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Another bubble.....these price gains in many areas are neither sustainable or justified.
This country is just pure stooooopid.
The scumaticians LOVE to brag about the USA being the richest country in the world......that is why they LOVE to artificially inflate the value of housing. Ewwwww, look how RICH we are.....so that means we can be the global babysitter!!!!!!!
Because like it or not, this country is about property owners and specifically homeowners, they are considered "good" and deserving (of tax breaks bailouts etc) and renters are considered "bad" and considered undeserving.
Because like it or not, this country is about property owners and specifically homeowners, they are considered "good" and deserving (of tax breaks bailouts etc) and renters are considered "bad" and considered undeserving.
True in a sense. But most renters do become homeowners. Have to rent before you buy your dream home or first home.
Because it is an investment, so it is good for people who own a house. It isn't good for people who don't own a house.
Unless it is a rental property a House is NOT an investment.
There is little chance on getting any positive return on your dollars. Be happy if the price keeps up with inflation. And do not forget all the money you put into a house over the years.
Unless it is a rental property a House is NOT an investment.
There is little chance on getting any positive return on your dollars. Be happy if the price keeps up with inflation. And do not forget all the money you put into a house over the years.
Sorry, but I think you're wrong. There's little chance of getting a positive return on your dollars if you make any uneducated investment. You have to be smart about it. I think people get in trouble buying homes when they treat it emotionally vs. as an investment.
If you pay rent, the money is gone. If your rent is about the same price as a mortgage, it's generally dumb to rent. If you purchase your home, it's an asset, and part of your net worth. How do you figure that it's not an investment? We've always made a good return on our homes (and that INCLUDES renovation costs). You just have to be smart about it. If you pay top dollar for a pristine home, do nothing to it to increase its value, or do a huge remodel that just redecorates or makes routine repairs, and doesn't increase value, or costs more than what you can expect in return, you're going to be very disappointed at sale time.
We live in an area with a stable economy, and home prices dropped after the crash, but they didn't bottom out because they weren't overly inflated (like some parts of the country) to begin with. We bought our older, structurally sound home with good potential in a very desirable area about 13 years ago. It needed a lot of cosmetic work, plus we put on an addition. We did the renovations mainly ourselves, although we did contract out some work. We looked for a home that had already had wiring and heating/cooling upgrades, etc. When you renovate, you have to keep an eye on cost vs. added value and marketability. All of the improvements we made were common to the area where we live--they're expected in nicer homes. Even after the crash, our house is still valued well above what we paid for it PLUS the money we put into fairly extensive renovations. It was a smart investment. Now that we own it outright, our cash flow is much higher because we're not paying rent or a mortgage payment--just property insurance, and expected repairs/replacements over time. We plan on staying here at least another 20 years, so it's a win win.
I know lots of young couples buying foreclosure starter homes in decent areas, doing the same thing we've done over the years, and it's a great way for them to start building some net worth, as long as they have the skills to do renovations professionally, and they make smart decisions on the work they do.
Any investment value greater than zero (or zero plus inflation) is suspect, because it depends on the greater fool theory. There is no physical reason why a house should become more valuable at all. It is not growing like a crop. It is not producing anything that you can turn around and sell, like a factory. It just sits there. It becomes more valuable because people believe that it will become more valuable. Worse, because the general assumption that it will become more valuable is already reflected in the price you paid, you need a buyer who believes that it will become more valuable even faster than the general consensus. Hence, the cycle goes on and on until the scheme collapses.
If anything you would think the price of the home would devalue due to the fact that its components wear over time. When I see older homes, I see "costs" in terms of repairs and upkeep cycles. That is not to say that a older home is a bad buy, but it is an important thing to factor in and every home regardless of it being new or not will need major upkeeps at some point in time. It blows me away to see some people go out and spend hundreds of thousands of dollars for home that is in major need of maintenance only because they are told the home is worth more because everyone else is paying that much. /boggle
Another bubble.....these price gains in many areas are neither sustainable or justified.
This country is just pure stooooopid.
The scumaticians LOVE to brag about the USA being the richest country in the world......that is why they LOVE to artificially inflate the value of housing. Ewwwww, look how RICH we are.....so that means we can be the global babysitter!!!!!!!
Prices will drop. Though my concern is the irresponsible nature of people when they finally do. I see massive defaults due to people just walking away when they begin to drop.
