Warren Buffett said:“When everyone else is greedy, be afraid. When everyone else is afraid, be greedy.”

I can tell you that in Austin, the fear is diminishing and greed is rising. Which means our window of opportunity is closing. Our ace-in-the-hole is that our interest rates are tied to national conditions which are lagging our Austin recovery.

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When it comes to saving for retirement, most people have a magic number in their head. It represents the amount of money they need to have saved in order to retire, feel wealthy, change jobs, etc.

But there’s a problem with this way of thinking. Let’s suppose you are 50 years old and looking to retire early. You figure you need $100,000 per year to support your desired lifestyle in retirement.

So you check the actuarial tables and see that statistically you are likely to live another 30 years. So what’s your number? Well, 30 years times $100K is $3M. But now you need to adjust for inflation. A 2% inflation rate means you’ll need to save nearly a million dollars more. So now your number is $4M.

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Whenever we see a market correction, whether it’s the stock market, the housing market, or some other market, we should take some time to evaluate why it happened. With the objective of determining how much was the result of bad luck or bad timing and how much could have been predicted and consequently avoided.

In the most recent real estate collapse, there was ponzi scheme mentality of buy, ride the wave of appreciation, and hand off the hot potato to the next buyer. As long as there was another buyer willing and able to pay the higher price, the game continued. We all know what the result was, but it begs the question, how were we to know that these properties were overpriced? What determines the true value of a property? Continue reading →