Protecting Yourself from a Housing Bubble

BankRate.com recently added an article that addresses the reality of the market we find ourselves in and attempts to educate the average consumer as to how they can protecte themselves from the housing bubble. The article has five bits of advice that would make Dave Ramsey proud:

1. Don't borrow against your home's equity,
2. Build equity through principal repayment,
3. Move away from adjustable rate mortgages,
4. If buying a home, make a large, significant down payment, and
5. Live in your home for the longer haul.
   

These bits of advice, sadly, are rarely heard in today's consumerist market where the average American carries nearly $9,000 in credit card debt and people are buying homes with interest-only and negative amortization loans. Personally this advice seems very common sense to me, and maybe that's why I live in a 1,000 sq. ft. condo as opposed to a larger house. The market will soften, though, and that home, while not currently an option, will definitely be one down the road once the market rights itself.

If I could add an additional piece of advice to the list it would be this: If you are a first-time home buyer, wait out the market, if possible, especially if you live in a grossly overheated market. Rents are so out of whack with the cost of ownership that it doesn't make sense not to rent at this point in time. Home ownership is a great goal and benefits both the owner and community on a number of levels, but the benefits can't outweight basic math and financial sense.