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If HE Says It Is Time To Buy a Home, BUY A HOME!

“If you don’t own a home, buy one. If you own one home, buy another one. And if you own two homes, buy a third and lend your relatives the money to buy one.”

– John Paulson 9/27/2010

WOW! That’s a powerful statement.

There is no question that John Paulson is a bull when it comes to residential real estate right now. Should we care what Mr. Paulson thinks? Should we listen to him? The answer to both questions is a resounding ‘YES’. Here are several reasons why.

Who is John Paulson?

Paulson is the person who made a fortune betting that the subprime mortgage mess would cause the the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

According to Forbes John Paulson is:

a multibillionaire hedge fund operator and the investment genius who made a killing going short subprime mortgages a few years ago.

According to the Wall Street Journal Paulson is:

a hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.

What did other financial players think of his statement?

The Wall Street Journal agrees with Paulson:

Ignore the critics. The odds have to be on his side…It isn’t just that home prices have fallen a long way. It’s also that, if you can get a mortgage, you are basically taking a reverse bet on the bond market. You could be a long-term borrower at fixed rates, instead of a long-term lender. Right now you can borrow for 30 years at around 4.3%. After the mortgage tax deduction, for some people the net effective interest rate is nearer to 3%. That’s going to prove an awesome deal if we see inflation again.

And Forbes said:

As this is the best time in 50 years to buy homes, Paulson advised his listeners to take 30 year mortgages to buy a home as “your debt and interest payments get locked in at record lows, while the price of your home will rise.”

Are others also saying now is the time to buy?

Just last week, we posted that there is a growing number of people saying that NOW is the time to buy, including:

  • The Wall Street Journal
  • Professor Karl Case, founder of the Case Shiller House Pricing Index
  • The wealthiest families in the country and
  • 70% of everyone else in America

Bottom Line

Thinking of buying a home? Are you taking advice from a friend or family member telling you that now is not the time? It may be time to listen to people who better understand the opportunities that exist in real estate today.

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35 replies
  1. Kelly A. McBride
    Kelly A. McBride says:

    I think this in information that really needs to be shared. The market is good to pick up a foreclosure. Not just at a reasonable price, but so many are in great condition. I saw one two weeks ago and honestly I saw little evidence that it had ever been occupied. It was only 4 years old. Sat on the market for a year prior to the original buyer. They may have lived there 9 months. It was a still deal.

  2. Cory Workman
    Cory Workman says:

    He needs what he said to happen.

    Cause there are too many houses. We built too many houses for not enough people.

    Population growth will be stagnant with the baby boom generation entering retirement and passing on.

    They will leave even more empty McMansions sitting around as they all move to condos on the coast somewhere.

    Prices are going nowhere for a long time. Rents will fall because there are too many homes.

    I own a home, but only because I could buy it for less than current rental rates (which will likely fall).. and the tax write offs.

    No way in hell i’d buy another house.

  3. Joan Parkinson
    Joan Parkinson says:

    It is a great time to be a buyer. People who do not take advantage of this opportunity will look back on this time as many looked back on the 50’s & 60’s. My husband and I put every cent we had together to purchase a home in 1966 for $33,000 ($3000 higher than our top price range). We sold that house in 1992 for $265,000. Houses in that neighborhood sell today for $400,000-$600,000 even after the real estate bubble burst. The interest rate on our loan was 3.5%. You can get a loan today for only 1% point higher. You will not see an opportunity like this again in your life time. If you are first time buyers, it’s a no brainer. You will have a place to call your own and a tax deduction as well. If you are a move up or down buyer, do it and lock in a long-term mortgatge at better rates than you are paying now.

  4. Mark Brian
    Mark Brian says:

    If you can, maybe you should. But such a serious decision needs to be thought about long and hard. Just because affordability is great, prices are great, inventory is up giving you plenty of choices and interest rates are at historic low levels does not mean it is right for you…..or does it?

  5. Billy Jalbert
    Billy Jalbert says:

    Interesting article. Paulson won because he gamed the system. He’s brilliant, but always beware of guys like Paulson who may have an ulterior motive. I agree with his premise regarding interest rates and Cory’s rationale which was pure logic; it’s cheaper to own than rent. Those are outstanding reasons. On Maui, I add another which is buy for love. It’s hard to be disappointed that way. Finally, don’t over-reach. The perils of that folly don’t even need to be discussed any further…Cheers.

  6. Marty Vusich
    Marty Vusich says:

    Check out who is telling you to Buy! Its like the owners of a company saying its a great time to buy their Stock. The worst of the RE Market is yet to come. Morgage write-offs- yes but there will be minimul appreciation for years to come.

  7. dude
    dude says:

    If the job market was hot, people would be snapping houses like it was the new black. But it doesn’t look like it will be for a few years. We haven’t even had quantitative easing 2 yet.

    Prices are relatively high compared to the long run, but interest rates are lower, so it is ok. Basically, if you have a stable job, buying a house beats renting. Otherwise, you’re just setting yourself up to ruin your credit.

