[afghan67]

Originally Posted by Prichard

Don't forget "rent" under your benefits. You need to account for utility. So, figure $1,500/month for 12 years - if you really want to be accurate, you'll add interest on top of that. Without interest, that's $216,000.

As far as leveraging investments - where can I get $200,000 with only $10,000 to invest in the stock market? According to what you're saying, if I have $100,000 worth of investments, then I aught to be able to go on margin and invest in $2,000,000 worth of securities. I believe you are actually limited to 50% of your holdings, or something like that on a margin account.

When you look at ROI, the the fact that you can leverage your investment factors into total profitablity. By looking at it on a cash basis, you are not performing a valid analysis. I suppose you could throw some risk factor in there for having to carry a loan, but don't forget that the government has weighted things to the advantage of homeonwers by making sure they can get 10 and 5% loans - HUGE leverage. That's just not available to any other class of investors other than homeowners. And, before you say "Bill Gates" can get unsecured loans, that's not quite accurate - he has his entire net worth backing those loans. Ask yourself if Joe Blow who makes 100,000 / year and has a net worth of $30,000 can get that loan.

The rent is in my calculations. It has to be discounted to present value. If you were to prepay rent for a house for 12 years $1,500 per month, you would not hand over $216,000 today. Said another way, you would not pay someone $1,500 today to rent something for a month, 11 years in the future.

Also, your leveraging argument holds water only if your house goes up $200,000 in the first year. You put up $12,000 and borrowed the rest. So you are almost fully leveraged the day you close. It would be years before you would have significant equity to play with.

By then, the same investment in stock would have enjoyed significantly more appreciation than the house. You can leverage that cash, spend that cash, or utilize it for another investment.

[nychiefsfan]

Lawrence Yun, senior economist for the Realtors, noted that household formation had slowed. He implied many people had decided to put off buying a home and were doubling-up in rental units or moving back home with parents.

"It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market," he said. "The lack of buyers' confidence is a major factor in the lower sales."

baynews9.com - Business News: Home Sales Hit Slowest Pace in 4 Years (http://www.baynews9.com/content/9/2007/6/25/264442.html?title=Home%20Sales%20Hit%20Slowest%20P ace%20in%204%20Years - broken link)

Why should any buyer be "confident" in anything Yun says?

Like a recent article stated:

We never heard anyone from the National Association of Realtors say anything along the lines of: "The real estate market overperformed this month, as home buyers, irrationally convinced that home prices would continue to appreciate beyond all rhyme or reason, stepped up their splurging on new and existing homes, rashly confident that they would be able to sell their purchases at a 25 percent markup in just one year."

How the World Works: Globalization, Globalization Blogs - Salon.com

[nychiefsfan]

[ American Morning' Offers Another Gloomy Housing Forecast
Reporter calls Realtors' prediction 'optimistic' and labels forecast of no real recovery until 2009 'respected.'

Business & Media Institute

Pitting one expert prediction against another “American Morning” took the side of more housing market woes on June 26.

CNN’s personal finance correspondent Gerri Willis reported housing market predictions from both the National Association of Realtors (NAR) and from Moody’s Economy.com, but left viewers without a silver lining.

“I got to tell you John [Roberts, “American Morning” co-host], this is not good news for people who are out there trying to sell their house and this of course is supposed to be the biggest time of year for sales,” said Willis to open her report.

Willis based her report on data from NAR that the market is “underperforming” with median home prices 2.1 percent lower than a year ago and sales still slipping. But Willis still criticized NAR for being too “upbeat” and “optimistic.” Instead, she called a more negative view respected.

“Countrywide – I talked to the folks at the NAR who put out these numbers to begin with. They believe sales volumes will start trending up in the third quarter, but they are among the most optimistic. I talked to the folks at Economy.com, some of the most respected economists out there who watch these markets. They say you will have to wait until 2009 to see a real recovery,” said Willis.

The Economy.com prediction was in line with previous remarks from the group. Back in November 2006, Mark Zandi of Economy.com drew comparisons to the Great Depression and the housing market.

Willis completely ignored how lower prices have the upside of benefiting buyers, though an NAR press release made that point:

“The good news is buyers have more negotiating power with a fairly large supply of homes available in much of the country,” explained NAR President Pat V. Combs. “Buyers who’ve been on the sidelines may want to take a closer look at current conditions in their area – if they wait for sales to rise, their choices and negotiating position won’t be as good as they are now.” In other words, "BUY NOW!!!!"

According to CNN, Americans who refuse to agree with the media’s dismal reporting on housing are “Out of touch with realty reality.” That story said that most Americans have an optimistic view of the housing market despite media reporting, according to a recent poll.

“A majority - 52 percent - said the current housing slump would end within two years,” according to the CNNmoney.com report written by Les Christie. “There, they seem to agree with housing industry insiders such as Lawrence Yun, economist with the National Association of Realtors and Doug Duncan of the Mortgage Bankers Association.” Yun has said we've "hit bottom" for over a year now. I don't believe anything he says.

