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Grandpa and Grandma gave good advice

In my years in the business I have seen a lot of ups and downs and have also seen history repeat itself recently.  Adjustable rate mortgages were around in the late 70's and by 1981 mortgages reached 17 ½ % and the prime rate hit 21 ½ %.  When rates reached this level borrowers were loosing their homes and much was written about why adjustable rate mortgages were so bad and why they would die a deserved death and never be seen again.

Fast forward to 2004/2005 and everyone forgot about the early 80's and adjustable rate mortgages became the means that many used to get into the home of their dreams.  It didn't matter what could happen to these rates because we would get the home that we and our families always dreamed of and we would get it now.

I saw another thing happen.  In our own community I heard many Realtors, Builders, developers and mortgage lenders make statements like "This (the current real estate market) is going to last for 5 years, 7 years, 10 years, etc.  Many Realtors believed this and started buying hummers, boats, vacation homes, sports cars, etc.  I even know of  young Realtors in their twenties purchasing expensive vehicles with payments as high as $1,100/month and new homes with payments as high as $2,800/month based on the 2005 real estate market.  Many of those young Realtors have had creditors knocking on their door and have received demand letters from the IRS.

We will come out of this economic crises many parts of the country are experiencing some day.  Our country will climb out of it just like we have climbed out of every challenge we have faced.

I hope when we do climb out of it that someone will carve somewhere on some mountain the importance of learning from history and learning the lesson that Grandpa and Grandma taught us about not buying anything if we either 1) could not pay cash for it or 2) make enough of a down payment to get the monthly payment down to an area where we could comfortably afford it without putting a strain on our financial status and our families.

No market, whatever condition it may be in will ever last forever.  The truly "Rich Dads" referenced in the book "Rich Dad, Poor Dad" refers to are all the men and woman that have learned to create cash flows instead of debt and learned to live without in the first few years to have all we could possibly need when we really need it.

 Posted By: George Tallabas - Boise Idaho Real Estate Agent - Associate Broker 
with RE/MAX Advantage, Canyon Counties #1 Brokerage in sales and listings
specializing in Boise Idaho Real Estate and Southwest Idaho Real Estate.

Native Idahoan and Boise Idaho Real Estate specialist serving Boise, Meridian Eagle, Nampa, Caldwell and the surrounding Treasure valley area of southwest Idaho. Specializing in residential, investment, land and commercial real estate. Search thousands of MLS listings at Boise Homes for sale and learn all about Idaho by visiting Search Idaho Homes

Comment balloon 26 commentsGeorge Tallabas • March 23 2008 09:12PM

Comments

Yes, I remember the 18% interest rates.  I was putting a 3200 sq ft addition onto my home at the time...can you even imagine...and they think the rates are high now!

I have a customer from France right now and he thinks 5%-6% is rediculous, I guess borrowing money in France is cheap!  Actually from what he tells me, it is!

Posted by Karen Monsour, REALTOR, SSRS - Sells FL Waterfront, Short Sale Expert! (Coldwell Banker Fort Lauderdale Beach) about 11 years ago
You're exactly right, George! A lot of us got sucked into that....like buying development property with big interest payments... Can I borrow some of your "saved" money?  ;)  Thanks for the post!
Posted by Don Wixom, "Looking out for your next move..."tm (RE/MAX Advantage Nampa, ID) about 11 years ago

Karen - My point is that no market will last forever and anyone that creates huge debts based on one or two good years in playing finacial russian rullet

Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago
Donito - I am so glad I listed to Grandpa and Grandma and I feel truly blessed!
Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago
I've been fortunate to be surrounded by some pretty savvy persons who've traveled this roller coaster sufficiently to see things before the average person.
Posted by Chuck Willman UtahHomes.me, Utah Homes (Utah Homes) about 11 years ago
Chuck - Unfortunately, I tried to counsel many agents in our office that I saw heading down financial disaster but none of them would listen to me. You are one smart man to have listened to those that had "been there done that".
Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago

You are so right.  It is amazing at what short-term memories we have.  It's the old out of site out of mind, and on to the next.

