.

Right on Your Money I Dan ~dlec .,

Want More Money?

Ignore the Headlines! For more information,

visit cnn.com/
rightonyourmoney
Except this one. Sure, housing's in a hole. But there's a
poten"f case for buying now, whether it's real estate or stocks
ExcerJij:from TIMEmagazine: February 2008. At last someone in the media who
understands howreal estate(and investing)works!! This is not your typical"scary"
sky-is-fallingarticle(so it won'tsell as manymagazines),but finallya reporterwho
usesreasonand logicto analyzethe buyinga sellingof realestate
FAMED MONEY MANAGER PETERLYNCH last quarter, and there has been plenty of And "jumbo"mortgages,those more than
is IAerhapsbestknown forhis timeless panic about a recession.TheFederalRe- $417,000,are likely to remain artificially
wisdom that you can beat the pros by fo- serveis slashing shorHerm interest rates high for a fewmore months while banks
cusing on stocks ofcompanies where you atthe fastest clipin decades.Butif you work through their credit issues.
either work or shop or have some other stickto your steady,diversifiedplan while Butlet's sayyou are emotionally
edge.Buta more relevant Lynchismtoday everyoneelseis retreating,you will be ready to be a homeowner. Youhave good
is this gem:'Ignorethe headlines. happy years from now.Forone thing, Fed credit, plan to stay put for fiveyearsand
That's no easything. How do you rate cuts alwayslift the economyeventu- have been waiting forthe perfect entry
tune out all the chatter and ink on reces- ally,and the stockmarket typically starts point. It's time to get serious-before
sion,housing, subprime woes,the credit respondingjust asheadlines get gloomi- an inevitable rise in interest rates wipes
crunch, rogue traders, insolvent bond est.Sure,the market couldfall again be- out your advantage."The thing that will
insurers, $100oil and nukes in Iran? It's forerecovering.Butthe recessionmay be make home prices stop falling is the veD'
enough to make you sit on your thumbs half overalready-or we may avoidone same thing that will push mortgagerates
and wait beforemaking any big moves. altogether.Youjust never know. higher,"says JimSvinth, chief economist
Butwhat, exactly,are you waiting for? Asforhousing, certainly someskepti- at mortgage firm Lending Tree.Soany-
There has rarely been a moment in cismis in order.Formerlysizzlingmarkets thing you gain by a further drop in prices
history when you couldn't scareyourself in Florida,Nevada,Arizonaand California might be offset by rising financing costs.
into doing nothing.And yet, asLynchob- probablyhaven't seenthe worst headlines Considera ical home that sells
served nearly 20years ago,"in spite of all just yet,though they may well be close. for $218,90 .Youput own 20%an get
the great and minor calami- a 3o-yearfixed-ratemort-
ties that have occurred... all
the thousands ofreasons that
theworldmig?tbecomingto
. . is BIG
IThiS .

The Case Against Waiting to Buy

an e~d-ownmg s~ockshas
contmued to be tWIceas re-
warding as owning bonds."
Atop reason to not buy
stocks,in Lynch'sview,is
if you don't alreadyown
a home-in which case,
that should be your first
investment, since an owner-
occupiedhome is nearly
alwaysprofitable.Through
a spokesman,Lynchreaf-
firmed these views to me-
housing debacleand all.
When prices are falling,
few people have the discipline
to buy stocks,a house, gold,
Put 20 °/70 d own and get a
.
~ Monthly principalandinter-
gage attoday's rate of 5.5%.
est come to $994.31.Let's say
Financecosts will riseas the economyrecovers,so that 12months from now
tryingto timerealestate mightnotpayoff the same house goesfor10%
less,or $197,010.Butby then
the recession is history and
the Fedis jacking up rates to
stem inflation. If mortgage
costs rise just half a point, to
6%,your monthly payment
would be $994.94and you'd
have s~vednothing. Mean-
while, home prices might
steadyand sellersmight
becomelesswilling to nego-
tiate. And you have spent a
TOOAY COSTIN12 MONTHS? 'Year living someplace you'd
$218900
' . Typical $19'l010
' rathergQtpe.
It s more com p Icate
home '

rice If prices d rap an

art or any other asset. But 3D-yearfixed-ratemortgage p additional10% you must sellbeforeyou can
those who do pull the trigger buy.Butthat logjam won't
excelin the longrun. AsJohn . 5.5% Int erest 6% Persist forever~and if it ap -
D.Rockefellerfamously saId, Currentrates after rate Recessionends,andthe pearsyou'll be trapped fora
"Theway to make money is to recentdeclines Fedstarts toraise rates fewyears,try to refinance at
to day's lowerrates.llisks al-
$ 9 94
. 31
buy when blood is running in Monthly $ 994 94
thestreets." payment . waysseem
' mostacute
when ~
And the streets are stained. the headllnes <rive you ulcers ~
. . CONCLUSION:If you waited a year to buy, you would havesaved , 0" . ~
cnmson. Start wIth stocks. nothingandspenta year.Jivingsomeplaceyou'drathernot be But that sexactlywhenyou :;:
They havebeen pummeled Source:
LendingTree should think long term- b
this year. GDPbraked sharply and get off your thumbs. . ~
54 TIME February 25,2008