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GENERATIONS of people that owned homes, worked their tails off, maintained them millennia that have shown that owning real property is a tremendously effective means of increasing one's wealth and raising the standards of living for yourself and future generations of your line...
Aaaamen!!!
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So if I were to buy a house today you think it would be worth less in say 30 years from now?
....
But the value of housing has (recently) been blown out of proportion ...
Thirty years is a relatively short period of time. In such a short time span, timing and purchase price are important.
However, the value of a house (and land) as an investment is not simply buy price minus sell price. That kind of two-dimensional thinking is part of the reason why the country shot itself in the foot in the first place.
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People ... worked their tails off
, and not only that, but productively.
These variables are also decisive in the equation.
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... people cluster in cities. But every city starts as an essentially worthless plot of land that some group of people decided to build on ...
and put to productive use, making economy also of the synergies that exist among each other in close proximity, even the surrounding land that produces food.
Contemporary US suburbanites live far from the food, they travel is gas-guzzling vehicles to and from oversized housing to largely unproductive jobs, while energy prices are increasing. Not a good model.
They havent done much to support the housing market to date. What are you expecting the Fed to do?
Have you looked at mortgage rates or the housing credit.The look at teh figures just out the inventroy dropped to 9months supply to 8months supply and the sdame year redcutions were down 8%. Not that bad with unemployment rising meaning people with money are takinfg advantage of ower prices and interest plus many the 8000.
i see that there were some problems with the housing tax credit:
The Treasury Department's inspector general for taxes questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18.
i don't understand how people expect a sustainable housing recovery when 1) investors are starting to have increasing levels of delinquent or non-paying tenants, which would result in a pullback in housing as an investment, 2) unemployment continues to go up, with no plan in place to reverse it and yet more talk about a "jobless recovery". the one thing we can all agree on is that jobless people cannot pay either rent or mortgages unless they are being subsidized by the government, which is getting less revenue since the recession started.
People ... worked their tails off , and not only that, but productively.
These variables are also decisive in the equation.
Yes, many worked hard to afford and maintain their homes, but over the last eight years, many more did nothing, expected double digit returns and used those returns as a source to fund their inflated lifestyles.
"Improvement" is all based upon perspective. From the perspective of people who were locked out of the housing market by severely inflated prices that buyers obviously couldn't afford, the current situation is a big improvement over the 'boom' years, and they can only hope for more.
At this point, I don't really care what my house is worth. It doesn't affect my daily life. That's the big fallacy so many people fell for. They thought that increased paper value on homes they owned made them wealthier. On paper it did, but the only real way to benefit from the value of your house is the sell it. A house is first and foremost a place to live, not a cash register. Money you take out of your house must be paid back somehow. It is not 'your' money, as the banks used to tell us. To think that money you borrow against your house belongs to you is like thinking that the money you gave to the store when you bought food or clothes is still yours. It isn't. You have the asset; the seller has the money. "Cashing out" of a house means eventually losing it if you can't pay the money back out of income. And that effectively means buying your house twice.
Luckily, my mortgage is a small share of my house's value, and I expect to have it paid off in the next 2-3 years. I can't wait to have no house payment. I have no interest in 'cashing out' of my house because I know it would kill me financially.
The upturn in sales you are seeing now is temporary, driven by people hanging onto the hope thing will return to the days of the past. The reality is they will not return to the past. The smart ones are preparing to live in the future.
The home sales figures are being exaggerated by the seasonal adjustments. The unadjusted figures have been falling for three months. Because of the financial turmoil during the period from July 2008 to March 2009 depressing normal seasonal tendencies, the seasonal adjustments are now skewed toward expecting unusual weakness in the current period. The actual number of resales have dropped by 15% since July.
