Real estate prices in gold hitting a 20 year low

[jimmygu3]

Re: Real estate prices in gold hitting a 20 year low

Another pretty obvious factor to toss in is interest rates. They're near lifetime lows for most of us, yet home prices are declining. What happens when the world wakes up to getting paid back in declining dollars, stops lending us money, and mortgage rates start rising again? Won't that be even more downward pressure on home prices? A $300,000 home at 6% today will cost less in monthly payments than a $200,000 home someone wants to "downsize" into if rates go to 9% (if my math is right).

Yes, rising rates will hit the monthly payment consumer & the housing market hard, but the ratio isn't quite as extreme as you calculate. One reason is that in a fully amortized loan, the higher the interest rate, the less principal paid in each installment. Also, taxes and insurance are based on home value, not interest rate or monthly P&I, so they moderate the effects of increased rates.

Below is a table of what a $2000 payment will buy, assuming annual taxes of 1% and insurance of .2%. As you can see, rates jumping from 6% to 9% produces a 23% drop in house price, based on monthly payment alone.

Rate Loan Amount assuming $2000/mo total payment
0% $503k
1% $474k
2% $426k
3% $384k
4% $346k
5% $314k
6% $286k
7% $261k
8% $240k
9% $221k
10% $205k
15% $147k
20% $113k

[jtabeb]

Re: Real estate prices in gold hitting a 20 year low

A year ago gold was in the 650-700 dollar range. There is nothing I hold that has done as good as that.

I don't know why you kind folks can't see the forest from the trees on this one.

Gold is the DEFLATOR!!!!!!!

I'll say it again S L O W L Y

Gold is the deflator. During Asset Deflation, buy the deflator. Until Assets Stop Deflating!!!!!!!

How Hard is that to fathom?

I've been very happy with +35% ANNUALIZED yes that's correct ANNUALIZED returns on GOLD and SILVER.

Want proof?

See the charts.

I just bought some more with my "Tax Rebate".

I buy every dip and have slept like a baby and have beat the freaking pants off nearly every damn thing out there. All by holding some hunks of shiny metal.

This is not rocket science, people.

Sorry for the tone here, But I heard this OVER and OVER and OVER since 2002. "It's too expensive now, I'm gonna wait and buy some when it is cheaper."

Please show me in the charts where this would have been a good strategy (at ANY TIME in the Last 7 years) for a holding period over 12 months.

Buying Dips is SMART. Waiting to Buy later at a HIGHER price is NOT SMART.

That's my 69 cents.

[grapejelly]

Re: Real estate prices in gold hitting a 20 year low

yep...well, I found the OP interesting and provocative. But I believe gold has an enormous run ahead of it. Buy gold, and then once it peaks, one of those years sell gold and buy stocks.

Gold vs. stocks is a great trade as has been pointed out here before. Now it's gold...and when you can buy the Dow for an ounce or two, it will be time for stocks.

Real estate is a decent investment if you can get it cheap enough to cash flow out pretty well, especially what with the tax shelter aspects to it in the US, as Dr. Hudson has mentioned. It is a creature of the credit markets as it is bought with enormous leverage. Credit is really a big issue right now and for the foreseeable future. That is why I see real estate declining quite a bit further.

[santafe2]

Re: Real estate prices in gold hitting a 20 year low

Real estate is a decent investment if you can get it cheap enough to cash flow out pretty well, especially what with the tax shelter aspects to it in the US, as Dr. Hudson has mentioned. It is a creature of the credit markets as it is bought with enormous leverage. Credit is really a big issue right now and for the foreseeable future. That is why I see real estate declining quite a bit further.

Today may not be a great day to invest in real estate but it's no more than five years away. As they say, they're not making any more of it. In the US there are two great ways to make money, start a business and buy real estate. Both are highly leveraged. That's why both are famously adept at conferring bragging rights and crushing bad decisions.

It is the job of first world government leaders and the various central banks to devalue currency. At least until it becomes and issue. One of the great investments a person can make is a leveraged investment in real estate. If you put 20% down, you get $5 for every dollar they devalue. It may not work forever but it was the advise I got from my father and grandfather and the advise I'm giving to my kids.

[grapejelly]

Re: Real estate prices in gold hitting a 20 year low

hey, santafe2, I agree with you. Most of the great fortunes are either made in real estate, or invested in real estate after they are made. Dr. Hudson here has pointed out why...the depreciation gives you tax sheltered investment income. And of course, you pay off the loans from rents. And you pay in increasingly cheap dollars.

I think investing in real estate may be right in about a year and a half or so.

[santafe2]

Re: Real estate prices in gold hitting a 20 year low

I think investing in real estate may be right in about a year and a half or so.

The time frame will make itself evident as we move forward. Real estate cycles are long, so much easier for the average investor to understand. The last time we had a downturn, the bottom lasted for 2-3 years. It's a combination of raw price and interest rate.

[rtchoke]

Re: Real estate prices in gold hitting a 20 year low

JTABEB,

How much of a drop do you consider a dip? Do you buy at every single dip, or just the more significant dips?

[c1ue]

Re: Real estate prices in gold hitting a 20 year low

Good luck buying real estate.

I guarantee there will NOT be blood on the streets in the next 3 years.

Until that happens, you're not going to get the deals which make you rich.

I watched a customer of my mother buy 200 houses from 1979 to 1985; the average house cost was $5000 in 1979, rising to $20000 in 1985.

This 70 year old real estate baron (in 1985) was getting $500/month in average rent for these places; you can see how the money piled up.

Buying $400K properties in California and getting $2000 rent isn't going to get you very far up the ladder; similarly $150K properties in the Midwest with $800 rent isn't doing it either.

But good luck with your belief.

[GRG55]

Re: Real estate prices in gold hitting a 20 year low

Today may not be a great day to invest in real estate but it's no more than five years away. As they say, they're not making any more of it...

Are you sure?

http://articles.privateislandsonline...e-world-dubai/

[santafe2]

Re: Real estate prices in gold hitting a 20 year low

Are you sure?

http://articles.privateislandsonline...e-world-dubai/

It will be fun to watch the earth reclaim those "islands".