How to Keep a Roof Over Your Head If Home Prices Fall Through the Floor
Chicken little may be right. But don't worry about it.
The housing market is getting a little wild, with folks trading condominiums like they are individual stocks, one Florida market soaring 46% over the past year and buyers resorting to interest-only mortgages to purchase homes they couldn't otherwise afford.
Danger ahead? A slump in property prices might hurt speculators. But if you are an ordinary homeowner, I wouldn't be overly concerned -- provided you have enough money for your next down payment. Here's why:
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STATE OF THE MARKET
See an interactive map of the state of the U.S. housing market, and get details on home prices in a dozen cities.
FURTHER READING
? Concerns Mount About Mortgage Risks
05/17/05
? Rapid Rise in Home Prices Spreads
05/17/05
? Moving markets. Despite all the talk of a housing bubble, many places have enjoyed only modest gains over the past five years, as you can see from the accompanying chart.
"The housing markets are not that crazy," contends Chris Mayer , director of Columbia University's Milstein Center for Real Estate. "I think it's a very narrow group of people who should be worried. It's high-end properties in New York, Florida and a couple of California cities. Outside of that, I don't think there's a bubble."
Still, suppose you live in one of these markets, you are convinced property prices will crash, and you want to protect yourself. What are you going to do, sell your home, move the family into a rental and buy again in a couple of years? Even if property prices tumble, you might be out of pocket, once you figure in rental and moving costs and the expense of buying and selling real estate.
And if prices do slide, there could be a silver lining. Let's say you plan to stay in the same area, but you want to trade up to a bigger home. True, if prices drop, you will lose on your current house. In all likelihood, however, the price of more expensive homes will suffer an even steeper dollar decline, so trading up will be less of a stretch.
On the other hand, if you own a house in, say, highflying Los Angeles and plan to retire to the muted Dallas market within the next few years, a California property collapse could really sting. Should you sell your Los Angeles home now and rent until you move? It could be a smart strategy. But it could also be a lot of hassle.
? Mortgaging your future. It isn't just skyrocketing home prices that have people worried. There's also been much hand-wringing over ballooning mortgage debt. But if you have a hefty mortgage, it won't necessarily hurt you during a market decline.
Imagine that you and the elderly couple next door both own $300,000 homes. They are debt-free, but you still owe $240,000 to the bank. If the price of both homes declines to $240,000, your home equity would be wiped out. Nonetheless, your $60,000 loss is no larger than that of your neighbors.
In fact, the elderly couple may have suffered more. Many folks believe the biggest threat to the housing market is higher interest rates, which would damp demand by making mortgages more expensive.
Under that scenario, your elderly neighbors might suffer a double whammy, with the value of both their home and their bond portfolio getting battered. By contrast, you probably don't own a whole lot of bonds. Instead, you are a big-time borrower, thanks to your mortgage. As Prof. Mayer notes, that mortgage is now more valuable, because you have yourself a loan with a below-market interest rate.
This, of course, assumes you have a fixed-rate mortgage. What if you have an adjustable-rate loan? Higher interest rates will mean bigger monthly mortgage payments. But the news may not be all bad: If the spike in rates was driven by rising inflation, you may find your income is also rising -- and thus the larger monthly payments are entirely manageable.
? Next time around. In truth, the above scenario isn't quite as rosy as I depict. Granted, if falling property prices wipe out your home equity, you may be fine as long as you stay put. But what if you need to move?
Sure, you might be looking at selling one depressed property and buying another, so it seems like a wash. Problem is, to purchase your next house, you will need to cobble together a whole new down payment, because you don't have any equity in your current home. In fact, once you figure in the brokerage commission to sell, you might be underwater.
To protect yourself, you could try a few oddball strategies. For instance, if you foresee moving, you might hedge against a home-price decline at
www.hedgestreet.com, an online exchange that lets you bet on the direction of home prices in six local markets. Similarly, you could hedge against rising interest rates by buying funds such as Potomac ContraBond, ProFunds Rising Rates Opportunity and Rydex Juno. Unlike most bond funds, these are designed to climb in value when interest rates rise.
But this stuff strikes me as being a tad too clever. Instead, to ensure you have plenty of home equity when you sell, you might simply pay down your mortgage more quickly by making extra principal payments. Alternatively, you could take the precaution of amassing a pot of "future down payment" money in your taxable account.
Think carefully about how you invest this money. You want to avoid any investment that could get hit hard by rising interest rates or falling property prices, notably longer-term bonds and real-estate investment trusts. Instead, for your future down-payment money, your best bet is probably a low-cost short-term bond fund, such as TIAA-CREF Short-Term Bond or Vanguard Short-Term Bond Index.
