Quit Your Job. Housing is Cheap.

[by Tom McNichol]

Is now the time to quit your job in order to take advantage of historically low interest rates?

A lot of people are asking that question right now. Well, okay, not a lot of people. Hardly anybody, really. But maybe it’s time someone should. Yes, perhaps this is just the time someone should be asking that question.

As we’ve seen in recent months, the so–called “wisdom of the crowd” has turned out to be wrong. Stupid, really. Not so long ago, the wisdom of the crowd insisted that real estate was the smartest investment you could ever make, that the value of your house would always go up, no matter what.

Remember? All you had to do was buy a house – any house really – and if you really wanted to be analytical about it, you could install one of those sweet Smith & Hawken sundials in the backyard (I went with the $139 hand-cast aluminum model with the baked-on finish, but everyone’s different) and watch the sun’s shadow as it crept across the dial’s face, safe in the knowledge that your house’s equity was increasing, just as surely as the earth rotated on its axis. (Apparently, real estate values also increased at night, but I was unable to confirm this with sundial readings.)

How well I remember those lazy summer days, slouching in the rustic red cedar Adirondack chair (damn you, Smith & Hawken), watching the sun’s shadow faithfully whisper across the sundial. Sometimes late in the afternoon, if you listened with the right ears, you could hear the faint tinkling of wind chimes in the distance, a noise that sounded like: ka-ching. Those were golden summers. I don’t remember exactly how many there were. Two. Four. I don’t know, possibly as many as 10. It’s hard to say. Looking back on it, I probably should have stayed in the shade more as I monitored the sundial.

Okay, so now we know that the wisdom of the crowd concerning real estate turned out to be wrong. The whole thing: totally, fundamentally mistaken. Foolish even to consider. Downright embarrassing. Whatever. The point is that the crowd was wrong. We all agree on that. It’s time to move on.

And that inevitably brings us back to the question: Is now the time to quit your job in order to take advantage of historically low interest rates?

The crowd would certainly have you believe that the answer is “no.” Play it safe, keep your head down, ride out the storm – that’s the current wisdom of the crowd. Quitting your job may put a strain on your finances and you’ll end up taking out a Fresh Loan to cover the cost of your bills. Lending money is common and can help you out of a tricky situation. Usually, you can get a short term loan pretty quickly too. If you already have a stable job with a steady income, why jeopardize that? But is there any evidence that this wisdom is any wiser than the wisdom that got us into this mess in the first place? It’s worth noting that the Chinese ideogram for “wisdom” combines the symbols for “opportunity” and the one for “global financial meltdown.”

Let’s take a hard look at the facts. The Federal funds rate, as you read this sentence, stands at 2 percent, its lowest level since December 2004. And there’s every reason to believe that the rate will continue to drop as the economy tanks even further and huge dust storms sweep across the country. By the time we elect a new president, the Fed rate will likely be at or about 1%.

Think about that for a moment. When the interest rate drops to 1%, lenders are basically giving away money for free. The only question is: are you ready to take advantage of these historically low rates?

If you’re holding down a fulltime job, you’re probably not ready to take advantage of this unique market. There’s just too much going on at work. Especially now that Steve in accounting was promoted to something they’re calling “Team Productivity Facilitator,” which means that an increasing part of your workday is given over to showing Steve why you shouldn’t be fired. Let’s face it – Steve is a total tool. Always was, always will be. That’s just Steve. But let’s not get sidetracked. The point is that holding down a job leaves you practically no time to seize the once-in-a-generation opportunities offered by today’s market, with its historically low interest rates.

By quitting your job now, you’ll free up valuable time and “mindshare” to seize those market opportunities. It’s time to start thinking big: buy a fancy car, take a long vacation, refinance your house (if you still have one), or settle up on the foreclosure costs of the house you recently lost. You can use your upcoming $600 tax rebate as a down payment (don’t worry, the check’s in the mail). With interest rates this low, borrowing money from the bank or putting the whole shebang on your credit card has never been cheaper. And as the economy deteriorates even further, it’s not out of the question that the Fed will drop its key lending rate to below zero. That means the banks will be paying you to take their money. Assuming there still are banks. And money.

So to answer the question: yes, now is the time to quit your job to take advantage of historically low interest rates. Giving two weeks notice to your employer is the standard courtesy, but if anyone at work starts whining (especially Steve), I would just walk.

Remember, 2% is just another rate for nothing left to lose.

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