Five Lessons From the Mortgage Meltdown

My wife and I put down 40% on our first house. While I am not saying that everyone should do that, it makes much more sense than putting yourself at risk by buying a house that you simply cannot afford. Buy what you can afford without having to resort to financial gimmickry (see "Understanding Leverage").

3. Cable Programming Is Not the Same as a Proper Education or Apprenticeship

CNBC brought us play-by-play coverage of the tech/Net bubble and daytrading phenomenon. In recent years, courtesy of the ever-expanding cable television landscape, the likes of HGTV and TLC popularized shows such as Designed to Sell, House Hunters and Flip That House, and as a result, a whole new generation of couch potatoes got into real estate (see the Marginal Moron Rule).

With these shows, what starts off as informative or entertaining programming slowly morphs into a collective conscious of speculation. The lesson: Don't mistake or substitute cable programming for a rigorous education or apprenticeship in a particular investment field.

4. If You Build It, They Might Not Come

Real metropolitan centers are built up around centers of industry, government, commerce and finance. Real estate prices always hold up better where there are jobs to be found. Yet, the last 10 years saw a buildup of excess housing inventory in places like Arizona, Michigan, Ohio, Florida and Southern California. Field of Dreams is not a documentary. "They" will not come unless you have jobs for them.

With the exception of Michigan and Ohio, there seemed to be a widespread belief that an endless supply of retirees were seeking to evacuate Northern climates for year-round golf and pay up for the privilege. And the automobile and other heavy-industries are in decline, so could someone tell me why so many houses were built in Michigan and Ohio?

If you plan to get involved in real estate development, please check the local economy and job market.