Suze Orman Vs. Warren Buffett: Whose Real Estate Advice Should You Follow? | Sun Valley Real Estate

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You know Suze Orman – she delivers hardcore financial gut checks to everyday Americans on a regular basis. In her latest book, The Money Class, she also recently delivered a pretty striking declaration: that the American Dream – which, for many, includes home ownership and upward economic mobility – is as dead as a doornail.

To back this up, she points to huge numbers of jobless and what she sees as the near impossibility of getting credit these days.

But you might also have heard of Warren Buffett. He just so happens to be the third richest human being on the planet.

In , he, too, made a striking declaration of his feelings about owning a home: “Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.”

And the Oracle of Omaha didn’t stop there – he literally raved about home ownership, saying that “the third best investment I ever made was the purchase of my home.” Now, that’s a big statement from a guy whose investment decisions have earned him a net worth over $50 billion!

Suze says the American financial dream is dead.

But Buffett says buy, and buy now.

Who’s right?  (And who’s wrong?!)

Orman is right that one extreme version of the American Dream is dead.

But not the traditional American Dream of owning an affordable home that appreciates over time. That basic premise of the value of

homeownership is valid. But it may be valid for a smaller segment than

ever before. Orman believes that renters should save, save, save up

every penny and they may never be a candidate to own a home.

Buffett believes now is the time to purchase as affordability has never been better.

Buffet wins here;

he’s right that a home is a very strong investment, with abundant

yields, both financial and emotional. And according to our latest

survey, the American Dream of homeownership lives on in the hearts of

the 72 percent of Americans who say owning the place they live is a part

of their personal American Dream.

How can you make sure your exercise in owning a home is set up to be like Buffett’s 3rd best

investment (#s 1 and 2 were wedding rings, btw), rather than Orman’s

image of the American nightmare?

Here are 3 basic steps Buffett

urges every American who owns a home – or wants to – to include in


approach to home ownership

Ditch your “dream home” for a practical pad. When

it comes to homes and mortgages, bigger is not always better.  What is

better is to buy a home that makes sense for your family’s future and

its finances. In

Buffettt’s own words, “a house can be a nightmare if

the buyer’s eyes

are bigger than his wallet and if a lender . . .

facilitates his

fantasy.”  Instead of buying dream homes, Buffett went

on, the goal

should be to buy a home you can afford.

When you buy, plan to hold. Warren

Buffett is worth $50 billion, and he still lives in the home he bought

52 years ago – for $31,500. Many Americans got caught in the housing

crash when they took on mortgages they could only sustain for a short

period of time, then weren’t able to refinance as expected. Buffett’s

stock investing advice has long been to avoid making investments you

can’t hold for at least 10 years. Likewise, buying a home should be done

with a long-term plan to avoid catastrophe when home values fluctuate

in the short term.

Mortgages should have fixed, affordable payments. In

his shareholder letter, Buffett points out that a housing company he

holds has done vastly better than other real estate and mortgage

industry players and attributes their success to the fact that “our

approach was simply to get a meaningful down-payment and gear fixed

monthly payments to a sensible percentage of income.”

Buffett believes

these two mortgage musts are the key to avoiding

foreclosure, opining

that “If home buyers throughout the country had

behaved like our

buyers, America would not have had the crisis that it

did . . . .  This

policy kept [the company] solvent and also kept buyers

in their homes.”

Unless you are one of those rare buyers who

know their income

will increase by a predictable amount at a

predictable point in time,

like a lawyer prepping for partnership, a

good rule of thumb is to stick

with a fixed mortgage payment (including

taxes and insurance) that’s

under 30 percent of your take home income.



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Windermere Real Estate, Sun Valley – Hailey, Idaho @ George Martin, Jr. Associate Broker

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