Posted by Bill Exeter, 1031 Tax-Deferred Exchange Expert (Exeter 1031 Exchange Services, LLC) about 11 years ago
George, the book The Millionnaire Next Door is a great example of a little of what you are talking about.  The average millionnaire drives an older vehicle and lives in a modest home.  Great book!
Posted by Marlene Scheffer, Realtor to Kitsap County, WA (Realty Station) about 11 years ago
Good article...I too have been around forever and seen the rates etc. that you talk about. It is ALL true !
Posted by Doug Fritchie (DOUG FRITCHIE-Silver Legacy Properties,Inc.) about 11 years ago
The one thing about the cycles that repeats is that they include those who were not around in the previous cycle and those who have short memories.
Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) about 11 years ago
George  In my 32 years in this business I've seen just about eveything that can rattle the market come along and we both know real estate is extremely cyclical,  Karen
Posted by Karen Kruschka, - "My Experience Isn't Expensive - It's PRICELESS" (RE/MAX Executives) about 11 years ago
George, I just dug that book out Rich Dar  Poor Dad and read it for the 3rd time. Myself, being licensed since 1995, it is my first time experiencing this type of market, both in financing and houses. Next time I hope I am prepared, when it is up, knowing it will not last either and will come down.
Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) about 11 years ago
George, this is just so true.  I remember those high interest rates and the recession in the early 1990's when we were doing short sales etc.  Having worked on predatory lending and affordability issues I know that a FEW of the lending programs that are now causing all of the problems were created to help people...unfortunately everyone lost site of exactly what you wrote about so well! 
Posted by Diane Aurit, Lake Norman Real Estate (LKN Realty, LLC) about 11 years ago

Bill - So true- Thank you.

Marlene - I agree that is a good book...I just hope all realize what is important and what is not.

Doug - I hope many will listen to us.

Randy - So very true my friend

Karen - There is a big value in experience my friend

Missy - I am proud of you for reading the book for the 3rd time and for being prepared.

Diane - Thanks for your kind words and have a wonderful day.

Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago

Unfortunately we have become a "instant" society.  We don't wait for anything anymore.  It's way too easy to ust charge it, or buy into deferred payments, no interest - no payments for XX months, and rent to own stores. The idea of saving money has become a foreign concept to way too many.

But like many things, this too shall pass - hopefully.  I am seeing more people that are concerned about how much they will have let if they buy X.  This has not been commonly seen too much in the past few years.

Great reminder, George.  History does repeat itself - and we should learn each and every time it does. 

Posted by Carol Smith (Casmi Photography) about 11 years ago
Carol - Very true my friend.  History unfortunately does repeat itself way too often and not many learn from it.  I hope you had a great Easter and have a great week ahead.
Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago

Hi George,

The people who will learn from this are the ones who are willing to accept personal responsibility for their situation and who are willing to change.  Those who believe that this was "done" to them will most likely end up in the same situation over, and over, and over again.  There's no reason for them to change, because they believe that it's out of their control. 

Posted by Michelle Ewing, Riverside, CA (Trademark Realtors) about 11 years ago
Michelle - I just hate to see people getting themselves in financial trouble because they won't listen to those with experience.  It just saddens me.
Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago

George:  We have some good news today... a reason for the jump in the Dow.  

"The National Association of Realtors said sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It marked the first sales increase since last July, but even with the gain sales were still 23.8 percent below where they were a year ago."

Posted by Jan Wood (None) about 11 years ago
Jan - Yes, I read that this a.m.  I just hope that when the market comes back that buyers will be smarter about the type of loan they obtain and Realtors/Mortgage lenders will take better care of their money and not squander it away.
Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago
I have taken grandmas and grandpas advice and boy I am glad that I did.  I gave the same advice to some prospects and they are so greatful because they saved enough to buy -- It is unfortunate for may that they have lost their homes, -- I don't think we know the entire story yet.
Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) about 11 years ago
Words of wisdom from a wise man, Our nations leaders should be following this wisdom as well instead of running up huge debt for our kids and grandkids and maybe set a good example
Posted by Michael Eisenberg, Bellingham Real Estate Guy (eXp Realty) about 11 years ago

Joan - Good job my friend.  Have a great day!

Michael - Very true....thanks

Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago
This is so true.  I lived through most of that.  When I started in real estate the interest rates were up there in the 18% range.  One of the best compliments one agent paid me, meaning to be snotty, was that "Barbara has every dime she ever made."  Insult meant, compliment taken.  I don't want creditors at my door.
Posted by Barbara S. Duncan, GRI, e-PRO, Executive Broker, Searcy AR (RE/MAX Advantage) about 11 years ago
Everyone uses credit these days but paying cash for everything is the right way to do it!  What great advice now people just need to follow it!
Posted by Patricia Beck, Colorado Springs Realty (RE/MAX Properties, Inc., GRI, CDPE) about 11 years ago

Barbara - Good for you and be proud.  I have also been accused of having the first penney I ever earned.  This is not something to feel bad about in a credit and money hungry society.

Patricia - Some of the truly wealthy people I have met never abuse credit and use it very little.  A lesson many could learn.  Again, thank you my friend.

Posted by George Tallabas, Idaho Real Estate (RE/MAX Advantage) about 11 years ago

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