But my bias for 401k alternatives is real assets that produce a steady real income. A home can be rented out. In a world where downpayments are not required (FHA 3% less tax credit) and mortgage rates are held low through government action (FNMA and Fed purchases of MBS etc), and there is no real penalty for walking away when underwater, it will be hard to rent any home that can be easily bought instead. Why would anyone want to rent a single family home that they can buy with little or no commitment and at low monthly cost?
I think we have not yet understood the full long term impact of the Great Bailout. Over the next few years, journalists and financial advisors and individuals will digest what is happening now, and come to realize that buying a home with little or no money down is a huge gift from the federal govt when paired with a plan for ruthless default. People will be buying homes with little or no commitment to paying the purchase price, to an even greater degree than in the last bubble.
Certainly people assigned temporarily to one location would prefer to rent, but the population of people in this situation is steady, and we can’t all make a retirement living by buying more and more homes and renting them to this small slice of our working population.[/quote]
Another good post, patientrenter.
What separated owners from renters in the past was, first and foremost, a hefty down payment. Secondarily, was the good credit score and proof of steady income (which could be waived with a hefty enough down payment, BTW).
The #1 way to prevent another foreclosure “crisis” is to require a minimum 20% down payment. Some exceptions can, of couse, be made for veterans and other people who have earned the exception.
