I believe in Robert Kiyosaki’s (Rich Dad, Poor Dad) premise that an owner’s house is not an investment.  It is an expense.  The argument for the past 20 years or more has been that it is an investment, and an investment that can be used to pay other expenses when its value increased.

But, when values decline, you have little in the way of a back up plan.  As a Realtor, I have spoken with dozens of people who have second homes they can’t sell when they get transferred.  It is becoming more common that people who transfer frequently are renting.  It is a better approach, and recognizes the reality that a home is an expense.

As the WSJ article concludes, people are not able to borrow even when they need to, such as during a job loss.  It is reflective of the past 15-30 years of debt-based spending.  It is a trend that is rapidly reversing itself.  It is a trend that needs to reverse itself.

Unfortunately, this will cause significant pain in our economy.  And, the pain will likely last a decade or more.  Though the current recession is often compared to the Great Depression, we aren’t there.  Not even close.  But, the economy has been on the drug of debt, and that’s a hard drug to detox from.  Ever tried cutting up your credit cards cold turkey?

Poor financial education (aka: absolutely no financial education for most of Americans) has resulted in many Americans sticking their head in the sand.  It’s easier to ignore a problem than to address it.  For a while.  When the Sherriffs start knocking on your door to serve papers for failure to pay, it will be a hard wake up call for many people. (Note: you can’t get arrested for failure to pay your debts, but you are served notice of suits through county Sherriffs)

I suppose my point in this post is that we need to be prepared.  The recession is not going to be over soon.  It’s likely to double dip, or even triple dip.   Despite what the National Assocation of Realtors says, home prices are not going up soon.  There will continue to be foreclosures suppressing prices for years.  I’m still thinking on even this point: It may be time to consider investment property to be a liability for a while.  I’ll let you know what I decide when I can figure it out.  It’s a bit of fortune telling, so I must be careful.

My prediction is very conservative: we’re looking at a recovery of only 1-2% of GDP for about 3-5 years. Then we might start pushing higher.  Job losses will continue negatively for another year.  House prices will slow their decline, but will either remain stagnant or slide a little more.

There are a good 300,000,000 variables.  Anything could go wrong.  Many things could go right.  Let’s all just do our best to improve our personal finances and our businesses.  We can do it.  I have faith in Americans’ resolve.  Ignore the news and keep at it.