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Many financial advisors do not consider your home an investment and do not count it as net worth. I agree by that and assume my net worth will decrease by the same amount as the house purchase price if I buy one. Maybe the obvious reason they do not consider real estate as net worth is the illiquid nature of real estate.
You should run not walk from any financial advisor who doesn't consider real estate assets part of your net worth.
Howard is stating the decision to buy a home should not be based on fluctuations in price but rather one's ability to afford one. He is saying not to fall prey to the "on sale" mentality in which people feel compelled to buy something because it is cheaper even if they can't afford it. I think he makes a great deal of sense and I tend to agree with him.
At least part of what you are saying is buy what you can afford. We agree. I buy under my means. My last car loan was when I was 17 years old. I've had income years where I could have bought a new Porsche with 2 months of pay. Instead I splurged and bought a nice used Chevy. I learned it's much better to work 10-15 hours a week than 100 plus hours a week. Additionally, the harder I worked the more I paid to the government. Now I've structured my lifestyle to coast for the next 30 years and I stopped chasing the dollar in 2003. I therefore had the opportunity to watch everyone of my kids hockey of softball games. That certainly trumps driving up stressed in a Porsche. I'm not easily impressed with status and stuff. I diverge.
Quote:
Originally Posted by Howard Roark
Many financial advisors do not consider your home an investment and do not count it as net worth. I agree by that and assume my net worth will decrease by the same amount as the house purchase price if I buy one. Maybe the obvious reason they do not consider real estate as net worth is the illiquid nature of real estate.
AFTER deducting the purchase price of my house from my net worth, if its value drops, I would not assume my net worth dropped.
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Maybe it is just me but I still think I was smart to buy when the market was pummled. I've picked up $60K in appreciation so far on my place in Surprise and it is still rising. In my world of finances, that pays for a lot of trips to Home Depot, mowing, HOA's, etc. Additionally other people pay all of the expenses when I am not using it. Even better, I have a net gain excluding appreciation off of the bottom. There is an art to know where to buy and why, how big to buy and why, and how to market your weekly rental property over and above rental sites. I also happen to enjoy it.
As I type, I'm sitting in northern MN overlooking the bay or our lake. I profit on this home as well. So for Howard to think that real estate isn't an investment is simply an uneducated statement. If my quality of life is better than a "financial planner", why should I worry if they say real estate isn't an investment?
We do agree that there are a lot of people that are rushing to buy a home that have no business doing so.
Quote:
Originally Posted by Howard Roark
It is a draw, the topic of fake value applies also to the interest payments, insurance, and property tax as well as maintenance. So it is fair to leave off the taxes owed as you start your traditional IRA distributions. I converted a significant amount to Roths anyway. The tax man, insurance man, and bank and Home Depot all visit you for their share.
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Speaking of fake values, your true net worth better not include your statement balance on you Roth IRA or Keogh. That's because you haven't paid the taxman yet! A $1,000,000 on a IRA statement is currently valued in MY mind at $500K. See how dumb your financial planner is. I bet he tells you that $1M is worth a $1M to you. It's not.
I pulled my money out years ago and paid the 10% penalty. I made that back buying and selling real estate in the late 90's and early 2000's. Now I value is real and post taxes.
I like to look forward to see where the country is going. As sure as I am sitting here, the government is going towards European style tax rates. There is a pile of money sitting in those IRA's that will help pay for the new promised services and our rising debt. So you better wait even longer to buy a home when you use the 1/6 net worth model. Because you are sitting on some fictitious pre-tax net worth.
Last edited by MN-Born-n-Raised; 05-11-2012 at 06:07 AM..
At least part of what you are saying is buy what you can afford. We agree. I buy under my means. My last car loan was when I was 17 years old. I've had income years where I could have bought a new Porsche with 2 months of pay. Instead I splurged and bought a nice used Chevy. I learned it's much better to work 10-15 hours a week than 100 plus hours a week. Additionally, the harder I worked the more I paid to the government. Now I've structured my lifestyle to coast for the next 30 years and I stopped chasing the dollar in 2003. I therefore had the opportunity to watch everyone of my kids hockey of softball games. That certainly trumps driving up stressed in a Porsche. I'm not easily impressed with status and stuff. I diverge.
Maybe it is just me but I still think I was smart to buy when the market was pummled. I've picked up $60K in appreciation so far on my place in Surprise and it is still rising. In my world of finances, that pays for a lot of trips to Home Depot, mowing, HOA's, etc. Additionally other people pay all of the expenses when I am not using it. Even better, I have a net gain excluding appreciation off of the bottom. There is an art to know where to buy and why, how big to buy and why, and how to market your weekly rental property over and above rental sites. I also happen to enjoy it.
As I type, I'm sitting in northern MN overlooking the bay or our lake. I profit on this home as well. So for Howard to think that real estate isn't an investment is simply an uneducated statement. If my quality of life is better than a "financial planner", why should I worry if they say real estate isn't an investment?
We do agree that there are a lot of people that are rushing to buy a home that have no business doing so.
