How to Avoid Another Housing Bubble

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That always seems to be the Million Dollar Question in retrospect whenever we begin to rebound from a declining housing market. Especially in our current market cycle, where the downward crash was so much more significant than usual. Unfortunately, because there are so many variables outside of our realm to control that contribute to the evolution of a housing bubble, it's difficult for us as individual home buyers and home owners to avoid them altogether.

However, there are some wise, prudent strategies we can employ to help minimize the fallout that typically occurs:

1. Stay Within Your Budget: Keep your total housing costs (principal, interest, property taxes, insurance) 25% or less of your gross monthly income. Don't borrow more money just because the bank or lender says you can qualify for it. The last thing you want to do is to live for your mortgage payment. You can't achieve a meaningful quality of life if you're simply existing from paycheck to paycheck paying off your mortgage loan.
2. Save Up Your Money: Adjustable Rate Mortgages may seem attractive on the front end, but can potentially lead to some difficult financial circumstances down the road. Saving up both a significant down payment and a 6-month emergency reserve will help you to negotiate greater home buying power, and achieve better financial independence.
3. Establish and Maintain Solid Credit: Along with a consistent savings plan, work at establishing and maintaining a solid credit history through timely payments. Keep the number of credit cards you have to a minimum and always pay them off each month. Whenever possible, always pay with cash.
4. Buy Wisely: When you're ready to purchase a home, take your time and do your research. Balance the emotional aspects of buying a home with the investment aspects. Rely on a licensed real estate professional to help you find the home and location that makes the most financial sense for you.

While we can't always avoid the next housing bubble completely, we can most certainly make intelligent and informed decisions that will minimize the effects it will have on us in the future.

When you're ready to move beyond the housing market crash and buy your first home (or your next home) you can dowlnoad our free eBook, "The Essential Guide to Buying Your First Home."

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