Death Spiral States: The Last Place You Want to Own a Home

Posted: December 11th, 2012 by Facebook Friend

by Brittany Stepniak  on the Wealth Wire (via BIN)

Americans don’t seem to settle down at young ages anymore. Their careers and relationships tend to pull them all over the United States, but once people enter their 30s, they tend to start thinking about home ownership.

That’s very good and well, so long as you understand the risk-factors associated with your home location of choice. According to Forbes, new home buyers should be cautious of the type of workers who reside in the states of interest.

Are more folks in the nearby neighborhoods reliant on government jobs and government welfare than those who hold steady jobs in the private sector? If the answer is yes, don’t buy in these areas.

In these uncertain financial times, investors have to be selective. They have to be extremely careful when dividing capital, acquiring real estate, and diversifying their portfolios. If you’re an investor interested in the benefits of home ownership, we urge you to take a look at 11 states where you should rent, not buy.

This list was compiled based upon the ratio of takers vs. makers in that statewide community. Takers are defined by Forbes as people who receive government money; in the form of employee wages, pensions, or welfare. A maker is noted as someone “gainfully employed in the private sector.”

As the takers in these ill-fated states begin to outnumber the makers, taxes go up for everyone. Wealthy citizens begin to leave to avoid the outrageous tax-increases. As the wealthy people in the private sector are leaning on this principle, the poorer taxpayers left behind are faced with the burden of experiencing yet another round of tax-increases to compensate for all the tax-payers that left and are no longer contributing to that state.

It’s a circle of darkness for many states struggling to keep entrepreneurs from fleeing the state to more attractive locations – based solely upon key financial matters.

Although we all want to escape the humdrum lull of quiet towns from time to time, don’t act too hastily. Running away to the sandy shores on the west coast to soak up the California sun and laid-back atmosphere is great for a vacation, but not for permanency.

No matter how you look at it, California is in trouble. They keep spending money they don’t have,catering their public servants handsomely, while spending billions on people who aren’t even legal citizens. In fact, a City Journal essay by Victor Davis Hanson says that California spends$10 billion a year on entitlements for illegal aliens. This sounds absurd, but it’s true…

Even if you have money in municipal bonds in California, that’s still a pretty risky bet. All in all, it’s hard to justify buying a home or investing at all in a bankrupt state like California. So if your career or spouse takes you to Los Angeles or San Diego enjoy the experience – just make sure you’re renting while you’re living there.

Don’t fall into a mortgage death trap and end up with a home in an area unable to produce their own goods and services without government assistance. These are the areas that will be hit the hardest in the fiscal cliff aftermath.

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