若房价下跌，该怎样保护自己？
悲观主义者可能是对的，但你也不用担心。
住房市场正变得有点儿疯狂，人们倒手公寓就像买卖单只股票，佛罗里达州的一个市场去年飙升了46%，买方只有求助于只付息抵押贷款才能买得起房子。
危险就在前方？地产价格大幅下挫可能影响到投机者。但如果只是一个普通的房主，我就不会过于担心了－－只要你还有足够的资金支付下一笔首付款。以下便是理由：
－－转移市场。尽管大家都在谈论住房泡沫，但许多地方的房价在过去5年间仅有温和增长。
哥伦比亚大学Milstein房地产中心(Columbia University Milstein Center for Real Estate)主任迈耶(Chris Mayer)称，“住房市场并非那么疯狂。我认为只有非常有限的一些人应当感到担忧。那就是在纽约、佛罗里达州和加利福尼亚州几个城市的高档地产领域。除此之外，我不认为有泡沫存在。”
尽管如此，假设你住在其中一个市场，你确信地产价格将暴跌，而你希望免受损失。你会怎么做，出售你的房子，举家搬进租来的房子，然后过几年再买房子？即便地产价格真的暴跌，一旦算进租金、搬迁成本和买卖房地产的费用，这样做你仍可能会赔本。
如果价格确实下滑，你可能还有一线希望。假设你打算留在同一个地区，但你希望换一所大一些的房子。无庸置疑，如果房价下跌，你现有的房子将蒙受损失。但十有八九的是，更贵的房子的价格跌幅会更大，因此换大房子并不是那么费劲的事情。
另一方面，如果你在房价飙升的洛杉矶拥有一所住房，并计划在未来几年退休后搬到房价涨势温和的达拉斯市场，那么加州地产市场的崩溃可能真会让你如坐针毡。你应该现在就出售加州的房子并在搬家之前一直选择租房吗？这可能是一个明智的策略。但它也可能带来许多麻烦。
－－抵押你的未来。可不只是冲天的房价让人忧心忡忡。不断膨胀的抵押贷款债务也令人坐立不安。但如果你背负著大量抵押贷款，在市场价格下跌期间你不一定会受损。
假设你和隔壁一对上年纪的夫妇各自都拥有一套价值30万美元的房子。他们没有负债，但你还欠银行24万美元。如果两所房子的价格均下跌至24万美元，你的房屋净值将丧失怡尽。尽管如此，对你而言，6万美元的损失并不比你邻居的多。
实际上，那对老夫妇的损失可能会更大。许多人认为住房市场面临最大的威胁是利率走高，因为这将导致抵押贷款代价高昂、进而削弱需求。
在这种情形下，对你的老夫妇邻居而言可能是祸不单行，其房屋和债券组合的价值均将遭受重挫。相反，你可能不会持有太多的债券。幸亏那笔抵押贷款，你可是一个大债务人。正如迈耶教授指出的那样，你的抵押贷款现在更值钱了，因为你拥有一笔以低于市场利率借入的贷款。
当然，这是假设你借入一笔固定利率抵押贷款的情况。如果你的贷款是可调整利率的，那怎么办？利率走高意味著月供款增加。但这也不全是坏消息：如果利率的上调是由于不断攀升的通货膨胀造成的，你可能会发现你的收入也在提高－－而这样一来，你完全可以应付增加的月供款。
－－下一次购房。确实，上述情形并不像我描绘得那么乐观。当然，如果地产价格的下跌导致你的住房净值丧失怡尽，这时只要呆著不动，你可能不会受什么影响。但如果你需要搬家，那怎么办？
当然，你可能正在寻求出售一处受损地产再买进另一所住房，因此这似乎像是在进行一次清洗。问题是，为了购买你的下一所住房，你可能必须凑齐一整笔首付款，因为你在现有的住房里已经没有任何权益了。实际上，一旦你算进出售房屋的经纪佣金，情况会更糟。
为了保护自己免受损失，你可以尝试几种古怪的策略。比如说，如果你预计要搬家，你可以通过
www.hedgestreet.com对冲房价的下跌。这个网上交易商让你赌定6个本地市场房价的方向。类似地，你可以通过购买Potomac ContraBond、ProFunds Rising Rates Opportunity和Rydex Juno等基金对冲利率持续上升的风险。与多数债券基金不同，这些基金的设计相当特别，其价值随著利率上升而增加。
但这样的策略让我感到有点儿太聪明了。为了确保你在出售房屋的时候拥有足够的房屋净值，你完全可以通过额外的本金付款来提前偿清抵押贷款。或者，你可以采取预防措施，在你的应税帐户中积累一笔供未来首付款所用的资金。
仔细想想你该如何投资这笔钱。你要避免任何可能因利率攀升或地产价格下跌而遭受冲击的投资，尤其是长期债券和房地产投资信托基金。相反，为了积攒你未来的首付款资金，最好的选择可能就是一个低成本的短期债券资金，如TIAA-CREF Short-Term Bond和Vanguard Short-Term Bond Index。
