Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
My house just appraised for 86% of what I bought it for in 1995. That's after $50K of improvements. I would have to say it was a lousy investment if that's what it was. I no longer look at a house as an investment. It's just a place to live. If I stay in mine for another 18 years, I MIGHT get out what I paid into it NOT COUNTING interest and taxes when I sell.
A house is not an investment. It's a place to live. "Owning" just happens to be cheaper than renting. If I rented my house, it would cost me another $400/month.
Exactly. A home is not an investment, and the people who bought a home or homes thinking they were learned the hard way. It's a place to live, nothing more.
Exactly. A home is not an investment, and the people who bought a home or homes thinking they were learned the hard way. It's a place to live, nothing more.
It is for flippers. Flippers don't live in the home they buy. Some of them don't even live in the neighborhood.
In some markets, the majority of the people buying are investors who will never live in those homes.
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.
For many, a home is the largest investment they have, ever. Even more valuable than their retirement nest egg. So the higher the value goes, the better off they are.
Nobody invests in a tank of gas for their car, or a trip to the store to buy food, or a college education hoping to sell those items down the road for a 40 or 70 percent gain over the long term. The gas would have long evaporated or turned to gel, the food would be rotten, and the college education is impossible to resell.
For many, a home is the largest investment they have, ever. Even more valuable than their retirement nest egg. So the higher the value goes, the better off they are.
Nobody invests in a tank of gas for their car, or a trip to the store to buy food, or a college education hoping to sell those items down the road for a 40 or 70 percent gain over the long term. The gas would have long evaporated or turned to gel, the food would be rotten, and the college education is impossible to resell.
How did that turn out for millions of those people in 2007-2011?
Some homes are being flipped for double their price in one year, it's going to be worse.
For one thing it's mainly regional, not general. And second the numbers of homes is much smaller in each market. In 2008 it involved every community in the US, and almost all middle class/income folks. Today there's a lot of cash deals going on. In CA my daughter had a hard time buying a house with a conventional loan, because they'd be overbid right away with cash buyers. It's happening in Phoenix and Tucson too from what I'm told.
For one thing it's mainly regional, not general. And second the numbers of homes is much smaller in each market. In 2008 it involved every community in the US, and almost all middle class/income folks. Today there's a lot of cash deals going on. In CA my daughter had a hard time buying a house with a conventional loan, because they'd be overbid right away with cash buyers. It's happening in Phoenix and Tucson too from what I'm told.
Majority of people who are paying cash for homes are investors. Many homes don't even make it on the market, they are sold in bulk to investors.
If wealthy investors lose, you can bet middle class families will lose. They aint going down by themselves.
10's of millions of borderline financed middle class families are not lining up to buy overpriced houses with underfunded mortgages these days. If someone has loose change to invest, they can spare the loose change without going broke or being thrown out on the street.
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?
Lower prices benefit those who are looking to buy a first home, but rising prices benefit the vast majority, who already own a home, which is why rising prices benefit the nation as whole.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
