Are you paying “The Procrastination Tax”????
In these times of economic hardship, it seems amazing that people will pay taxes willfully, right? However, there is one that MILLIONS of Americans are paying RIGHT NOW!!!! I can never understand why, but they do: The Procrastination Tax.
You pay it, and don’t even realize it! And it’s likely the biggest discretionary tax you will pay! It’s a tax paid for with trade-offs.
Everyday trade-offs that people of my generation might do differently include:
• Pet Rocks
• Lava lamps
• Swatch Watches
• Zoobas Pants
• Members Only Jackets – I am proud to say, I am the last member – how EXCLUSIVE IS THAT?!?!?
If had all the money I spent on that stuff and invested it in Apple Computer, Bill Gates would be bummin’ money off me now!
Well, many people are afraid right now to buy a home because their core belief that real estate will always appreciate has been shaken to the core. Their fear is justified. However, they are paying the Procrastination Tax – the tax which is borne of fear BUT paid for EVERY MONTH in REAL MONEY!!!
Apprehensive buyers are overlooking a key trade-off:
• What WILL happen for…
• What MIGHT happen…
What WILL happen is that rates, theoretically, cannot go lower and will only go higher. (I admit, I can’t believe they continue to go SLIGHTLY lower, but that is just the result of the Fed dropping trillions of dollars into the economy.)
However, if prices are going higher (including the price of money), does it make sense that housing prices will fall forever? (Sure, they can over the short-run, but over the long-term, unlikely.)
So, for people looking to live in a home 5, 10, 30 years, locking in CHEAP, LONG TERM MONEY is the more important consideration.
Did you know that a change of interest rates by as LOW AS ½% WILL INSULATE BUYERS FROM PRICE DROPS OF 11% TO 12%? If interest rates go from 3.5% to 4% or to their historical averages, of 8.5% to 9.0%, the savings for a 30 year loan ONLY GOES UP!!!
I will show you the math in a later blog post, but that will be for number nerds like me.
The take away: Money will never be this cheap. If you want a 30 year secured loan, a home mortgage is the way to go…at today’s rates you can’t go wrong.