It doesn't matter how many cycles I have been through. An intelligent person can use all available data to determine the ability to make or lose money and decide whether to make or lose money in that situation. Saying that one cannot ignores all premises of logic and reason.
What's funny is that I don't pay the dues on my charter, nor did I pay a dime to take it. That's what an employer who values your contribution is supposed to do. All of my exams came with free airfare, hotel stays, books, supplemental materials, meals. The whole shebang.
Wow, you've been in the industry for 20 years, that makes you somebody who can't adjust to reality.
As a renter I qualify for things a purchaser never would. That includes no housing taxes, greatly reduced occupancy insurance, no worries about maintenance, no worries about levies, no worries about losing money. I also get a free shuttle to and from the train station, so I don't even need a car (which I don't have right now).
I can and would afford a house right now if I chose to, even in Fairfield Co., one of the most expensive areas in the country.
Hey, as long as you expect to lose money and are fine with that, then that's a decent decision. Personally, I don't like losing money and do what I can not to.
I'd be interested to know whether 2400 includes various insurance, taxes, a maintenance budget (including mowing, landscaping, paint...etc), time, and various other things included in home purchases.
You certainly have the right attitude about housing, in that it's not an investment.
I could spend time systematically and methodically proving what folly your arguments are. But your arrogance is so strong, I would rather let you play the fool and believe your own arguments.
However, please do not continue to give advice on a subject you obviously know so very little about.
Not really. Consider that USD LIBOR is very low right now, having fallen almost 200bps since last year. Yet mortgage rates haven't changed and, in many comparisons, have gone up.
None of the above qualifies you as a real estate expert. CFA? How does that make you an expert on real estate investments? The MBA teaches you how to analyze business markets and do analysis mostly on stock investments, unless you have some sort of real estate specialization. Given your position, I would guess not.
Please do not pass yourself off as any more than novice in the real estate market. Because based on what you have told us, that is all you are.
DrPizza
Administrator Elite Member Goat Whisperer
It's pretty eye-opening to realize that some of you look at home ownership only as an investment. I'd gladly spend a few hundred more a month in order to have nearly complete freedom with what I do with my dwelling than to have a little extra money by renting and be victim to the whims of the homeowner. Fortunately, in my market, and it's an unusual market, it costs more to rent than it does to buy. The mortgage + taxes, insurance, etc. in escrow for a 3BR home often costs less than rent on a 2BR apartment.
I have to side with legendkiller though about most major metropolitan markets: you're better off waiting right now.
I have to side with legendkiller though about most major metropolitan markets: you're better off waiting right now.
Supplies aren't expanding currently because this is the annual seasonal increase for purchasing. Seasonally adjusted supplies are expanding at historically unprecedented rates (excluding 1929). Foreclosures are skyrocketing.
According to all data I read, which, to say lightly, is voluminous (rating agency reports, surety reports, economic reports from my bank's chief economist who is regularily featured on Bloombergtv and cnbc), securitization industry reports. Not to mention trust-level default and delinquency data put out by various industry players.
Right now, my own bank won't even touch RMBS, nor will we even touch any kind of consumer credit. That is similar to most other banks. There isn't one bank out there (except for a few japanese and euro banks) actively originating securitizations. Conduit facilities are rolling, but not originating to any great extent.
Right now, securitization is largely stagnant. 2008 volumes are far below 2007.
Without funding, mortgages won't get originated and pricing support won't exist.
I remember reading that some ARMS were based on LIBOR.
I also read that 30 year fixed mortgage rates have historically run 1.5%- 1.75% above 10 year US Treasuries, but the risk premium that investors are currently requiring may be much higher than that.
I also read that 30 year fixed mortgage rates have historically run 1.5%- 1.75% above 10 year US Treasuries, but the risk premium that investors are currently requiring may be much higher than that.
Then counter the fact that from 1890 to 1995, housing increased approximately 20% in value over inflation. That period is key, as it's the long-run appreciation outside of a credit boom. Consider that the credit boom is the *ONLY* reason for housing's appreciation from 1995 onward, when outstanding mortgage volume ballooned.
There's no other asset class, save government bonds, that has done that. Considering the annual expense of owning a house and actual funding costs of that house, housing has *LOST* money overall during the measurement period. It costs far more than .18% annually to upkeep and pay interest on a house, even with 5:1 leverage.
Sure, people can make money, provided they are smart and utilize items such as booming subdivisions to make alpha returns. However, overall, housing is a loss leading asset.
skyking
Lifer
- Nov 21, 2001
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my brother is having a bit of difficulty getting a lease for a second piece of equipment. He was able to get the first one lined up OK in November, but now the originator of the first lease is acting less than friendly about another lease. That is putting it nicely
I take it that he is up against the same problems?
I take it that he is up against the same problems?
What qualifies somebody as a RE expert? That I am a broker? Or that I work in the industry that has driven RE, funding it, and now, analyzing it's blow up?
I only need to analyze the economics and financing situation to know that the fundamentals are completely ridiculous. I may be a "novice" when it comes down to looking at a home, except for helping my own parents, brother, and sister finance and purchase their own homes, or sell them (including the arranging of 4 mortgages). However, in knowing how the housing market has worked in the last 7 years, I am quite adept.
If you have anything to the contrary in this market, such as data refuting Case-Shiller or any iota of data showing non-seasonal price/volume support for housing, please provide it.
It's funny, all you've done to refute me is to attack me, not my data or my points. You claim it's because I am too arrogant, but who is the arrogant one here? The one who claims to be smarter by mere proclamation, or the one who actually provides logic and data?
Seems to me you've got nothing to hang your hat on.
They may index on a base rate, but the liquidity, systematic, and non-systematic risk spread are fluctuating pretty wildly right now.
