This year the world has had a lot to fear. For most Americans the economy has changed our attitudes about how we live our lives and, in particular, how we spend our money.
I was recently told about a West Columbia couple, Jim and Sarah White (not their real names), who were ready to upgrade and move into a bigger house. When they first got married they bought a cute little bungalow near the middle of town, with three small bedrooms, and one bath, which had been completely renovated and was just perfect for the newlyweds. Now that they had been married a few years they were ready for a family and decided that they would need more space. Both husband and wife had received nice raises during the year and could well afford a new home and a bigger house payment. After searching around they found the perfect house at a great price and decided to list their house for sale.
A few weeks into the process, Jim's company laid off eight people. While Jim's job appeared to be safe the couple got scared and decided not to sell their little house because they knew that even if one of them lost their job they could still make their current house payment.
Fear is running rampant in the economic world. While many of you would commend Jim and Sarah for their smart assessment of the situation and their quick decisiveness to live on less, let's fast forward a few years.
Three years later, the economy has settled down, the job market is expanding. Both Jim and Sarah have taken on more responsibility at work and are busier than ever. Their cute little bungalow is now full of "stuff" they have acquired, as they have had extra spendable income with such a small mortgage payment, gas and food prices dropped, and everything seems to cost less. Sarah is pregnant and they have to move.
They begin their search for a new house. The housing market has picked up and now the house of their dreams is priced $40,000 more than when they looked three years ago. With the economy doing better there is pent-up demand for larger houses by all of those people who waited out the economic downturn. The little house has lost its appeal since it is easier for people to buy a home. Jim and Sarah's bungalow has appraised out at just over $10,000 more than they would have gotten three years ago. The interest rates have gone up from 4.75% to 7%. Over the next 30 years Jim and Sarah will pay out an additional $185,000 in payments and interest for their new house because they waited. Jim and Sarah allowed the fear of the market and economy to drive them to make a decision that would cost them greatly.
What should Jim and Sarah have done to assess the situation before they made a hasty decision? What could Sarah and Jim have done to feel better about the decision to buy a new house? Both Jim and Sarah could have:
•· Gone to their bosses to discuss the security of their positions and the economic indicators of their industry.
•· Sent out resumes and interviewed for new positions with other companies to determine their employability (You should at least know what you are worth to other companies).
•· Kept their current house on the market to see what their bungalow would sell for. They could always turn down a low offer or rent short-term if their house sold before they secured another.
•· Investigated the real aspects of the economy in their area.
In Columbia, South Carolina, the medium home price actually went up $1,000 in 2008, unlike the rest of the US where the price went down as much as 20%. While average home sales have declined 23%, the number of new homes being built has declined by 70%. This means that there are fewer houses on the market, making the lower end houses more likely to sell and more able to compete in a market. Homes stay on the market an average of three months, just about two weeks longer than this time last year. The housing market is strong in South Carolina due to many factors:
•· The Port expansion in Charleston, and the new port in Jasper, and the new distribution centers being built near Santee will bring in thousands of new jobs, as most of the imports for the entire US from China will now be coming through SC.
•· Strong military bases. While the war in the Middle East winds down there is no plans to ease military spending so the money being spent oversees might soon be flowing back in the US.
•· Large numbers of seniors are still seeking a warmer climate and a cheap economy, both of which are available in SC.
•· People will vacation at home. Myrtle Beach had a record year in accommodation taxes in 2008, reflecting a great year for tourism.
SC companies are advertising in the Northeast US for skilled laborers to work in new industries that have come to the state. The SC technical colleges are bombarded with education requests and due to budget cuts are not able to expand their programs to meet the needs of these new industries.
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