reading about the real estate bubble

[Jeff7181]

I have a question... and some of you might consider it stupid... but anyway...

How can you "lose" with real estate as an investment? I mean... short of a natural disaster or an atomic explosion that renders the land uninhabitable. Ok... prices drop... so? They'll go back up eventually. Real estate shouldn't be a short term investment anyway... should it? If you're worried about having enough money to survive, then you've invested way too much to begin with. Real estate is not exactly a liquid investment... if you want a liquid investment to earn some money while you skim the short term profits off the top, go with stocks or even better, mutual funds.

So... why is everyone so concerned with real estate? People NEED places to live... eventually the property value will come back up.

 

[AntiEverything]

Quite right Jeff, you speak with wisdom.

 

[RbSX]

Originally posted by: Kremlar
Seriously. I have 2 friends who live at home with mommy and daddy and have both had a good amount of money for a down payment on a house for 5 or 6 years now. They keep saying house prices are too high, they can't afford it.

Bull - they just don't want to actually support themselves, and give up some of the frivilous things they buy now to actually gain some independence.

Well, here they are now - prices are much higher, and they refuse to make a move.

I bought my first house 4 years ago and was deathly afraid the market had topped off. Sold 3 years later and made $80K or so on the deal.

Personally, I wish I would have bought years ago when I first started renting, convincing myself it wasn't a good time to buy - I'd have a $500 mortgage payment right now on a great house!

I think you're pretty stupid. The real estate market is no longer sustainable and will inevitably crash. What your friends are doing is right, whats the point of putting 500,000 dollars into a house that in a few years might be worth less than that?

 

[Jeff7181]

Originally posted by: AntiEverything
Quite right Jeff, you speak with wisdom.

So I guess it's people like me who can see that who stand to make a profit? While the other idiots buy high and sell low... I can buy low and sell high.

 

[Poulsonator]

Originally posted by: IHateMyJob2004

As long as you plan on moving within 5 years, it's a good move to make.

We do, but if we decide to stay, we can always refinance. Of course, if everything crashes and burns, we may just be better off paying the increased interest rates.

Who knows what will happen to the RE market. It seems to be that it's on a out-of-control spiral to the inevitable crash, but who knows. It's not like they can make more land, and people do need to live places.

 

[DBL]

Originally posted by: IHateMyJob2004

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

Problem.... Buy home for $500K. Owe $400K on it. Bubble bursts. Home now wworth $250K. Sell it for $250K. You still owe $150K.

Still no problem?

Not really. You just can't sell. Live in the home for 10 or so years until housing prices recover and now with your increased income, you can sell the house for your original price and use the 90K+ or so in equity and original 100K down payment to upgrade to a more substantial home for slightly less than 1 million. Of course a more conservative upgrade (~750K) might be more prudent.

The only real problem would occur if you lost your job and were unable to find a similar paying job for an extended period of time.

 

[Baked]

It's not gonna happen... Ok, just don't happen before I saved up enough money.

 

[Jeff7181]

Originally posted by: DBL

Originally posted by: IHateMyJob2004

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

Problem.... Buy home for $500K. Owe $400K on it. Bubble bursts. Home now wworth $250K. Sell it for $250K. You still owe $150K.

Still no problem?

Not really. You just can't sell. Live in the home for 10 or so years until housing prices recover and now with your increased income, you can sell the house for your original price and use the 90K+ or so in equity and original 100K down payment to upgrade to a more substantial home for slightly less than 1 million. Of course a more conservative upgrade (~750K) might be more prudent.

The only real problem would occur if you lost your job and were unable to find a similar paying job for an extended period of time.

Yeah... that would be incredibly stupid to buy a $500,000 home and sell it when the price drops to $250,000. That's not very smart investing. If you're not investing, and you actually need to live in a $500,000 home... then what do you care? You're living in it... not looking to sell it.

 

[dcdude]

http://thehousingbubble.blogspot.com/

 

[Rudee]

Originally posted by: Orsorum

Originally posted by: ironcrotch
I wonder how many vultures are out there just waiting for things to go bust.

I am.

Me too.

 

[dirtboy]

The bubble turned me a 100k profit in 3 months... got in late, but I know enough not to reenter. I feel sorry for the people who bought the property; I just hope they can keep ahold of it when things do slow down.

 

[alent1234]

I bought a 1 br apartment with my wife in 2003 in Queens in NYC. Price was $134,000 and I put down around $20,000. It's worth around $200,000 and will probably go higher. They are building luxury condos in the area and the current price is $700,000 for a 1br condo there. It's causing prices to rise in the area. A lot of people don't like it and are moving closer to where I live and away from the condos. Nice places to eat are popping in the area as well. I think this will be a wave of gentrification on a level like what happened in Park Slope, Brooklyn in the 1990's.

 

[alkemyst]

Originally posted by: IHateMyJob2004

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

Problem.... Buy home for $500K. Owe $400K on it. Bubble bursts. Home now wworth $250K. Sell it for $250K. You still owe $150K.

Still no problem?

That is a problem yes....however, most are looking at mostly a 10% gap may a 20-30% window if the bubble bursts and a idiot. You can hold that a few years and break even.

The people with the problem are the 'investors' going for homes they'd love to live in but can't.

In S.Florida, many did interest only loans the last 10 years and went from 75k townhouses to $750k+ exceptional homes. There were properties I looked at in 1999 at $75k that sold at $250K+ now.

