stock, or beanie babies… then your points are well taken.
Some buyers, however, are buying because it suits their family needs long term and it is a long term home for them.
Perhaps they should be buying spending their money on cars instead. Clearly you are bullish on that idea. 😉
