On the Nature of Things | Forum

.

As boomers downsize because of retirement, finances, health or death, they're expected to release some 26 million homes onto the market by 2030, while the younger generations may not be interested in buying


There will be another hit for housing prices

Young generation has no money to buy

.

Very short term, medium term, and long term problem.

Frickin' Democrats with their subprime mortgages and loose monetary policy.

Mr. Perfect wrote:Very short term, medium term, and long term problem.

Frickin' Democrats with their subprime mortgages and loose monetary policy.

Blame is debatable.

Given that what has happened is now history, I think speculation on how the situation will evolve going forward is more interesting.

Any ideas?

.

Look folks

Price of house, residential rent, commercial rent .. short, real estate .. in final analysis .. is an integral part "cost of doing business"

That cost, similar to labor cost, is an item in American business competitiveness .. cost of product

High real estate prices counter to America's competitiveness

meaning

they must and will come down .. no matter what


.

Typhoon wrote:

Mr. Perfect wrote:Very short term, medium term, and long term problem.

Frickin' Democrats with their subprime mortgages and loose monetary policy.

Blame is debatable.

Given that what has happened is now history, I think speculation on how the situation will evolve going forward is more interesting.

Any ideas?

Misery.

The infomercials on how to get rich based on so and so's tried and true method tested over two decades have started again. Now they are talking about how one can buy cheap and use those properties as rental properties. Honestly, it's likely a much more sustainable business model than house-flipping. But I think the house-flipping infomercials were a big part of the cycle that caused the boom and the bust.

Enki wrote:The infomercials on how to get rich based on so and so's tried and true method tested over two decades have started again. Now they are talking about how one can buy cheap and use those properties as rental properties. Honestly, it's likely a much more sustainable business model than house-flipping. But I think the house-flipping infomercials were a big part of the cycle that caused the boom and the bust.

this is the largely the australian approach - government policy allows tax breaks for investing in private rental housing so most of the baby boomers put their retirement funds into second and third properties because the difference between the interest payments and the rental income is tax deductable.

originally it did stimulate investment for rental properties and make them more affordable, however the longer term consequences are far too much money is tied up in housing and all these people are going to retire and sell their investments at the same time which also nastily cooincides with the big demographic blip of the next generations being much smaller and their incomes arent high enough to pay for them.

the real estate spruikers are still saying it will work into the future but the less biased commentary is debating soft versus hard landings.

the australian government (local,state & federal) all play games to maintain these inflated prices... continous streams of new rules about minimum standards that allow only for highly developed and expensive houses, keeping land releases down to a minimum to reduce supply and first homebuyers grants and shared loans so the less well off can afford these inflated prices...so not quite as bad as house flipping with ninja loans but still achieving the same outcomes.

Enki wrote:The infomercials on how to get rich based on so and so's tried and true method tested over two decades have started again. Now they are talking about how one can buy cheap and use those properties as rental properties. Honestly, it's likely a much more sustainable business model than house-flipping. But I think the house-flipping infomercials were a big part of the cycle that caused the boom and the bust.

Actually, the explainations I have read, that make the most sense to my feeble mind is that the informercials were not a cause of the housing boom and bust, they were merely a symptom (one of many) of a very advanced social mood of unwarranted optimism. Informericals are "almost always" a reliable indicator of a trend just about to change.

Just before a trend changes "Everyone knows the tend will continue far into the foreseeable future..... if not permanently!!!"

Basic contrarian theory. When outside their areas of expertise, peer pressure reigns and humans herd.

As the old saying goes "The public is right about the direction of the trend, but wrong at both ends."

Now that the trend has changed (in the early 2000's) the hunt for the villians can proceed. The heroes of the previous bull market will always be blamed for the bear market and become villians in the public eye.

I really don't like residential real estate as an investment. Maybe owning an apartment building in a neighborhood you think will become fashionable, something like that, but the bottom line is that our population, in places, will likely be falling over the next several decades or, if it doesn't fall outright, it will only be maintained by continued mass importation of low-wage, unskilled workers.

Investment in farmland is probably a good idea. Instead of speculating on a house, buy some land in a rural state and lease it to a rancher to graze his cattle on, or to a local farmer who wants to grow something on it to take to market.

