Nurse, Bring Me RE's Charts

[flintlock]

Re: Nurse, Bring Me RE's Charts

It seems the only conclusions that can be drawn about real estate are local.

Annual rents in Pleasanton, CA are 3 - 4 % of purchase price instead of the target 8 – 9 % investors are told to aim for. Property taxes certainly are low, 60 % less than in many east coast cities and suburbs. I’m fascinated by the replacement cost threshold. I know places where you can build an 1,800 square foot house for 300,000 or less.

RE is always local. Around here you can build a nice 1800 sq ft home for much less. Sisya's $800k would buy a new 6000 sq ft home with all the amenities around here, in a nice upscale area. Amazing differences in home prices around the country. But even in Atlanta theres a big premium to live "in town".

Also interesting that Sishya's experience in home appreciation mirrors what i've seen. People who can afford a $600k plus home seem to be doing just fine. The middle class, not so much. The Atlanta paper just ran an article about mobile home sales rebounding, for what its worth.

[BK]

Re: Nurse, Bring Me RE's Charts

Is real estate really local?

The current boom in prices in Pleasanton-CA is also occuring in New York metro, Boston metro, Washington CD Metro, Atlanta -Metro, Dallas - metro area, Houston area, and Greater London. Yes, I know locality drives a portion of real estate value and there are lots of places where you can't give real estate away today.
But, every where I travel I hear people say "...fill in the town...." is a unique place and will always be a good value because of the "......fill in the industry...software, biotech, government, university..." and will always retain its value.

There are a lot of people piling on to one side of the real estate ship and is it really possible that everyone will be right about their inflation hedge bet on real estate when interest rates are a thirty year low?

Has any one read this recent commentary by the Bank of England? http://www.theguardian.com/business/...d-house-prices

I am daily reminded that my country has never lived through an economic period like this and imagining the future using a lens of what has happened in the past is folly.

[Fox]

Re: Nurse, Bring Me RE's Charts

I think both stock market and Real estate market is going to rocket up along with Inflation and I have been saying this for sometime now. I also believe that our wages will catchup to the Inflation "soon". I am buying a house from a seller who bought it for around $80K in 1972 paying property tax in just around $1200 per year.

Welcome back sishya it's always good to here from boots on the ground but I think you're over extrapolating your very local situation

From the charts at the begin Nationally the RE market in the US is in a very strange wonderland. Prices are bouncing up while ownership, affordability, and new household formation are falling drastically? It doesn't Jive and investors and all cash foreigners fill in the logic gap.

Investors do not make a a RE market they ruin it. Especially investors with other people's money. Being a Landlord is a very tough job and requires micromanagement to keep control of very slim margins. It cannot be done as a structured product with everyone taking their skim off the top. For the most part, not always, tenants are honest when the landlord is down the street. When the landlord is some banker on the other side of the country? God help you.

Investors also dump quickly when things go bad. It's a numbers game to them. And when the numbers don't work out (ie a hint of a recession) the fire sales begin. When the current bull market ends RE is going to get really ugly.

That leaves the foreigners. This is actually significant and may be a portion of the turnaround that actually sticks. Those rich Chinese are not just buying vacation homes to visit their kids abroad, they squirreling away cash from the homeland because they no the Chinese bull ride won't last for ever. All the indicators are already pointing to China leading a global recession now. This is uncharted territory, and those that have the means are preparing for the worst.

In any case unless the US drastically changes it's visa and immigration allowances, Foreigners won't drive an RE market other than in a very few ideal locations.

All in all, I see more downside risk than upside risk in the near and medium term future.
Good luck

[sishya]

Re: Nurse, Bring Me RE's Charts

Fox,

Chinese hands are extremely strong hands., cash offers. Cash offers are not like "no money down" buyers seen in 2005.

I bet people had the same opinion about people like my seller who bought at $80K also in 1970's. We had many recession since then also.
Wages / Inflation caught up since then.

US will change immigration policy. USA will restrict family immigration and going to open up Employment Immigration via Immigration reform.

Let's see how this goes. But remember California leads the rest of the country.

[Milton Kuo]

Re: Nurse, Bring Me RE's Charts

Is real estate really local?

The current boom in prices in Pleasanton-CA is also occuring in New York metro, Boston metro, Washington CD Metro, Atlanta -Metro, Dallas - metro area, Houston area, and Greater London. Yes, I know locality drives a portion of real estate value and there are lots of places where you can't give real estate away today.
But, every where I travel I hear people say "...fill in the town...." is a unique place and will always be a good value because of the "......fill in the industry...software, biotech, government, university..." and will always retain its value.

There are a lot of people piling on to one side of the real estate ship and is it really possible that everyone will be right about their inflation hedge bet on real estate when interest rates are a thirty year low?

I doubt everybody will be right. However, I've been waiting a long time for the real estate bubble to deflate and the Federal Reserve has made it abundantly clear through the purchase of one trillion dollars of fraudulent trash (TARP, TALF, etc.), one trillion dollars of US Treasuries and mortgages (QE3), and going on six years of ZIRP that it will, if necessary, sell out and sell off the country to protect the crooks and idiots from eating their losses. I don't know when mortgage rates are going to move back up and it's just too unpleasant renting to possibly wait decades for housing prices to revert to mean.

[don]

Re: Nurse, Bring Me RE's Charts

+1