Dave Sidoni argues that buying a home now offers fixed costs and long-term stability compared to renting, even as inflation and Fed rate hikes create uncertainty. He says fears about timing the market are amplified by recency bias from recent volatile housing cycles.
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Are we in an economic meltdown? Perhaps we're not in a full on Chernobyl, but many people are starting to see warning signs. So if this is the case, then when it comes to buying your first home, then you should totally pump the brakes, right? Actually, in times of uncertainty, renters should be way more scared than people buying a home. Let's talk about it. What is happening? My how to buy homies. I'm Dave. David Sidonian. If you are new to the show, welcome. We're very glad to have you here today. And if you're looking for weekly advice and guidance on how to buy your first home, you want to know all the ins and outs and all the insider secrets. Well, then subscribe. Become a homie, and you get weekly information to digest into your ear holes. And yeah, you're probably going to have to hear me say homies and ear holes. Homies. I was going to get back to the Alphabet definitions, but yet another crack in the economy stirred the headlines this week. And that means I know some of you need the calming reassurance of Uncle Dave to explain how this affects you. So relax, as always. I got you guys. So how's your summer going so far? Sounds like we should all be headed to a bunker and hoarding canned goods. I actually saw a guy on TikTok. He was at a gas station with his pickup truck bed lined with a tarp, and he was straight up filling the bed of his pickup with gas. Guess he didn't want to wait for it to go up another 20 cents next week. Dude, the economy is crazy right now. With inflation at 8 and a half percent here in June of 2022, it doesn't look like it's slowing down like everyone had hoped for. So the Fed went nuts and they just agreed to a 0.75 percentage point raise in the Fed rate. Who knew that three quarters of a point of anything, three quarters of a percent could be such a big deal? This is a big deal because it's the highest raise in the fed rate since 1994. So what happened? Everybody freaked out. Stocks went up, and then they went down and bonds rallied, and now everyone's talking about a recession. Meanwhile, maybe you're thinking, okay, you know, uh, I'm kind of new to this adulting thing. What the hell does the Fed raising the rate mean to me? And if gas is more and food's more, does that mean the houses are going to be more, too? Let me give you the technical definition of what the Fed raising the rate means to Everybody and our bottom line, our pocketbook. Well, what it means is that nobody knows what's going to happen. The government's going to try to help, but we don't know how they're going to help or who they're going to help. And if the Fed rate doesn't fix it, we don't know what to do next. And the big corporations, they're going to keep screwing everyone because that's what they do. There. You feel better now. Feel all informed. The truth of this situation is in times like this, stability is your best friend stah ability. You need to be stable to stay safe. Buying a home should be looked at as a safe, long term stabilizing factor in your economic life. Homeownership is a rock that will stay the course and be your foundation. This is the way the homeownership has been viewed in the past. I mean, since the Great Depression people have been looking at it that way and it's been a stabilizing force for over 100 years. However, in the past 20 years, because we've had these crazy wild swings in housing, suddenly everyone is tossing their first home buying into this swirling mess of changing economy and thinking that somehow they're all tied up together. This is something that we call recency bias. Recency bias is a psychological phenomenon where you give more importance to recent events compared to what has happened further in the past or historically. Now in the case of real estate, this is massively present. Right now I'm seeing serious recency bias when people talk about buying their first home as opposed to just renting. Now some of you are just starting to adult and in general, most 20 to 50 year olds, they only think that real estate behaves in these huge swings because that's the recent behavior that's been happening in the last 25 years. It's either shooting up or it's crashing down now. So either you think this because you're on the older edge of that 20 to 50, or you're, you're on the younger edge. You think this because your parents got crushed in 2008 and they give you all these horror stories. Now as things get hairy, this generation could make sounder decisions by taking a step back back to realize that when things get bananas, owning a home, owning a home the right way is your best shelter. Literally and economically. Figuratively, it's your best shelter. When the storm of recession comes, a blowing homeownership may not be as sexy as it was when there was the 19.5% increase in prices and appreciation in 2021. But it has two huge comfort factors in an uncomfortable economic environment. Number one, buying a home is fixed and stable. And number two, you are in control. Prices are going up everywhere on everything, including rents. The rent numbers are going straight up and they're not stopping. Look at this chart. Straight up since 1988. But a home is a fixed payment, fixed, stable. If you own a home, you get the warm, cozy blanket, a full fixed stability. It's a non changing bill that you can always be assured of and it gives you some peace of mind and you are in control. You cannot get kicked out of your home unless it's your doing. That is not the case when you rent. Your landlord can raise the rent for no reason other than people can't afford to buy a house because they got scared. They didn't make any sort of plan, so now he has more applicants. Or your landlord can decide they need to change the building completely. So they decide to rehab the whole thing and turn it into someplace that you, you can't afford or that isn't designed for you. Or worse, if the recession hits really hard, the landlord could sell the building that you rented and change it altogether. Yeah, getting your home that you rent sold out from underneath you is a real thing, especially if you're renting in a smaller complex or a duplex or those of you out there renting homes. If they need to sell it unexpectedly because they need money because of this recession, then you might need to go a lot quicker than you were expecting to. And heck, I even know stories where the landlords have lost the house in the recession to foreclosure and the sheriff comes and kicks you out. Again, no control. So the fear that's out there for home buying, I'm actually way more scared for the new renters out there right now that maybe they need a few years to get together and become a homeowner. These people are the most vulnerable people in an economic uncertainty. That's way more scary than trying to buy a stable living place to live in and ride all this out. Homeownership is the opposite of uncertainty. So why don't most people see it that way? Because of recency bias, Owners are fixed and owners are in control.
