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Here’s the thing: It’s always easy to do a little Monday morning quarterbacking and say, “Wow. Anybody with a brain could have seen THAT was going to happen.” For example – looking back at the housing bubble and seeing how incredibly overpriced many homes were – not to mention the sizes of the mortgages a lot of lenders were writing – it’s easy to say now that the housing market was poised for a fall – a big one.
But while some people got stuck with a lemon – like an inflated mortgage that left them owing more than their home was actually worth – other people watched as the economy began to spiral downward and waited for the adjustments and incentives that would surely follow. You can guess which group came out on top.
For most of us, it’s easy to get wrapped up in the minutiae of day-to-day living; but sometimes, learning to read the signs and signals of broader economic indicators can help you make much wiser financial decisions.
Same is true of the so-called dot-com bubble when tech stocks soared and each day brought new market highs. Looking back now, it’s easy to see the warning signs that were blazoning like neon lights from all those overpriced Internet stocks that simply could not support their inflated prices. But for less-than-savvy investors who refused to see those signs and instead opted to try for higher earnings, the eventual topple of the Internet stocks in 2000-2001 took a huge toll on a lot of retirement portfolios and caused a lot of web companies to go belly up.
Bubbles are nothing new; there have been quite a few in the U.S. since the first group of traders gathered under a buttonwood tree on Wall Street in 1792 (the New York Stock & Exchange Board was formed 25 years later). And actually, for a lot longer than that: Way back in the 17 th century, there was a tulip bubble – yes, a tulip bubble – where tulip prices soared to such heights, a single bulb could cost a skilled craftsman more than 10 times his annual income. TEN TIMES! For a FLOWER BULB!
So what can we learn from all these bubbles? First, it’s true, history does repeat itself. And knowing that, we can be a little bit smarter when we shop for mortgages or other investments. So, the next time you see housing prices or mortgage rates (or tulip bulb prices) spiral upward or downward, take a breath before plunging in; while it’s easy to get sucked into the buying frenzy, it’s much wiser to look at the broader picture so you can, hopefully, spot the signs that can spell disaster – or opportunity.
Today’s interest rates are nothing new- in reality, rates are still near rock bottom if you took an average of the past 15 years. If you haven’t guessed by now, they’re definitely going up. And going up fast. Act quickly if you’re looking to acquire or sell real estate, time is against you (at least in the short run).