I don't see how the housing market can keep prices stable considering the following:
* Pressure on the Fed to raise interest rates
* Pressure on the government to stop borrowing so much money for welfare programs
* Expiration of the $8000 credit
* Housing demand pulled forward artificially by the credit
* Stealth inventory of foreclosed homes which haven't been marketed
* Layoffs continuing (although at a slower pace)
* Unemployment benefits expiring
* Inability of many people to refinance upside down ARMs
The banks and government have done a great job of slowing the housing crash, but they can't keep doing it forever. When they do have to stop, the things they have done to slow the crash will add even more downward pressure to housing prices.
Thirty years is a relatively short period of time. In such a short time span, timing and purchase price are important.
As an old guy I would agree 30 years isn't that long, however, I think it's safe to say that thre aren't many properties in this country worth less than they were 30 years ago even after several busts. In fact, I'd be surprised if thre's any 30 years period in this country where prices have fallen on real estate.
As to your point about carry costs, no agrument there. My point was simply to the issue as to whether or not prices would "ever" return to the past, not whether or not real estate was a good/better investment now than ever before.
I would agree 30 years isn't that long, however, I think it's safe to say that there aren't many properties in this country worth less than they were 30 years ago even after several busts. In fact, I'd be surprised if there's any 30 years period in this country where prices have fallen on real estate.
As to your point about carry costs, no argument there.
I think we agree, then, that within 30 years, nominal prices will most probably be higher across the board, even compared to the peaks in 2005 or thereabouts.
I think we also agree that, whether a purchase made in, say, the 2003-2009 period is actually profitable, considering all costs, within 30 years depends on many variables, including the buy price during that period, size of mortgage, taxes and insurance costs in the state/county/subsection of purchase, opportunity costs of alternative investments, etc.
In short, we can conclude that, in a given currency regime, nominal prices usually rise over time. And we can conclude that a real estate investment over the period of a generation may or may not be a good investment, depending on a significant number of variables.
Furthermore, I would argue that the most healthy type of return on investment in real estate occurs in the framework of a sound economic model.
Getting back on topic, there is indeed a risk that the economy will stagnate, or may even double dip, in 2010, and that a real estate investment made in the 2003-2009 period may still be in the red, depending on circumstances case-by-case.
Moreover, those would made purchases based on bubblemania are probable underwater for a significant period of time, some for a generation (i.e. the next 30 years), especially if doubt continues to surround the soundness of the economic model adopted for the US.
jimhcom obviously is not real old. If he were he might remember that there are GENERATIONS of people that owned homes, worked their tails off, maintained them lovingly and well, ALL without EVER considering a HELOC or doing it for "price appreciation".
In fact I suspect jimhcom is pretty darned young. And the kind of young that often goes along with "reckless" or other less than flattering adjectives that generally are applied to those that are NOT particularly wise. Perhaps it is that lack of wisdom that is shaped too much by the past decade or so and not the millennia that have shown that owning real property is a tremendously effective means of increasing one's wealth and raising the standards of living for yourself and future generations of your line...
What is it with people on this forum making wild a** personal assumptions?
Well Chet, you know what they say about assumptions, the truth is that wisdom comes from learning from experience, and not the number of years you have been taking up space on this planet. That being said I have owned several pieces of real estate, and have actively managed rentals, my first being acquired about 40 years ago. I have seen boom and bust going back to the 60's. Real estate is no different than any other investment in that it is not necessarily good or bad. You can loose money in real estate as easily as make it if you do it poorly, as millions of people today have found out. In the late 50's there was a real estate bubble in San Diego. When it ended there was a depressed market for a decade, and there was virtually no building going on. The bubble of the 50's is nothing compared to what we have going on now. The economy depends on three pillars, real estate, employment, and the consumer. All three of those pillars are currently undermined, so tell me Chet, what is going to inflate the market going forward? The current bubble was formed over 2 decades, and real estate prices in many places rose to ridiculous levels due to manipulation and debt. We have not seen the bottom yet, and will not until the numbers begin to make sense and the economy is on a sound foundation.
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