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If you aren’t looking for a new home you aren’t going to find one. Over the years I have seen thousands of FOR SALE signs on houses but never paid any attention to them because I wasn’t looking for a house. Therefore when the time came to look for a house I didn’t have any experience with that subject or any knowledge of the current market. In other words a great offer could have been made to me and I wouldn’t have made any effort to take advantage of it.

Over the last several months the situation has changed and I have spent enough time and effort so that I have moved from being a total ignoramus to being a simpleton with a hazy view of most of the incredible number of variables. This is a vast improvement from the randomly distorted view of a beginner to being a hazy one. The hazy one, hopefully at least, has the general outlines of the various important parameters instead of clear but erroneous visions of things which are not valid or relevant which the beginner is probably loaded with.

All of these things are not obvious and the simple proof is that the housing industry totally went haywire in the previous decade. If people had behaved reasonably relative to these housing issues the economy wouldn’t be in such a mess at present. Perhaps the biggest problem was that everyone was spending money which they didn’t have but only hoped to have. The potential homeowner was borrowing money from a lender believing the lender had money to loan. The lenders were themselves borrowing money from other lenders. There were unknown and probably unknowable layers of this type of borrowing fake money from others. The reason it was fake money was because the lender wasn’t required by law to actually own 100% of the money he loaned but only some fraction of that which was secured but that value was legally amplified several times in the numbers given the final borrower. It was mostly numbers representing money but existing nowhere but on paper and on computer screens. After a couple of layers of this legal amplification there wasn’t much reality left as to what was being loaned to the potential homeowner. It is what is usually called a house of cards because cards are made of unstable paper, but these days the image should be more current like a momentary flicker on a screen. The idea is that each of these schemes has an optimism based on a hoped for reality which has been exaggerated beyond any palpable reality. People want something to be true and when they get together they tend to reenforce each others’ unreal expectations. Eventually of course physical reality crashes in on the party and the people who didn’t get out in time suffer. Those who have some experience with these processes through cultural learning can escape with considerable profits.

It is to the benefit of the ponzied money lenders to magnify expectations to the maximum and to derive as much profit as possible before getting out. The old saying for this process goes: When the busboys are talking about stock investments it’s time to get out of the market. The reason is simple. When the poorest people in the economy are investing there is no longer any money to put into the market and therefore it must go down. And a diving market is usually in a positive feedback cycle and will dive even steeper until it goes well below the value of the item.

That silly analysis is just one of many similar things going on in the housing market. But one take away message is that a home buyer shouldn’t spend money which he doesn’t have but only hopes to have. That is difficult because it means a home buyer should only purchase a home which he can pay cash for and few people want to wait until they are in that condition. Furthermore, money paid for a rental could be used for paying for a mortgage and rental money is lost money. The answer is:

Purchase a livable house which you can own outright at the lowest possible cash price.