Quote:
Originally posted by Porsche-O-Phile
I've said it before and I'll say it again - a market that effectively shuts out first-time buyers can't sustain itself. It's like a jet engine. If there's suddenly nothing getting sucked in the front end, it won't be long before there's no ability to create thrust out the back end. The only people in the RE market now making any sort of money are (1) extremely lucky and (2) those that already have been in for a long period of time.
Every time I look at the possibility of buying, I keep reaching the same conclusions:
1. What's the point of tying up so much of my $$$ every month into a non-equity-building "asset"? In order to get into a home now, most people (including me) would have to resort to unconventional methods.
2. What's the point of tying up so much of my $$$ into a potential rate of return of MAYBE 5% (if I'm lucky) when I can easily do double that rate of return in stocks/options/futures?
3. The prices are still HUGELY out-of-whack with actual values. I base my assessments (right or wrong) and consequently what I'd be willing to pay based on MY perceptions of what a property is worth - not what a bunch of less-than-objective "experts" like sellers, realtors and mortgage brokers tell me it's worth.
4. I'm beginning to think the smart play is to aggressively pay down all my debt and pump as much into REAL wealth-building assets right now (stocks, mutuals, futures, etc.) That way in about 5-7 years I can cash the hell out of this sinking ship called Southern California, leave it's congestion and illegal aliens behind and go someplace where values and prices are more commisurate with reality.
5. Possibly nuts, but I'm seriously looking at buying a sailboat. The local marina is a 10-minute walk from my place now. For the price difference between renting my current place and what it would cost on a mortgage to buy it, I can easily afford a 36-foot sailboat and slip fees. It'd be like a bank account and would be the cheapest waterfront property I could ever own, especially if I pursued a liveaboard permit. It's crazy when one can seriously consider a boat to be an equal or better play than real estate. But that's the state of reality in this market. When I start running numbers, I find (repeatedly) that this idea it isn't as nuts as one might initially be inclined to think. . . And when I'm ready to cash out, I sell for basically no loss (you really only lose lots of $$$ on depreciation of new boats - used ones actually hold value reasonably well). It'd be a sort of floating bank account.
6. For DECADES, the incentives regarding homeownership have been (1) tax write-off and (2) equity building. The reality of the current market is that any federal tax savings are eaten up by local property taxes and upkeep costs and that there is little, if any meaningful equity-building potential for first-time buyers. This is an intermediate-term to long-term problem because it will ripple through the housing sector. There will be a stratification in pricing between "entry level" places (that are just out of reach of potential first-time buyers) and "upgrade" places, which are just out of reach of entry-level owners. No longer can/will an entry-level owner sell and generate enough profit to establish equity in a larger, more valuable place. Even if they could, it seems like many of them can't trade up because there's nobody to buy their entry-level place now, so many potential deals fail on the "buy" end. The only way I see these deals working is if the owner transfers their problems (no-equity mortgages) into a bigger place and another sucker is willing to assume a no-equity position to "own" the entry-level place. They only magnify their problems. . .
Long story short, RE is a bad call and will be for quite a while until this shakes out.
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Can't agree with you Jeff:
1) Paid 190K for my house in 1992 - Today it worth 600
2) Paid 45K for cabin overlooking the lake in 1987 - Today it's approaching 300K
3) The retirement I haven't even finished building is worth 150K more than I have in it......
I have other money with my broker and a sizable 401K.....Neither have increased like real estate....