 

[dderidex]

Originally posted by: Jeff7181

Originally posted by: DBL

Originally posted by: IHateMyJob2004

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

Problem.... Buy home for $500K. Owe $400K on it. Bubble bursts. Home now wworth $250K. Sell it for $250K. You still owe $150K.

Still no problem?

Not really. You just can't sell. Live in the home for 10 or so years until housing prices recover and now with your increased income, you can sell the house for your original price and use the 90K+ or so in equity and original 100K down payment to upgrade to a more substantial home for slightly less than 1 million. Of course a more conservative upgrade (~750K) might be more prudent.

The only real problem would occur if you lost your job and were unable to find a similar paying job for an extended period of time.

Yeah... that would be incredibly stupid to buy a $500,000 home and sell it when the price drops to $250,000. That's not very smart investing. If you're not investing, and you actually need to live in a $500,000 home... then what do you care? You're living in it... not looking to sell it.

Except...WHY did the "bubble burst"?

The houses aren't going to jump from $500k to $250k for no reason at all...there has to be a reason. And 9 times out of 10, it's economic. There is a minor recession or jobs moving overseas, and unemployment spipkes. There is some ecological or environmental disaster, and properties suddenly become undesirable, etc.

The problem is that the things that TRIGGER 'bubbles bursting' GENERALLY also mean that the people currently living in the houses suddenly are no longer able or willing to at the time when the property value is at its lowest.

And the presumption that property values will ALWAYS go up is also invalid. The number of IT jobs leaving SoCal for India is rather shocking - what happens if we ever get to the point where ALL SoCal IT jobs are outsourced? All those tens of thousands of houses in SoCal are suddenly going to look mighty unattractive...

 

[Jeff7181]

Originally posted by: dderidex

Originally posted by: Jeff7181

Originally posted by: DBL

Originally posted by: IHateMyJob2004

Originally posted by: Scarpozzi
So what....if you are buying a house, it should all even out. If you already bought a house, you're making payments...it doesn't really affect you. Just don't worry about it and don't buy into real estate as a short term investment and you'll be fine.

Problem.... Buy home for $500K. Owe $400K on it. Bubble bursts. Home now wworth $250K. Sell it for $250K. You still owe $150K.

Still no problem?

Not really. You just can't sell. Live in the home for 10 or so years until housing prices recover and now with your increased income, you can sell the house for your original price and use the 90K+ or so in equity and original 100K down payment to upgrade to a more substantial home for slightly less than 1 million. Of course a more conservative upgrade (~750K) might be more prudent.

The only real problem would occur if you lost your job and were unable to find a similar paying job for an extended period of time.

Yeah... that would be incredibly stupid to buy a $500,000 home and sell it when the price drops to $250,000. That's not very smart investing. If you're not investing, and you actually need to live in a $500,000 home... then what do you care? You're living in it... not looking to sell it.

Except...WHY did the "bubble burst"?

The houses aren't going to jump from $500k to $250k for no reason at all...there has to be a reason. And 9 times out of 10, it's economic. There is a minor recession or jobs moving overseas, and unemployment spipkes. There is some ecological or environmental disaster, and properties suddenly become undesirable, etc.

The problem is that the things that TRIGGER 'bubbles bursting' GENERALLY also mean that the people currently living in the houses suddenly are no longer able or willing to at the time when the property value is at its lowest.

And the presumption that property values will ALWAYS go up is also invalid. The number of IT jobs leaving SoCal for India is rather shocking - what happens if we ever get to the point where ALL SoCal IT jobs are outsourced? All those tens of thousands of houses in SoCal are suddenly going to look mighty unattractive...

SoCal a "ghost town..." I can see it now...

 

[dderidex]

I'm jes sayin...

Whatever *causes* the bubble to burst at some point is ALSO going to make the properties undesirable to live in. If the demand for the properties was still as high as it is now, there will be no bubble burst.

It only "bursts" when the demand for the properties drops a great deal below what it is now....and if the demand drops for investors entering the market...why won't it ALSO drop for those already IN the market?

See what I'm saying?

 

[Jeff7181]

Originally posted by: dderidex
I'm jes sayin...

Whatever *causes* the bubble to burst at some point is ALSO going to make the properties undesirable to live in. If the demand for the properties was still as high as it is now, there will be no bubble burst.

It only "bursts" when the demand for the properties drops a great deal below what it is now....and if the demand drops for investors entering the market...why won't it ALSO drop for those already IN the market?

See what I'm saying?

It's land... it WILL retain value. It will never be completely worthless. Except like I said, if there's a natural disaster or something. If the area you bought land in turns into slums... then you did a piss poor job of researching your investment. If people just move away from a nice place because of outsourcing... just wait for other people looking for a nice piece of property. If everyone sells in a panic, of course prices will take a nose dive. I mean really... if you're investing $500,000 into a piece of property, you damn well better do a lot of reserach to make sure it's a sound investment. If a year down the road everyone leaves the area and the value drops, you did a crappy job of researching the investment.

 

[alkemyst]

Originally posted by: dderidex
The number of IT jobs leaving SoCal for India is rather shocking - what happens if we ever get to the point where ALL SoCal IT jobs are outsourced? All those tens of thousands of houses in SoCal are suddenly going to look mighty unattractive...

You don't seem to understand those worth the pay and those too paid.

There are 'help deskers' making 6 figures. Those are the ones getting eliminated. Same as I hope the garbage man making almost 6 figures to drive a truck, the guy on the assembly line making about the same to just push a button or 'inspect' (and still errors that are obvious happen like a car I looked at without trim around the door handle inside. Someone is probably still getting paid. [I understand accidents happen, but at that pay level it's sort of bad]