Boom or Bust?

More and more analysts are starting to come to the conclusion that the US market is on its way to some sort of "correction".

Here's an interesting statistic: In Manhattan, the average sale price of a home fell almost 13% in the third quarter of this year. Further, the amount of time it took to sell in that market was up by nearly 24% over the same time the previous year.

Leslie Appleton-Young, the chief economist with the California Association of Realtors, has been quoted as saying, "We are seeing a market in transition."

Is this a momentary cooling off, or a more pronounced downturn in the market? No one seems to know for sure, although there are lots of theories out there.

On the positive side, if the market returns to more sustainable prices, it could be good news for everyone. Houses will appreciate at a more measured rate, and more people will be able to buy. Further, if houses appreciate more slowly, we'll all be a bit less likely to jump into home loans that bank on our equity. After all, using your equity is "one time" money, which you'll have to pay back.

Also, we all have to keep in mind that mortgage rates are going up, no matter what the impact of hurricanes Katrina and Rita. With that in mind, it makes sense to take a prudent financial course: Pay down your debt as promptly as possible, live within your means, pay your savings first, and make sure that you don't have a mortgage that's bigger than you can afford.

I suspect my grandfather always lived that way.


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