If this thread were filled with home sellers fearing that they will never sell their home at any price, then we could probably have a definitive, climatic bottom similar to what happens during a stock market correction / bear market.
When everyone is looking for a bargain by attempting to catch a falling knife, we are probably not near that point, and it seems to me that we will rather have a rolling bottom over a number of years, especially because the housing market isn't as efficient as the stock market.
I remember reading a story about some investors who had bought a foreclosure property in the rust belt for an extremely low price (thousands of dollars), and having a look of genuine terror on their face as they truly didn't know if they had really won anything. Obviously, real estate is the rust belt is different than in other parts of the country because they have been in secular economic decline for many years, but that is probably what a definitive "bottom" in the housing market would look like.
When everyone is looking for a bargain by attempting to catch a falling knife, we are probably not near that point, and it seems to me that we will rather have a rolling bottom over a number of years, especially because the housing market isn't as efficient as the stock market.
I remember reading a story about some investors who had bought a foreclosure property in the rust belt for an extremely low price (thousands of dollars), and having a look of genuine terror on their face as they truly didn't know if they had really won anything. Obviously, real estate is the rust belt is different than in other parts of the country because they have been in secular economic decline for many years, but that is probably what a definitive "bottom" in the housing market would look like.
Capt Caveman
Lifer
- Jan 30, 2005
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Again, you need to study individual markets and your blanket statements are silly. If you do an analysis on town/cities in MA, you'd find that there are towns that have actually bucked the trend have appreciated every year over the last several years. Factors such as housing availability, school systems, medical care access, etc...
Take out 1890 to 1940, you may have different numbers.
I believe he is talking about housing purely as a long term investment, vs. value as something you physically live in and enjoy.
As an investment, you need to realize that a lifetime's worth of appreciation may have taken place over the last 5 - 7 years, and that may forebode very subpar investment returns going forward.
Warren Buffett has projected subpar returns for the stock market as a whole going forward, but that doesn't mean there won't be opportunities for savvy growth and value investors to still do very well over time going forward.
As an investment, you need to realize that a lifetime's worth of appreciation may have taken place over the last 5 - 7 years, and that may forebode very subpar investment returns going forward.
Warren Buffett has projected subpar returns for the stock market as a whole going forward, but that doesn't mean there won't be opportunities for savvy growth and value investors to still do very well over time going forward.
Got any proof of your assertion? Anecdotal evidence isn't worth the 0's and 1's it is transmitted with.
It's actually really no different.
"If you do an analysis on town/cities in MA, you'd find that there are towns that have actually bucked the trend have appreciated every year over the last several years."
I would suspect that those communities didn't participate in the housing bubble and are playing catch up now (I think same thing is happening in Charlotte). You would need to study price appreciation patterns from say 2000 forward to know better.
Link #1 (6/07)
Link #2 (3/08)
Link #3 (5/08)
Past performance does not predict future performance, and over an extended period of time reversion to the mean is likely to occur (i.e. inefficient housing market becomes more efficient, ala the stock market, over an appropriately extended period of time).
I would suspect that those communities didn't participate in the housing bubble and are playing catch up now (I think same thing is happening in Charlotte). You would need to study price appreciation patterns from say 2000 forward to know better.
Link #1 (6/07)
Link #2 (3/08)
Link #3 (5/08)
Past performance does not predict future performance, and over an extended period of time reversion to the mean is likely to occur (i.e. inefficient housing market becomes more efficient, ala the stock market, over an appropriately extended period of time).
Capt Caveman
Lifer
- Jan 30, 2005
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No. Check out Weston and Belmont. When you have some of the best school systems in the state, people are willing to pay to buy into the town.
And in Cambridge, you'll still find bidding wars for new/renovated single family homes and townhomes.
Wonder if those people will think the same thing 10 years from now? (and again, I am talking in terms of investment, not as something you live in and enjoy)
EDIT: link#3 above says, from a macro point of view, Cambridge is at historic level of affordability, while Boston may still be almost 20% overvalued. No data on Weston and Belmont.
EDIT: link#3 above says, from a macro point of view, Cambridge is at historic level of affordability, while Boston may still be almost 20% overvalued. No data on Weston and Belmont.
There are always exceptions to the rule. However, I'd also venture that places that are being bid up are also ones prone to later-stage bubbles. Yet, overall, the entire US is declining.
People didn't think Greenwich would pop, yet it has.
Good school systems cost money also, taxes suck and are a cost of purchasing.
Capt Caveman
Lifer
- Jan 30, 2005
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Of course, these towns haven't lost value in this market. What do you think will happen when the market goes up?
Particularly strong growth stocks tend to just tread water, or dip much less than the overall market, during a market correction, but a prolonged bear market will probably eventually take everything down.
Same thing probably applies to the housing market, over time.
LK's long term appreciation of housing data probably reflect that, over very extended periods of time, the housing market as a whole is efficient, and fair market value is going to reflect inflation adjusted replacement cost.
Same thing probably applies to the housing market, over time.
LK's long term appreciation of housing data probably reflect that, over very extended periods of time, the housing market as a whole is efficient, and fair market value is going to reflect inflation adjusted replacement cost.
Housing should appreciate very slowly. They are relatively riskless and thus, risk-adjusted returns are very low.
However, over the long-run, compared to a diversified portfolio of stocks, housing returns suck.
Many would say that that's a no-brainer, since stocks are more risky. However, a good portfolio will reduce almost all of the unsystematic risk, leaving systematic risk, which can be taken into account through time, since the market more or less appreciates at a decent clip over time, far faster than housing in the same time period.
Now, that's not to say you don't buy a house for what it should be, a steady place to live and raise a family.
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