If anything you would think the price of the home would devalue due to the fact that its components wear over time. When I see older homes, I see "costs" in terms of repairs and upkeep cycles. That is not to say that a older home is a bad buy, but it is an important thing to factor in and every home regardless of it being new or not will need major upkeeps at some point in time. It blows me away to see some people go out and spend hundreds of thousands of dollars for home that is in major need of maintenance only because they are told the home is worth more because everyone else is paying that much. /boggle
Exactly--you have to be smart about it, and you have to weigh the price you pay against the market and the maintenance/renovations you'll have to do to bring the home up to standard and to make it an attractive and comfortable home, consistent with your areas.
We personally like older homes because of the "charm" factor and the big trees--we're in a renovated turn of the last century farmhouse on an acreage--but we've passed on purchasing lots of them because they needed more work than it made financial sense for us to do.
If anything you would think the price of the home would devalue due to the fact that its components wear over time. When I see older homes, I see "costs" in terms of repairs and upkeep cycles. That is not to say that a older home is a bad buy, but it is an important thing to factor in and every home regardless of it being new or not will need major upkeeps at some point in time. It blows me away to see some people go out and spend hundreds of thousands of dollars for home that is in major need of maintenance only because they are told the home is worth more because everyone else is paying that much. /boggle
It depends on the location. In an area that has lots of land ready to build houses, older houses fall in price and usually become the poorer areas of town.
In certain areas, like the San Francisco Bay Area where I live. They do not have any more land to build houses on near job centers. If you want to live in a new home you have 1.5 hours away from work. If you want to live close to work you live in a 60 year old house. I own a 3/2 track house built in the 50's on a small lot, this would be less than a 100k house in most large cities. Where I live it is a 450k house, 15 miles south west of me it would be a 1.2 million dollar house. The house doesn't change, just the location, and you can't make more land.
If the price of gasoline or food, or even college dropped 20%, most of us would be overjoyed.
So why is it considered a catastrophe when housing prices drop?
Isn’t it funny how falling home prices are automatically assumed to be a bad thing? Yet a decrease in food prices, college, and gasoline would be good?
We have been systematically taught that housing is a good investment and that prices must go up. Ask your parents why they bought their house. One of the top 3 reasons will almost certainly be, “It was a good investment.” However, for many people in many situations, it is not. In fact, housing is can be a terrible investment. It shouldn't be looked at as an investment, it is shelter. No more than a car should ever be purchased as an investment.
Yet the illusion persists, whether it’s people begging to buy a million-dollar house with no research, or people saying things like, “I wish I’d bought more real estate” after incurring a paltry 1.2% return rate over several decades.
As a result, you get media reports that implicitly echo the cultural assumption that housing is a good investment. The way they describe the housing market — oops, “housing recovery” — influences and reflects our cultural assumption. Let’s take a look at a headline from a major national news publication:
"Housing prices rise by highest percentage ever. More news that the housing market is recovering."
Interesting…it’s a “housing recovery” when prices are getting expensive. Would you say that with toothpaste?
Also interesting: Why is it a painful decline when young people and other first-time buyers get more affordable housing, lower their debt burden, have more discretionary income not tied up in servicing mortgage debt?
What if we discard the assumption? Let’s try the following:
prices are become more out of reach for young people. Young paying their future earning to the old.
Or…prices reach a new level of expense, draining families of income for things like education, heath care and spending.
Affordability declines for first-time homebuyers.
As Warren Buffett said in his 1997 Chairman’s Letter to Shareholders,
“If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”
For young people, every time the market goes down, you should be cheering for your own individual finances. You can acquire investments at lower prices and you have a long time for the market to grow.
Yet, paradoxically, lower housing prices do represent a clear risk to the American financial system, whose growth is predicated on consumer spending, which is in turn strongly influenced by housing prices. That’s why this obsession is so serious and confusing to many. Lower home prices actually increase discretionary spending. (Excluding foolish HELOC induced lifestyles of course)
Just because virtually every media presentation celebrates the “rapid increase” in housing values doesn’t mean that applies to you. “Higher house prices = good” is a cultural assumption and a very negative one indeed.
You are simply highlighting one example of how the public at large operate under false perceptions, but by no means is it the only example. Fact is, very VERY few people have an accurate view of reality, because they have been systematically deceived in virtually every aspect of how the world around them operates. This of course is immediately rejected by most people, because no one is naturally inclined to accept the fact that they have been so manipulated. People believe themselves to be much "smarter" than they are, and this begins with the structure of education, and it's rules of operation.
