Housing Softening: MPLS Leads the Way in Price Cuts. (Minneapolis: comparable sales, mortgages)

[trackstar13]

Golfgal thanks for the support, I am glad I am not the only one who sees a house as a long term investment.

[MN-Born-n-Raised]

Originally Posted by track2514

Wow Born and Raised, you are definitely excited about this thread. I think we finally agree on something, land is usually more important than the structure when it comes to real estate and that is why it is important to buy in the right location. However, this is not always true of an historic home and sometimes the house can appreciate significantly due to historic status or features. This is why it is a bad idea to generalize, because they are always exceptions. Also, I read what I posted and many investments do not payoff immediately, so this is not a reason to say that a house is not an investment. Finally, please stop comparing a house with the stock market. For a house think of slow and steady and for stocks think about short term/quick return.

I mentioned earlier that I'm passionate on the topic of real estate; Guilty as charged. I'm also passionate on the formation of logical thought processes. And I gotta to tell ya, I’m not seeing a lot of logic in your viewpoints. I've challenged a few that you have formed and I see some massive holes (plus you seem to dodge a few when I present some rational questions to your view points).

Since you have a strong background in finance theory, I didn’t think that comparing ROI with different "investment” vehicles would be confusing. I really didn't think that was such a leap.

[trackstar13]

I think we can agree that we are both passionate about real estate. I am not only a homeowner due to the investment potential, for me it is more about freedom and being able to grill on my patio without a landlord telling that is against the rules. My biggest problem with the real estate bubble is the fact that people saw houses as a way to make a quick buck, and this includes investors, real estate agents, mortgage lenders, and many others. It bothers me that people buy a house right now expecting a 12-17% annual return on their investment. While this was the norm during the bubble, this is highly unusal and the historical trends show a much slower appreciation. I am sure you have heard the stories of people that bought right before the bubble and sold the house for a huge profit in 2006-07. I think whether or not we agree on the finer points, it is safe to say that we agree that buying a house to turn a quick buck is not a good plan there are better ways to do this.

[west336]

Great point Track! Anyone who sees a greater than 10% STABLE return on an investment is wise to invest in such ways, but not when that investment is housing (oh yeah, other people need to want to buy it for that to work, and everyone already has 2 or 3 homes now!!!)

[MN-Born-n-Raised]

Originally Posted by track2514

I am not only a homeowner due to the investment potential, for me it is more about freedom and being able to grill on my patio without a landlord telling that is against the rules.

This is the case with every homeowner. I'd sell my place in Andover but I'm waiting until my Son's graduation party in a couple of years. That might cost me $30K in decreased value but it is worth it to me. Re: freedom of owneship. You cannot put in a real fireplace in Denver and your grandparents may not be able to grill on the deck. I cannot grill on my deck in my Mexico home.

Originally Posted by track2514

It bothers me that people buy a house right now expecting a 12-17% annual return on their investment.

Who is stupid enough to think this is the case in 2010??

Originally Posted by track2514

I think whether or not we agree on the finer points, it is safe to say that we agree that buying a house to turn a quick buck is not a good plan there are better ways to do this.

We actually don't agree in the course points (let along the finer points). We do agree on the flipping point of view in 2010. IF you know what you are doing (and I don't) the flipping margin is normally very thin once you figure in your selling and holding costs. Renting out a SFH is also normally a net loss unless you use renting as a 3-4 year investment until the market turns for the better. Any longer and the repairs will eat a SFH proits alive.

[MN-Born-n-Raised]

Originally Posted by west336

Great point Track! Anyone who sees a greater than 10% STABLE return on an investment is wise to invest in such ways, but not when that investment is housing (oh yeah, other people need to want to buy it for that to work, and everyone already has 2 or 3 homes now!!!)

All my point was if you went from 1930 to 2010 and compared a house to the average stock market gains (using the S&P 500 fund) then that IS a long term investment comparison (the blips are averaged out). One return was 10% (S&P) and real estate didn't come close to that. I was not saying put money in the stock market and rent (although that would be a better ROI).

Hence, you buy a home as a needed expense (shelter) that you feed each month. If you are lucky, you picked the right spot and it helped you keep even with inflation. Some fortunate folks picked Lake Minnetonka in 1929 while others picked North Minneapolis or Detroit.

It's easy to seem smart or stupid by looking at specific examples.

Let's take an example of someone who WAS smart. When Scorpion snowmobiles out of Crosby MN sold its business to Artic Cat in 1978, the two owners bought up lake shore in Northern MN with their proceeds. I met Dick Harrison while looking for some lake lots to buy in 1995. He simply sells a few lots a year "to make ends meet". He bought up miles of shoreline. Not too shabby of an investment! Dick and his father bought land (not cabins or houses).

[trackstar13]

To answer your second point about who is stupid enough to believe that houses offer a quick return, if you ever watch HGTV, it seems like many people still believe this is the case. It appears there are still people buying in the areas like San Francisco, New York, Washington D.C., etc. that are putting no money down and looking to cash in within the next few years with only minimal improvements to the house. What amazes me the most, is that yes it is a little tougher to get money from the banks, but many people are still buying with no or little money down, even today.

[MN-Born-n-Raised]

Originally Posted by track2514

To answer your second point about who is stupid enough to believe that houses offer a quick return, if you ever watch HGTV, it seems like many people still believe this is the case. It appears there are still people buying in the areas like San Francisco, New York, Washington D.C., etc. that are putting no money down and looking to cash in within the next few years with only minimal improvements to the house. What amazes me the most, is that yes it is a little tougher to get money from the banks, but many people are still buying with no or little money down, even today.

They are buying with little money down because they are listening to people like you who are saying it's a tax break (more of a loan is more of a tax break). They are also listening to people like you who say if they get in trouble, they can just walk! If you need to walk, less money in makes more sense than more money in, correct???

[trackstar13]

Or maybe people like you say that housing is an expense so why spend more?

[MN-Born-n-Raised]

Originally Posted by track2514

Or maybe people like you say that housing is an expense so why spend more?

No. People like me would say pay it off all of your expenses like car loans, home loan etc. Live within your means. Borrow as little as possible because loans keep you poor so put down what you can!