If Colonel Sun is ever inclined, maybe he could repost that house rental to ownership graph from Japan. I don't think people fully appreciate what's happening yet.

DO NOT purchase any real estate unless you can produce a hard core reliable cash flow from it.

Mr. Perfect wrote:If Colonel Sun is ever inclined, maybe he could repost that house rental to ownership graph from Japan. I don't think people fully appreciate what's happening yet.

DO NOT purchase any real estate unless you can produce a hard core reliable cash flow from it.

I'm not sure which "house rental to ownership graph from Japan" you're referring to,

however, I found the following:

.

Banks, BOA, writing off part of your mortgage, taking possession of the house, and renting back to you

Banks in reality all deep under water

their balance sheet all phoney

all gimmick

Joe, pay, no matter what


.

Typhoon wrote:

Mr. Perfect wrote:If Colonel Sun is ever inclined, maybe he could repost that house rental to ownership graph from Japan. I don't think people fully appreciate what's happening yet.

DO NOT purchase any real estate unless you can produce a hard core reliable cash flow from it.

I'm not sure which "house rental to ownership graph from Japan" you're referring to,

however, I found the following:

Typhoon wrote:

Mr. Perfect wrote:Very short term, medium term, and long term problem.

Frickin' Democrats with their subprime mortgages and loose monetary policy.

Blame is debatable.

Given that what has happened is now history, I think speculation on how the situation will evolve going forward is more interesting.

Any ideas?

A good idea is to look at house prices versus rents, house prices versus wages and demographic trends. Even with recent declines, a lot of markets are still overvalued with respect to rents and wages, and demographic factors might drive prices lower, although that is hard to predict.

Here's a link showing housing prices compared with median household income for various markets. For the U.S. as a whole, the index is about 10% above the historic average (since 1985).

From what I know about the real estate market, house prices had a slow upward trend (with fluctuations) between 1940-2000 and then really took off between 2000-2006. So, if the historic average had data that went back further, the index would be more than 10% above average.

My guess, over the long term national housing prices could decline another 10% in real terms, mainly through nominal prices not keeping up with inflation. Even with inflation at 2% per year, if prices hold steady in nominal terms, prices in real terms could decline by 10% in less than five years.

Mr. Perfect wrote:DO NOT purchase any real estate unless you can produce a hard core reliable cash flow from it.

I agree. The smart way to buy rental property is to only buy it if you are confident that you will be able to collect enough rent to come out ahead (rent minus interest and other expenses) at the end of the month. People who pay more than what the property is worth as a rent-generating asset in the hope that they'll make enough money on capital appreciation to make up for losing money as a landlord are playing a very dangerous game, which has bankrupted many people.

Azrael wrote:.

People who pay more than what the property is worth as a rent-generating asset in the hope that they'll make enough money on capital appreciation to make up for losing money as a landlord are playing a very dangerous game, which has bankrupted many people.

.

In America, the most risky business is, restaurant

second most risky is real estate

Real estate investment becomes only interesting when highly leveraged .. unilaterally ending in "nothing down"

Which means upside is yours, downside is Joe's (American people)

That is the best place for crooks to be

Am told by people who should know ( ), mortgage business, corrupted to the bone

Real estate dead for generations


.

AzariLoveIran wrote:

Azrael wrote:.

People who pay more than what the property is worth as a rent-generating asset in the hope that they'll make enough money on capital appreciation to make up for losing money as a landlord are playing a very dangerous game, which has bankrupted many people.

.

In America, the most risky business is, restaurant

second most risky is real estate

Real estate investment becomes only interesting when highly leveraged .. unilaterally ending in "nothing down"

Which means upside is yours, downside is Joe's (American people)

That is the best place for crooks to be

Am told by people who should know ( ), mortgage business, corrupted to the bone

Real estate dead for generations


.

Haha! Yet in America, the most common investments: restaurants and real estate.

"Americans: dollar grabbers, nothing else."
-Oswald Spengler

Let us not deny our common ancestor, after all.

Case-Shiller update for year end 2012

Home Prices Closed Out a Strong 2012 According to the S&P/Case-Shiller Home Price Indices

Nationally, home prices are back to their mid-2003 levels



Full size image here

the bubble will burst again........