Wages drive real estate prices over time.  Currently the income to home value is way out of whack, and until this Valley can earn more money, prices are not going anywhere.  Simply to buy a $650,000 home in San Jose one or more individuals must make $120,000+ every year and have a good start of about $30,000 in savings as a down payment and for closing costs. Yes there are creative financing incentives and you could pay more of an interest rate but why would you want to?  The truth had always been fixed rates are the safer bet.  It’s best to know how much each month is going to be going out as your expenses, don’t be tied to anything except balancing your checkbook and keeping track of your progress, this really does help you plan for the unexpected. 

When Berneake first took office he stated, “The last 10 years we’ve lowered interest rates, the next 10 will be about raising them”.  Lowering the interest rate weakens the dollar, which is the worst thing to do when inflation is on the rise and the price of commodities are up.  Since outsourcing is still on the tip of the employers tongue and with progressive emerging markets happening internationally.  We must improve the strength of the dollar around the world before it can come back and help us at home.  For more Basic economics 101 lessons visit www.RobBlack.com for more hot topics in investing.

When you do buy real estate, plan on staying in that commodity for 5-10 years in that property, entrusting that you can pay for it.  Remember real estate was never an investment where you could double your money – its never been a smart get rich quick scheme, (By the way getting rich quick has never turned out as a good thing, one truly can not learn the lesson without fully experiencing it). 

Think of it this way, you must diversify your portfolio, think long-term, dollar cost average, and be hungry for constantly educating yourself with sound proven financial advice.  Take a course at a city college, gear yourself to save more than 10% of every paycheck earned.  Grow your money by having it work for you, read until your eyes pop out of your head.    

Thanks for reading my blog by the way…

Last note to lighten up the mood;  If Bush decides to bail out the foreclosure mortgage market, it will help push prices up here in the Bay Area  by about 10%. If you’ve been savvy and have made some money for that second home you’ve been dreaming big about, consider investing into the Tahoe &/or Hawaii real estate housing markets.  These luxury markets hold, they’re also closer to home and not dependent on International law and order.    If you’re really adventurous and you need a more international flair to your portfolio, try the next big and upcoming area to sight-see, Panama. Try not to invest in areas where people have already gone, invest in areas  where everyone is planning on going. Now go dream big and take a trip; you’ll get more done for yourself before leaving on vacation than you would have by doing the same routine everyday.  Deadlines and destinations are life’s greatest trail markers.