Reading the up to date news articles of the time will give you great insight into the emotional state of the market. A broad glance is essential because it will show the overall market mood.
At the bubble top you will notice many or most articles raving about the large gains or fortunes being made in the areas in question. There will likely be TV shows about the subject showing how seemingly regular people make fortunes off of it.
The media will be so saturated with this type of hype that most of the country would agree that the particular area is a good investment. The problem is that when everyone thinks the investment is good it means that there is likely little room left for growth and a ton of room to crash.
The bubble will burst as they all do and on the way down take another look at those headlines. They will all likely project tremendous fear. You will know the bottom is likely near when the fear subsides slightly and only a feeling of remorse or despair remains.
Just like how when everyone knows that something is good, there is no more room for growth. Well, at the bottom of a market crash there is ONLY room for growth. Right now we are in a period where the despair is dying down, but people are still either too scarred or too poor to do anything. Many people want to buy but cant because they cant afford it.
In my opinion the choice should be obvious when you compare renting to buying. When you rent, you pay money every month to someone but you don’t have to worry about maintenance. They take some of the money to cover expenses, some of it to pay off debt and the remainder is either a profit or a loss. This is not including the effect a change in market price will have on equity.
When you buy, the money you would be paying for rent goes to paying off debt and expenses. The difference comes over time. After you first buy your quality of life will likely go down in comparison to before.
You will build up equity in your home that you can use to remortgage and do what you want with. This will give you some flexibility later in life. At a market bottom you can still probably rent for cheaper than you can buy. The difference is that when you rent, your landlord will attempt to raise your monthly rent by $50 or so every lease renewal.
But, if you own your home and assuming you have not taken out any more mortgages, you will pay roughly the same amount year in and year out (especially in California). Because your debt payments will always stay the same (depending on your type of loan). You will only need to pay the increase in associated fees.
Over time you will have paid off your mortgage and will only need to pay property taxes. If you were renting you will have built up no equity and also would be paying more per month as well.
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