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Sunday, December 16, 2007


The downturn is not "coming in the near future," it's here. It may take awhile for everyone to see (or admit) but the lumbering dreadnaught doesn't stop and turn on a dime.

The reduction in new house constructions is the easiest tell-tale; I believe almost 1 in 4 jobs is related to the construction of new homes.

As far as your list for parents is concerned, there are ways to counter the problems:

1. Home values will occasionally fall, but in the long run, real estate is going to appreciate in value. Be willing to stay in your home for the long run. When we bought our home (8.5 years ago before Kelly was born) I said, 'This is my home for the next 25 years.' Thus the fluctuations in market values have no effect on me and my family.

4. Lock in at the best rate you can. Even if it's a little higher than you like this quarter (or month, or however you look at it) you can always refinance it later if the rates drop.

If you find things are getting ready to reset, don't wait for offers to come to you. Go to your bank, call your credit union, get on the phone with institutions that you've been doing business with your whole adult life and ask what their best deals are for 15 and 30 year fixed rate mortgages.

Don't be afraid to refinance your second mortgage, your 'home equity line.'

But lock the rate in, don't play Russian Roulette with rates. If they go down, you can always refinance later (waiting for deals where there are no closing costs that would offset the savings in interest over several years) and if they go up, you have already locked in at a rate that your family can afford.

Sorry for the long comment.

Fantastic comment. Advice that I totally agree with. (We did the same thing with our house, but it wasn't our dream home. We were happy to sell it when we did.)

One clarification: I agree the downturn is already here; I was mostly thinking the official numbers. Also, I think it's going to get so much worse that we won't think things are all that bad right now.

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