I would like to point out that in January of this year, I wrote about houses not being a sound financial investment.

Popularly "sub-prime" is thought of as referring to lending to people with poor credit history.  In fact, 61% of sub-prime borrowers had a credit rating high enough for a traditional loan.  The middle class tend to be at least as guilty of living beyond their means as the working class.  21% of those making over 100k a year say they live paycheck to paycheck.
At the time I wrote the blog an unprecedented number of people were deliberately buying houses grossly out of their means using interest only loans (which would never be paid off, by design) on the assumption (by both the consumer and the bank) that the housing market would continue to climb at the rate it was forever. 
That climb, however, was driven mainly by that very speculation, valuable only due to popularity.
This summer, 6 months later, so many people were defaulting on their loans that it affected the entire credit industry, and by extension, the entire economy.

I have an associates degree in economics.  How is it that I was able to see this, yet no one in the dozens of banks and credit institutions, nor the rest of the financial sector was?  Or perhaps were they just confident that friends in the white house would help out with tax payer money?

Stay tuned for the coming of my more direct predictions.

It's a part of the American Dream.
Instead of throwing away money on rent every month, you can buy your own home, giving you not only a place to live rent free, but a sound financial investment at the same time.

One small problem: the number's don't add up.
(Check my numbers: http://www.bankrate.com/brm/mortgage-calculator  http://www.dinkytown.net/java/CompoundSavings.html  http://www.hsfcuonline.org/cw2.1/calcs/Appreciation/calc_appreciation.asp )

First and foremost, there is the idea that a home is an investment due to appreciation.
The logical flaw in that idea is simple, and doesn't depend on appreciation or rental rates.

Say you buy a house at a certain price, and the value goes up 500%.  What can you do with that "value"?

If you want to live in your house, the best you can do with it is use it as collateral for a loan.
Great... now you can go much deeper in debt all at once than you ever could before.

If you sell the house, now you need to live somewhere else.
If your house just went up 500%, that means every house in your neighborhood just went up 500%.
What ever you made in profit by selling, it will cost you just as much to buy something else of equal quality.
Minus what you lose to agents, banks, and taxes for the transaction.

So in order to ever make use of appreciation, you must either move to a much worse neighborhood, move to a much smaller home, or move to a less desirable location.
So: IF you have kids who will be moving out of the home in 10 years, or you plan to retire somewhere cheaper like Arizona or Florida, only then might a house which you live in be considered an investment.
(Buying a house to rent out to others is another story, since you can sell it anytime)

If you want to stay in your home, you can never cash out, and any appreciation is useless.

But at least you are saving on rent... right?

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