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Buffett says to buy a home [ClearOnMoney]
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Buffett says to buy a home

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Commentary

Buffett says to buy a home

29 Oct 2012 by Jim Fickett.

The Brooklyn Investor has good notes from a two-hour interview with Buffett last week. Buffett strongly recommends taking advantage of current mortgage rates if possible:

Homes

  • Buffett said that it's a terrible mistake if you don't buy a home now, if you know where you are going to live for a long time and if you have a stable job/income.
  • Get a 30 year mortgage, it's a “golden opportunity” that won't be around in a few years. No chance like this five years from now.

I couldn't agree more. I don't know whether house prices have bottomed and, even if they have, I don't expect another boom any time soon. So don't count on capital appreciation. But the mortgage is a huge bargain. If we get high inflation, which is very likely, you can pay off the mortgage with dollars worth much less than the ones you borrowed, so that in effect you are getting a big discount on the price of the house. Even if we don't get high inflation, interest rates will eventually normalize, and those who failed to take advantage of once-in-a-lifetime rates will regret it.

(Incidentally, the Brooklyn Investor counters, “has Buffett spoken to any Japanese homeowners in the past 20 years?” But this is to miss the distinction between nominal rates, which are low in both the US and Japan, and real rates, which are reasonable in Japan and extremely low or negative in the US.)