Speaking of fake values, your true net worth better not include your statement balance on you Roth IRA or Keogh. That's because you haven't paid the taxman yet! A $1,000,000 on a IRA statement is currently valued in MY mind at $500K. See how dumb your financial planner is. I bet he tells you that $1M is worth a $1M to you. It's not.
I pulled my money out years ago and paid the 10% penalty. I made that back buying and selling real estate in the late 90's and early 2000's. Now I value is real and post taxes.
I like to look forward to see where the country is going. As sure as I am sitting here, the government is going towards European style tax rates. There is a pile of money sitting in those IRA's that will help pay for the new promised services and our rising debt. So you better wait even longer to buy a home when you use the 1/6 net worth model. Because you are sitting on some fictitious pre-tax net worth.
Don't forget the fact that those $$$ sitting in an IRA or anywhere else it's parked are losing value as they sit (todays dollars vs next years dollars) and it wasn't too awful long ago that a move was being made to confiscate IRA's and 401k's then doled back out to you by the feds when you retired. Until then they got the full use of your money.
We have most of our life tied up in real estate and some purchased at the peak...sigh. We will hold on for another 5 to 10 years and then just cash out or give it to the kids to hold. Not worth losing sleep trying to second guess the market, especially with Europe in such deep doo doo and this will surely have an impact on us soon. Just hang on as we go over another waterfall. There really is no place at all left to put your money.
As per someone else's request (I also agree with this) I am going to start a new real estate thread. We are now well below 13,000 active listings. How low will it go before the slow season kicks in? Will the slow season add several listings back on to the market? If not, will this force prices up more?
I gather you are speaking primarily of the Phoenix/Arizona market, but the concept seems applicable to most RE markets. I wonder if "shadow inventory" will have a greater impact on the long-term, depressed housing market. Whenever a sudden spurt in 'housing sales' is publicized, it seems like new listings/ sellers come out of the woodwork.
In some respects, it's like the unemployment numbers only including those people who are actively looking for jobs at that particular time, but, ignoring the 'underemployed,' those who have stopped looking -- and others whose numbers might negatively impact the 'political point' being made.
I gather you are speaking primarily of the Phoenix/Arizona market, but the concept seems applicable to most RE markets. I wonder if "shadow inventory" will have a greater impact on the long-term, depressed housing market. Whenever a sudden spurt in 'housing sales' is publicized, it seems like new listings/ sellers come out of the woodwork.
In some respects, it's like the unemployment numbers only including those people who are actively looking for jobs at that particular time, but, ignoring the 'underemployed,' those who have stopped looking -- and others whose numbers might negatively impact the 'political point' being made.
Sellers coming out in response to prices only impacts the market balance if the sellers are leaving the market (i.e. moving out of the area). They may be sellers on one end, but they are buyers on the other unless they are moving out. It could have local impacts if, suppose, people in Chandler decided they wanted to move out of that town in pursuit of newer homes in Gilbert. So an exodus from one part of the metro to another could cause price imbalances. But, overall, it's zero sum unless the exodus is back east or something. We are not seeing that and probably will not.
Inventory down to 10,000 this morning on the news. I wonder if this frenzy will lead us into another dump. It seems there are so many cash buyers from Canada that it's throwing off the ability to get a loan and buy. They were recommending putting an offer in before you even see the property to beat out the other offers early.. That would be a hard one for me to do, but I guess not so much for the winter visitors.
Inventory down to 10,000 this morning on the news. I wonder if this frenzy will lead us into another dump. It seems there are so many cash buyers from Canada that it's throwing off the ability to get a loan and buy. They were recommending putting an offer in before you even see the property to beat out the other offers early.. That would be a hard one for me to do, but I guess not so much for the winter visitors.
You've mentioned cash buyers from Canada a couple times now. I am wondering where you are getting the information that Canadian buyers are a large percentage. Is this conjecture or do you work in a field where you would have access to that info? I am not questioning it, just curious, because I would be surprised if they made up a large enough segment that they are distorting the market. Investors maybe, but Canadians?
Also what is 10000 relative to historical norms at this time of the year?
"I am wondering where you are getting the information that Canadian buyers are a large percentage."
Buyers who had a foreign mailing address in the public record represented 4.9 percent of total Phoenix-area home sales in March. Of all homes bought by a buyer with a foreign mailing address, nearly 70 percent were resale single-family houses, while about 23 percent were resale condos and about 7 percent were newly built homes. ~ quoted from DQNews.com
Out of those foreign buyers, roughly 90% are from Canada. ~ gleaned from InMan.com
I recently listed two properties, one $40K condo and one $80K SFR. About 50% of the multiple offers on each were all cash, Canadian buyers. My office is also currently working with several Canadian (and at least one Chinese) buyers who want to purchase all cash, about 50-50 investment-2nd home. In the last couple of years, the vast majority of the transactions my team has sold a side on have been either foreign or from out of state. My experience may differ slightly from a typical RE agent, as I deal heavily with investors.
There might be some foreign owned LLCs that would increase the %. I sold to Canadians in Summerlin. Nice of them to pay for their own title insurance.
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That's because you haven't paid the taxman yet! A $1,000,000 on a IRA statement is currently valued in MY mind at $500K. See how dumb your financial planner is. I bet he tells you that $1M is worth a $1M to you. It's not. 
