Be careful of what you wish for

I recalled this story of a single mother on her quest for home ownership.

During pandemic, her landlord wanted to sell the house she was renting because the housing market was red hot. She can’t find a place with the similar rent and space. Therefore, she considered buying a place. However, her credit score was not good. One reason was that she didn’t have a stable income. She has tow young children, so the expense was not small either.  Her application for mortgage pre-approval was turned down. She asked how she can improve her credit score quickly and significantly. I dreaded the answer, but I had to be honest with her. I told her that there is no such thing as improving credit score fast. If anyone tells you that, that could be a scam. Credit history takes time to build. Thus, it takes time to improve.  It might be a good thing that she didn’t get her mortgage approved.

Imagine this. If she got her mortgage approved somehow. Now the interest rate was raised drastically to fight historically high inflation. Thanks to the same reason, living cost increased considerably in all areas such as grocery, gas, household items, etc. She might not be able to make the mortgage payment. Thus, she might be forced to sell her newly-acquired property.  

Thanks to the exact reason, many people can’t afford the much higher mortgage cost now. Hence, the number of buyers of real estate declined significantly. Therefore, the housing price is predicted to decline. If she is forced to sell, she might incur a big capital loss. It would be devastating to her and her family.

Timing is really a b*tch! Elon Musk can tell you all about it.  😊 He didn’t expect Twitter’s price would go down so drastically right after he made an offer. It was the whole tech sector’s re-evaluation due to inflation and interest rate spike. He has all the resources in the world to hire the smartest people to advise him. This big loss can still happen to him. Fortunately, he can withstand it since he is so rich. We mere mortals should really proceed with extra caution since the real estate counts probably 80% or more of the total net worth of a new home owner.

Be really careful what you wish for.