Think about it .... you were taught at an early age that the sky was blue and the grass was green, and that 2+2=4. This is what you believe to be true. But, had you been taught the reverse ... that the sky was green and grass was blue, and that 2+2=5 .. and these things were reinforced from K-12 .... you would enter college, and you would dismiss the math professor as a nut if he claimed that 2+2=4. This holds true for everything people "think" they know. And the moment anyone challenges those "beliefs", even with unarguable facts, they are similarly dismissed as the nutty professor who thinks 2+2=4. This is how you misinform people, and how they participate in keeping themselves misinformed. We are not taught how to think .. we are taught what to think. The teacher issues his or her lessons ... you are then expected to recite back exactly what you were taught to think. Those that recite back the information most accurately (regardless if it is true or not) get the best grades, and are considered the "smartest". This is pure programming. So keep this in mind when talking to the liberal crowd who insist how much smarter they are based on their "education" levels. Therein resides some of the explanation for why liberals seem to see things entirely opposite of what rational thinking would otherwise require.
Unfortunately, most people operate under a set of false perceptions about almost everything they think they know, because it serves the interests of those who control information and education to keep them that way. You simply cannot make good decisions about anything, if you are using bad information. And nowhere is that more true than in all things relating to economics .... housing being no exception. Does it serve the bank's best interests or yours to see housing prices sharply rising? And what of the government .. does it serve their interests to see housing prices rise or fall? Perhaps even a better question is ... do you really ever own property, ever? Most people will surely get that last question wrong, and say of course we do .. private property ownership is the central theme of our economic system. Of course, that answer would be false. You cannot own property ... as long as there are "property taxes" attached to your property, you do not own it .. even if your mortgage is paid off. Don't believe me? Try not paying your property taxes, and you will quickly discover who ACTUALLY owns your home .... it ain't you, I promise you that. And now, with "eminent domain" it doesn't even matter if you pay off your mortgage, and keep your property taxes (rent owed to the government) current .. they can still take your home away legally .. and tell you to take a hike. Just recently in the news, a lady in the suburbs of Houston Texas was issued notice that the county was claiming her home under eminent domain, and offered her 1/3 of the market value of the home as compensation. ONE THIRD!!!! This, by any definition is THEFT ... ROBBERY ... if anyone came into your neighborhood and took your home ... or took 2/3rds of it, they would be criminals. But when government does this, it's not theft .. because you cannot steal something you ALREADY OWN. What was the reason for this apparent theft? Development ... they wanted to put in miles of hike and bike trails, and "her" home was unfortunately in the way, and must be taken. Now, this sorta throws a monkey wrench into this false perception of private property ownership, yet few people notice .. except when it is their home being taken away. And until this false perception of private property ownership is understood ... not much else will make a lot of sense to people about how the system REALLY works.
Now, let's go back to the other two questions .... who benefits from property values increasing and decreasing? If you have to ask this question, then you do not understand how this system works, or who actually owns that property. The answer is that OBVIOUS. The basic answer is always "depends" ... it depends on whether you are buyer or a seller. But the true, if more complex answer is, it doesn't matter whether the prices are rising or falling to those who know ahead of time which way those prices will go. And who knows that? Those that control this up and down cycle of economics, that's who. You can make as much money, and often a WHOLE LOT MORE in a recession, when the economic is contracting ... if you know, and therefore position yourself accordingly. But since most people buy homes to live in .. and they never really own property but are simply paying for the privilege of having a small equity share, lower prices are better for the vast majority. This should be obvious to most people, but it isn't. What they don't take into account is that since they as individuals never really own property, and at best have only an equity sharing arrangement with the banks and the government. This equity sharing is the illusion of ownership and the incentive to keep paying for that property. And even though higher real estate values are generally bad for the individual, they look at those increasing prices as a good thing, because they are operating with bad information. What they fail to realize is that for every one of them that sells their home when prices are high ... there are 10 others forced to sell when the inevitable recession hits and the prices are tumbling. In between those times, as the individual pays their mortgage and property taxes, month to month and year to year, who really benefits from those higher prices? The banks and government. The higher the real estate value, the greater the mortgage and the associated interest payments to the banks, and the higher the accessed value of the property, the higher the taxes owed to government. Simple.
But .... there is a larger game being played that even fewer know about, let alone understand. That game is called fractional reserve banking, which, if engaged in by you, would land you in jail for fraud, but is the rule of the day for banks. Most people's brains would simply shut down if told that the banks really don't want you to pay your mortgage. How could that be? Of course they want to get paid back, the masses will insist. But this answer is wrong, because again, they are operating with bad information. And here's why the bank does not want you to pay your mortgage ...
You see, when the bank lends you $100,000 to buy a home, the moment you sign the loan documents, a series of events are initiated.
1) The bank immediately books this loan as an asset, rather than a liability. And with a 30 year note which may have an annuity value of $225,000, that immediately represents about $2,00,000 in money available to the bank to loan other borrowers under the fractional reserve system. This money really doesn't exist, but is just a book keeping entry.
