One afternoon last week, three hours apart, I met with two couples, both of whom read this blog. As it turned out, they both wanted financial help.

The young, urban couple – he’s in IT, she’s in HR – rent a one-bedroom condo and are shopping for a home. But not fast. When they do, I was told, it will be in the $700,000 range. They have $82,000 saved, and together make over $230,000.

The older, rural couple – he’s early retired and she has five years left with the province – live in a cabin in the woods, and for the first seven years scooped water from the lake. They still have an outhouse. But they also have $800,000 in a bag in a hole under the wood-splitting stump. Neither one has ever made over $40,000.

As you might imagine, they both came to see me for financial advice. You also might imagine what it was. The kids with the high-octane jobs, the iPhones and the house lust are on a trajectory to debt and divorce. The old snorts with the bag of cash need to remember what money is for, and get a damn flush toilet and a skid of Cottonelle.

If real estate is not at the absolute throbbing heart of most people’s finances, it’s never far away. For the young couple, it’s the one asset which will define them socially and signal their place in the financial hierarchy. For the hippyish Boomers, its shelter and freedom, along with inconvenience and want.

Interestingly, the young couple will use leverage to gain an asset and at the same time assume a massive debt. Risk. The older couple traded comfort for wealth, with their net worth all in cash. Also a risk. But in the world in which we’re entering there’s little doubt who the survivors are going to be, toilet or no toilet.

It’s March, when home buying fever strikes hard, and Ottawans are snapping up everything from hip urban condos to sedate retirement townhomes in the ‘burbs. Interest and mortgage rates are at a record low, making home ownership irresistible. Prices, meanwhile, are creeping steadily higher, a goad to buy now before they soar out of sight.

Real estate, as you know, is a local commodity. That’s why 39% of all families in Michigan can be in negative equity, while two hours away down the 401 houses sell for huge premiums in budding wars. Real estate values are the result of supply and demand – dictated by human emotion.

This also makes it a very dangerous asset, since emotions can turn quickly and sharply. If the popular belief is ‘buy now or buy never,’ prices rage. If rates jump or listings flood, the market can die in days.

The news reports above give you such extreme views – real estate as a trap and a destroyer; real estate as irresistible.

Like the two couples in my office, to everything there is a season.

Source howestreet.com