  8. Millou
    Millou says:

    Yeah, don’t listen to the weathy on how to get rich. Instead, keep renting from me (and other like me) and in 30 years, I will own the house free and clear (even if it never appreciates a dime) and you will still be struggling to pay rent on your non-existant social security checks. You don’t buy a house to get rich quick, you buy a place to live that will eventually be yours free and clear. The mistakes made in the last few years was to use ones home as an atm machine for newer and more gadgets and bling. Drive the old car a few more years and get serious about your future!

  9. Jeanine
    Jeanine says:

    These buying signs have been here for the last 6 months. My clients are finally seeing it too. Unfortunately, I believe its the mortgage companies last-minute hoops and mind games that are making it hard for “good buyers” to take advantage of it right now.

  10. Helen
    Helen says:

    Millou hit it on the head. I have been hearing more talk in the media of why buying houses is out, was a bad idea in the first place, and how most Americans should just rent. Think about it….who would you be renting from? Who’s mortgage are you paying down? If the investor doesn’t have a mortgage, have you figured out what kind of return he is getting on his investment just from the rental income??? The problem was too many banks and people treating their homes like ATM’s. So many people who are upside down on their homes now, already cashed out and spent their equity when they did cash out refi’s. A house should be treated like a home, or respected as an investment. The housing shortage is coming…. This is a fading opportunity. Either interest rates will remain low, allowing prices to go up quickly, or interest rates will go up and it will be far more costly to buy. In the mean time, investors are snatching up all those good deals and will soon enough cash out on those that don’t take advantage of this market.

  11. Joe Murphy
    Joe Murphy says:

    I think that those that can qualify for a home with a 30 or 15 year mortgage should jump on it. For primary home purchasers it actually makes more sense to buy if you know are pretty sure you have stable income, and you plan to be in the area for at least a few years. I just sold a home this week for 120k, it had been valued at the peak of the market at almost double 5 years ago.
    That first time home buyer has a FHA mortgage with a payment PITI under 600 a month! That Bradenton home buyer had paid 900 a month for a similar quality home.
    We all need shelter, whether we rent or own it is all the choice of the individual.

  12. Patricia Pertusi
    Patricia Pertusi says:

    Affordability is key. Buying is the way to go in this housing market if you can afford it and if you have a stable income. The price is right in this current market. If and when they will truly stabilize and/or start to appreciate once again is a crystal ball situation. If you meet the criteria of affordability and stable income, step up to the plate and hit a home run.

  13. Patricia Pertusi
    Patricia Pertusi says:

    Affordability is key. In addition, one must have a stable income. These two qualities are essential. Many people fall into this category and those are the people who should buy NOW. Incredible buys are available NOW. Will they be there in the Spring?…if I had a crystal ball, I’d certainly share that information. Prices will begin to recover at some point. In the meantime, if a person meets the criteria mentioned, they should step up to the plate and hit a HOME RUN.

  14. Cyndia Moore
    Cyndia Moore says:

    As usual with information prepared in this style the information is incomplete at best. The “Wall Street Journal” is not a person and doesn’t have the ability to disagree or agree with anyone. Neither can “Forbes”. They are magazines not individuals. Those quotes validating John Paulson’s views are meaningless until they say what article, in what issue, written by whom was the quote taken from. I do not want to participate in passing along incomplete and inaccurate informtion, no matter how compelling or personally accomodating it may be.

  15. Steve Harney
    Steve Harney says:

    Hi Cyndia,
    I’m confused by your remark. Both the WSJ and Forbes articles are hyperlinked within the blog post so that you can read the original articles first hand. Unlike many blogs, we pride ourselves in linking every possible article we can.

    NED KIRCHER says:


  17. Scott
    Scott says:

    Wondering if now would be a good time to BUILD a modest-sized house (2,000 sf) (in a major metro coastal area) on a lot in a fully built-out area, with partial ocean views.
    (Lot is fully paid)
    Probably would rent out (very slight profit) or maybe sell if market is better after construction (7 mos.)

    Finished total cost of house would be 50 % of area home prices. (So, it would be similar to buying a foreclosed home)

  18. houses for sale dallas tx
    houses for sale dallas tx says:

    This means a property appraisal, new tax returns, new mortgage application and all other needed documents
    are provided to the new lender. Other options, like upgrading the carpeting, changing cabinets, and other options that require the builder to not only “build,” but also tear down are less likely to be agreed upon. I honestly don’t understand why able-bodied baby
    boomers who are building don’t have the foresight to incorporate Universal Design into their plans.


Trackbacks & Pingbacks

  1. […] John Paulson, one of the smartest housing analysts in the country, recently made it a point to say that if you don’t own a home – BUY ONE! Stan Humphries, chief economist of Zillow, explains that Paulson is talking about COST NOT PRICE. Paulson is not just betting on house prices, but also on the ability to lock in low financing now with the expectation that it will be easier to pay it back in the future because of inflation. […]

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  9. […] People keep saying that it’s a great time to buy. But why? According to this article, because bllionaire John Paulson says so! The blog is entitled If HE Says It Is Time to Buy a Home, BUY A HOME! […]

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