The mainstream media has repeatedly forecasted doom in the housing market since it began an upswing in 2001 and has continued to do so throughout this latest downturn.

'American Morning' Offers Another Gloomy Housing Forecast (http://www.businessandmedia.org/articles/2007/20070626132046.aspx - broken link)

Lawrence Yun, senior economist with the national association, said he thinks some home buyers may not be thinking clearly about the housing market.

"I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers," Yun said.
The Cincinnati Post - Lackluster home sales continue (broken link)

It's not the home buyers....

[nychiefsfan]

May Existing Home Sales Hit Lowest Point in Four Years; Good Thing Lereah’s Not Around to Try to Explain Things

Huntington News Network

Existing home sales were down to a seasonally adjusted annual rate of 5.99 million units in May from an upwardly revised pace of 6.01 million in April, and are 10.3 percent below the 6.68 million-unit level in May 2006, the National Association of Realtors reported on Monday, June 25, 2007.

This represents the lowest sales level in four years, indicating that housing is still not on the mend. David Lereah, NAR’s controversial former chief economist, has moved to Move Inc. as executive vice president, so it’s up to Lawrence Yun, NAR senior economist, to take over the job of making lemonade out of lemons.

Yun said the market softness is understandable. “I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,” he said, an improvement on Lereah’s blaming the weather -- as he did earlier this year. “Household formation has slowed dramatically since late 2006, implying that many people are doubling-up – they’re adding roommates or moving in with parents.

“The market is under performing when you consider positive fundamentals such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices,” Yun said. Economists always seem to be optimistic about job growth as long as THEY are employed. Consumer confidence satisfaction surveys almost uniformly paint a different picture, with plenty of anxiety over jobs and wages.

Yun adds: “ It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market.”

Then again, maybe they’re waiting for prices to drop even more!

Not only are sales well below the pace last year, prices are dropping, according to the May existing home report: The national median existing-home price for all housing types was $223,700 in May, 2.1 percent below May 2006 when the median was $228,500. The median is a typical market price where half of the homes sold for more and half sold for less, but there is a temporary downward distortion in the current national comparison because sales have shifted away from many high-cost markets in the past year.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.26 percent in May, up from 6.18 percent in April; the rate was 6.60 percent in May 2006.

NAR President Pat V. Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, and a past master at putting the most favorable spin on things (It goes with the job!) said higher inventories are helping to offset an affordability impact from higher mortgage interest rates.

“Although mortgage interest rates are trending up, they are historically favorable,” she said. “The good news is buyers have more negotiating power with a fairly large supply of homes available in much of the country. Buyers who’ve been on the sidelines may want to take a closer look at current conditions in their area – if they wait for sales to rise, their choices and negotiating position won’t be as good as they are now.”

Total housing inventory rose 5.0 percent at the end of May to 4.43 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace, up from an 8.4-month supply in April.

Huntington News

[nychiefsfan]

America's easy-credit, quick-flipping, borrow-now-and-forget-the-consequences lifestyle is coming to an increasingly painful, grinding halt.

Housing Slumps. Who's Surprised? - The Money Times (broken link)

[LingLing]

Originally Posted by SKB

What price range? It depends on what month. I think today those two homes would sell for 30% off their peak prices. Next year we will be looking at 50%. Port St Lucie is toast.

I agree with your assessement on PSL market.

[info please]

I'm right where I want to be . In the drivers sit with a buck in my pocket.

[JimKing]

You are right about Port Saint Lucie. My best friend's mother has been in real estate there for 25 years, she can not believe the mess. Her son owns a home there that he was renting out for a modest sum. His tenants bailed because they could rent their choice of new homes for a lot less than what it costs him to cover his costs.

PSL is a sea of for sale and lor rent signs.

[Prichard]

The rent is in my calculations. It has to be discounted to present value.

Ok, I'd agree with that, but you need to escalate rent by about 5%/year under that theory as well. You probably only need to take this out to about 10 years though, until it doesn't make much of a difference.

But, before you do all of that, I'm not saying that a good securities investor can't beat the return on a single family house over a 20-30 year time period, even considering everything like rent, interest deduction, leverage, etc. But, a bad securities investor can lose his butt, and a "safe" securities investor may not be making any better of an investment than a run-of-the-mill homeowner. More than 50% of what I have in my 401k came from profit on my real estate directed investments. It makes the returns on my securities investing (at least in the 401K) look trivial in comparison. Of course, if I tried to do the same thing in this market, I could lose my butt. Where you shouldn't time the securities market (unless you're some kind of program trader), you need to time the Real Estate market. You can't just "ride the storm out" and hope for values to go up when you're carrying a big nut.

[info please]

Well I don't think there is much more to say after today's news .The market is no in a recovery mode.