People are still scared, and rightly so. When the financial markets, real estate, and the economy at large collapsed, few of us escaped without pain.
Maybe you're middle-aged, with several kids, a home with a mortgage that's underwater, and a job hanging by a thread. (Or worse, you just lost your job.) Perhaps you're young, in debt, with no job—or not the one you thought you'd have by now—and disillusioned with the "American Dream."
Or are you the small business owner who had already taken out a second mortgage, maxed out your credit cards and put everything you owned into keeping the business afloat? Are you dependent on a bank that continues to focus more on its survival than the needs of the people it was designed to serve? Are you staring at sliding revenues, rising costs, and still making sure your remaining employees are paid before you?
When I read the comments to my columns, especially those from readers passionately declaring that the risks associated with buying and owning a home are greater than the obvious benefits, I feel your hurt, frustration, and especially your fear. I've lived it—more than once.
I spent many nights in the 1990s walking the halls of my home that was underwater, pondering where the money was going to come from to feed my family, pay my 8.5% mortgage rate and rising tax bill, trying to ignore that I was paying 20% juice on maxed-out credit cards, and praying that my third entrepreneurial venture would be the one that finally worked. I was scared, miserable, and difficult to be around.
A heartfelt apology, so get moving
Why am I sharing this with you? To show that I've been where you are. Don't miss a wonderful opportunity just because times are tough.
I believe that our experiences shape our lives. Like Nietzsche, I believe that what doesn't kill us makes us stronger. I believe we learn more from our failures than our successes. I believe that we all can get lucky, but not without taking risk and not without perseverance. I know many of you are waiting for someone to apologize for this mess—and might even need it before you can pull yourself up and move forward. So here it is: I am sorry. I am sorry the banks too easily lent to people with zero down and lousy credit. I'm sorry the government then had to bail out those institutions in order to save our economy. I'm sorry so many people, mostly those that did nothing wrong, got caught in this crisis.
Now you can get on with your life and stop feeling sorry for yourself. It's not that you're not entitled to feel as if you got screwed. It's just that other than me and maybe your mother, nobody else cares. Wake up and move on. What's done is done. All that's left is opportunity.
If you don't take it while it's here, someone else will. One of the greatest opportunities we have seen in a lifetime is staring you in the face. Owning a home, with all the stress it caused me in the mid-1990s, was the base of my economic pyramid, and the base of almost every other American's pyramid. It is what gave me the opportunity to house my family and start a business (by borrowing against its equity). Even though I was underwater at one point, it eventually appreciated, allowing my net worth to finally turn positive.
If you want to pay rent money to someone else, it's your prerogative. That person put 20% down, borrowed five times the amount at 5% interest, and uses your money to pay the principal, interest, and taxes on the place you're living in. One day, maybe tomorrow, maybe three or five years from now, that house or apartment is going to go up in value.
don't let fear cloud your judgment
Your landlord is going to make five times the down payment for every dollar the home increases and you will have provided the funds that will allow this. I am not being sarcastic here. I really do care or I wouldn't waste my time writing this column twice a month. Homeownership allowed me and my family to live the American dream. Homeownership gave me a second chance when I was young and too foolish to understand the consequences of credit-card debt and the exorbitant interest associated with carrying it. Homeownership was my first entrepreneurial investment and was the catalyst to my current career.
I'm just trying to pay it forward. Don't let fear cloud your judgment. Nothing worthwhile is ever easy. If you have a mortgage and you're paying 7% or more, do the difficult work and get it refinanced. If you have a good job and you don't own a home, or if you dream of a bigger home, this is your chance. Interest rates are going to start rising soon, as I've said. The tax credits—free money—are going to go away in a few months. Someone else is going to buy the home you've been eyeballing.
I have been screaming about this for the last six months. In my next piece, I will sum up all the evidence I've put forth since I started writing this column. I'll show you where we started and where we are today. I understand your reservations and empathize with your pain and frustration. Still, I urge you to be courageous. Opportunities like this are rare.