2) The bank takes a bunch of those new mortgages, and sells them to investors as Mortgage Backed Securities for more than the original loan amount, taking as profit some of that annuity value as up front profit. And that's OK, but .... as has been recently uncovered, they have been selling the same mortgages to multiple investors, like 5 or even 10 different ones!! That's not OK, because each of these investors believes they are the sole holder and beneficiary of that mortgage!!! So, the bank takes their original $100,000 loan ... parlays that into $2,000,000 in additional available money to lend others ... sells that $100,000 mortgage with an annuity value of $240,000 for a tidy sum of say $145,000 to 10 different investors, at a net gain of $1.35 Million for an initial outlay of $100,000, for a total gain of about $3+Million for ONE MORTGAGE. Multiply this times hundreds of thousands of loans issued each year, and we're talking some really huge amounts of money the banks are raking in by the truck load.
Now, this above scenario explains a number of things that would otherwise not make much sense. Such as, why housing bubbles are created and then later burst. Why banks would relax lending standards and give loans to people whose incomes did not legitimately qualify .. and why Millions of homes are left sitting vacant, and why sometimes, banks will auction off a $150,000 nice three bedroom home for $35,000. None of that makes sense. unless you have all of the information. But once you do have that information, it all makes perfect sense.
Here's the rest of the story ..... after the original lender resells that mortgage to 10 different investors. pocketing a cool 1.3 Million in up front profit ... they are on the hook for paying each one of those investors that monthly mortgage payment!! So, that $700 per month payment needs to be paid to each of the 10 investors, else they would inquire as to where their money is, OK? So, the original bank must make 10 payments of $700 to these investors, or $7,000 per month, while they are only collecting one $700 payment from the "home owner". They have to make up the difference of $6,300 per month, out of their pockets (out of the 1.3 Million profit they collected in the sale of that mortgage). But that's no problem at all, because, that 1.3 Million profit made up front will cover up to 206 months (17 years) of those owed payments to investors, but on a 30 year mortgage, there are 360 months of payments. Can you begin to see why the bank would prefer that you default on your mortgage? The sooner you default, the sooner they can notify investors of that default, which they no longer have to make those monthly payments to. The sooner you default, the more money the bank gets to keep, rather than pay out to those 10 investors. This also explains why Millions of homes in this country are sitting empty and decaying, and why occasionally, one of those homes will be auctioned off for a fraction of their true value. Let's say they sell that $150,000 foreclosed home for $40,000 at auction. Why did they not sell it for more? Because whatever figure they sell it for, they have to pay to each of those 10 investors .... so the less they sell it for, the more profit they get to keep from the original sale of the mortgage!! Often, they simply don't sell it at all, and just leave it sit empty, blaming market decline as the reason it cannot be sold. They will claim to sit on these homes until the market stabilizes and prices begin to come back up, and demand increases.
There is more to this, but that's the basic outline ...the banks also take out mortgage insurance which pays 80% of the original loan value at the moment of default and foreclosure, so this explains why the crazy claim that the banks want you to default on your mortgage is not only true, but makes more sense.
Now, armed with this information, you can see why all of these events and actions are deliberate and make sense. The creation of the real estate bubble drives up prices and loan amounts to artificially high levels, making the loans more lucrative when selling as mortgage backed securities. This also attracts investors and buyers ... while the relaxation of qualifications to receive the loans creates more volume of the ideal buyer who is more likely to default, which is precisely what the bank wants relative to this scheme they are engaged in. Remember, the hidden desire is to foreclose as soon as possible, to get out of having to make those multiple mortgage payments to those investors, plus collect the mortgage insurance. While you may pay your $700 monthly mortgage payment to the bank, the bank is paying out $7,000 per month to those 10 investors! The faster you default, the more money the bank gets to keep.
The extraneous damage caused by this fraud is another story altogether ... one such harm may indeed come to your pension or retirement fund, as these are some of the investors in these MBS securities. Then there are municipal governments that invest in these securities too, and when the securities default, they also lose money, and often raise your taxes to compensate for the losses.
Then of course we have the bail outs for the "too big to fail" banks and investment houses who created these fraudulent schemes in the first place ... only to then seek bail outs from government (YOUR TAX DOLLARS), to cover the "losses" for all of this alleged "toxic debt".
Suffice it to say, the clueless public are being beaten, raped and robbed blind, and they are oblivious to what is being done to them, because none of them have truthful information, and have no idea of how the world really operates, only believing what what they are told, by the very people robbing them blind.
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