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So for the equity market what names have you ever invested in that are trading below their 120 year average value?
Well, none unless you adjust for earnings growth. But that is necessary to preserve the analogy with real estate. There is still a slight misconstrual here, though. The Case-Shiller index is adjusted for general inflation, not rent inflation.
It's important to keep in mind that rent inflation and general inflation over long periods tend to go together, but by contrast, the dividend growth of a company is often quite a bit above inflation. This is due to the way corporations often expand by re-investing earnings.
This is less common in real estate - the analogy would be an apartment building or multiplex that slowly "grew" larger over time by cash-flowing construction from rental income.
When it comes to equities, I generally don't buy if price is more than 12-14 times annual earnings. Right now in the residential housing market of most US metro areas, the price to earnings ratio is quite a bit above that.
Over the past 120 years, a price of 12-14 times annual earnings is fairly typical, for both housing and stocks.
In housing, "earnings" is rent net of all non-purchase expenses. This includes vacancies if the property is not owner-occupied.
It IS awesome. And what our founding fathers so mightily fought for. They came from a place that kept them from acquiring and keeping property. So protecting that property that they worked so hard for was very important to them.
It is also important to me. And I'll fight just as hard to maintain a system that keeps those that have NOT worked for what I have acquired from taking it from me. Whether it's the actual property or the value that the property holds, I will never let the lazy, entitled and poorly prepared decide, after I have my property, that they somehow should have it.
??? And they created a system that keeps poor people from acquiring property (e.g. minimum lot sizes)?
How does a seller's right to sell me a 2500 sq ft piece of land take property from you?
Another question associated with this do you feel you are better off estimating expected returns off of a 120 average or say 10-20 year? I would make a fairly large wager equity returns over the next coupe of decades will be well under the 100+ year average
It's all about the ratio P/E10 compared to the 120-year average of that same ratio. Robert Shiller, (yes the same Shiller in Case-Shiller) pointed this out in his book Irrational Exuberance.
Some day I will have to see where I put the pictures of my first home... I know several had gag reflexes when they first saw it...
I was the cheapest home on the MLS at the time... contractor special listed at 30k and I walked away... and it was occupied by a squatter.
Realtor kept calling with the condemnation hearing coming up... she asked for an offer and I said not interested... she then asked if I would I pay 25k, 20k then 15k? I told her know... pressing me... I said I would not even consider it unless it was somewhere between 11 and 12k... she said fine... and added ALL CASH AS-IS and wrote the offer... and took my deposit check of $100.
The next day she called to congratulate me
It was the beginning of a great relationship... she would call whenever she had a "Special" home with problems which meant not eligible for any type of lender financing...
For me there is no looking back... I had my lifesaving's on the line and my days for renting were over...
If everyone could become a homeowner by putting their life savings on the line, there would be few renters.
You really gave me a laugh this morning. You can barely afford a room in a ramshackle house, but somehow you could have scraped together the money for these mystical "deals".
Oh, and I became an observer late into this saga, after the seller's failed contract sales...at the final condemnation hearing, he claimed he had been unable to perform within a specified time window, i.e. his failure was neither intentional nor negligent, but rather beyond his control. One of my neighbors later clarified that he was unable to perform because he was incarcerated at the time on a sex charge.
And my income was actually greater at the time, and I was renting one part of a SFR that had been split into two units. The condemned house was quite small, and slightly smaller than what I was renting.
If everyone could become a homeowner by putting their life savings on the line, there would be few renters.
Not sure about than... I do know a number of very successful well off people that live in San Francisco and they rent... many live in Rent Controlled Apartments and they would have to dig deep to own the equivalent.
One of my friends said the only reason I was able to buy is because of the three D's... Dirty, Disgusting and Dangerous...
I was OK with that because I was willing to pay my dues with every intention of moving up and just needed to get my feet wet...
Lenders generally are only interested in good properties... the one I bought was the opposite...
The Broker I bought it from was with Realty World... they would market their stellar property using "Real Scope"
For my property they referred to it as "Real Scum" and even did a picture board and presented it at the National Convention and won an award for being able to sell it...
Not sure about than... I do know a number of very successful well off people that live in San Francisco and they rent... many live in Rent Controlled Apartments and they would have to dig deep to own the equivalent.
One of my friends said the only reason I was able to buy is because of the three D's... Dirty, Disgusting and Dangerous...
I was OK with that because I was willing to pay my dues with every intention of moving up and just needed to get my feet wet...
Lenders generally are only interested in good properties... the one I bought was the opposite...
The Broker I bought it from was with Realty World... they would market their stellar property using "Real Scope"
For my property they referred to it as "Real Scum" and even did a picture board and presented it at the National Convention and won an award for being able to sell it...
Just remember the 3 "D's"
I'm not aware of any places outside of NYC and Caliiforia where there is rent control.
If I ever come across a "3D Real Estate" I'll recognize their game.
As another renter, I don't "get it" either, and frankly quite insulted to be called "dumb". Maybe we just have different priorities. All I know is I pay less than $800 a month to live on the beach in a town where summer rentals on the beach average $5,000-$10,000 per week. When it snows, a plow comes by and clears our lot, and the maintenance guy comes and shovels the stairs. When my dishwasher breaks, I call the landlord and have another one within 2 days. When my heat goes out, I call the plumber who comes and fixes it, yet I never see a bill. I don't pay property taxes. My cheap rent combined with no taxes means I can save a couple thousand a month toward my future. If that's "dumb", I guess I am, and am quite happy anyway.
are you allowed to sublet? I bet the owner would be really peeved when they miss out on income like that
??? And they created a system that keeps poor people from acquiring property (e.g. minimum lot sizes)?
How does a seller's right to sell me a 2500 sq ft piece of land take property from you?
First of all, I can guarantee that the founding fathers did not create zoning laws or minimum lot sizes.
Secondly, nobody keeps poor people from acquiring property. When I bought my first property, I was poor. I scrimped, saved, and went without to buy a home. You and I had the same opportunity to buy a home. You chose not to.
And lastly, if you create a slum out of my neighborhood, you are most certainly taking my property/investment from me. If you want to live like that, move somewhere that already allows it. Don't change the rules for me just because you want to live in a certain area.
Oh, and I became an observer late into this saga, after the seller's failed contract sales...at the final condemnation hearing, he claimed he had been unable to perform within a specified time window, i.e. his failure was neither intentional nor negligent, but rather beyond his control. One of my neighbors later clarified that he was unable to perform because he was incarcerated at the time on a sex charge.
And my income was actually greater at the time, and I was renting one part of a SFR that had been split into two units. The condemned house was quite small, and slightly smaller than what I was renting.
Oh yea, that's right. You only set your sights on that ONE THING, and if it doesn't pan out, you curl into a fetal position and give up. I forgot.
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