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Old 08-25-2010, 11:21 AM   #41
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The population of the US is increasing, and the average household size is decreasing, thus increasing demand for housing. So if supply is restricted and demand is rising what happens to price?
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Old 08-25-2010, 11:44 AM   #42
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My parents made very little money when I was growing up, but what little they did get, they used to buy their house and the few acres around it. Now that the economy in their area is as bad as it is, I bet they're glad they did! A house you own outright can be a good safety net in your later years if you suddenly find yourself in a financial boggle. Maybe that's not something that folks on here will take seriously, since I bet most of the forum readers have a better "safety net" financially speaking than your average person, but it's a consideration.

Also... Because I grew up knowing that they owned their own home, I was taught that it was just normal to be able to do more or less what you pleased with your house. Feel like knocking out a wall? Go to it. Want to put up an addition? No problem! Plant a tree? Make a garden? Dig a really deep hole in the driveway for no darn good reason? (Maybe I was too bored as a child... ) Go for it!

A result of that upbringing is that I now feel constrained living in rentals. It's like someone is always looking over my shoulder. I know that I'm only borrowing what I use. If something is damaged, I worry about the cost of fixing it, but I worry more about what the landlord is going to say! That feeling of unease will probably not go away until I purchase my own house. Besides, I want to build my own place anyway. I want to take my own two hands and erect a castle from bare earth. I think it is part of the heritage of being human to want to exert yourself over the elements and carve out a personal refuge. There are things I want in a house that are not commonly available, things that are personal to me and my lifestyle. Because of that, I have no choice but to eventually own my own land and house if I want to fulfull my dreams and goals.

I definitely won't consider it an investment in the sense of something that will ever earn me a monetary return, however. It will be an "investment" in my quality of life.

Josh
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Old 08-25-2010, 12:05 PM   #43
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The fact remains that they aren't making any more land, and there is a limited supply of land in places that people find desirable to live. (This is true even in places like Cleveland, or Dallas and of course in islands NYC, Honolulu or the SF Bay Area).
I basically agree with you, but even core area of cities like like San Francisco and Seattle while they may be limited in land, have an almost limitless housing potential thanks to building up rather than out. Much of Seattle is really bad, functionally obsolete and deteriorating former worker housing from 100 years ago, and even worse places in the near suburbs. Within 50 years I would think that will be mostly gone and replaced with highrises in the city core, and narrow vertical townhomes in nearby surrounding areas.

IMO it really doesn't matter, because Weimar style inflation will soon be delivered by our beloved Mutt and Jeff at the Fed and Treasury, and we will all be rich once more.

Ha
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Old 08-25-2010, 12:14 PM   #44
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...Within 50 years I would think that will be mostly gone and replaced with highrises in the city core, and narrow vertical townhomes in nearby surrounding areas....
So true, South of the Slot, maybe but not in my neighborhood.
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Old 08-25-2010, 11:25 PM   #45
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Isn't the crux of this matter not so much whether a house is an investment as whether we think of it as an investment. Let me make a case for not thinking of it as one. A paid-off sustainable house is a wonderful thing in retirement (think: pre-paid place to live) because it protects against future rampant inflation if you rent, and it protects against reductions in retirement cash income (i.e., not much outlay to continue living there: property taxes and some upkeep). Yes, I know, inflation will probably not be a problem for the next couple of years, but with the massive government spending it could well resurface as one later. Note I used the word sustainable. A McMansion would probably cost too much in taxes and upkeep to provide the protections I spoke about. A paid-off trailer on your own paid-off lot might be heaven compared to a trophy home which causes stress to go through the roof every time the monthly mortgage payment is coming due.
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Old 08-26-2010, 12:20 AM   #46
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This is a scary plot. And it's not like Japan had a large inventory of buildable land. Home prices headed south anyway.

Ha
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Old 08-26-2010, 12:29 AM   #47
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This is a scary plot. And it's not like Japan had a large inventory of buildable land. Home prices headed south anyway.

Ha
Very scary.

Is there an overlay of the demographics for each country over these time periods?
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Old 08-26-2010, 02:19 AM   #48
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Very scary.

Is there an overlay of the demographics for each country over these time periods?

Not exactly the same time frame but the chart makes it clear the difference between US, Japan, and China. Japan and Australia population is flat the US is growing.


For some reason I can't get the Flash based graph to work but you can click on the link

Google - public data
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Old 08-26-2010, 08:00 AM   #49
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Well ... the graph data (top line) ends at 2005. Prices have tanked anywhere from 30-50% in my hood. So in 2010 the line is hovering ~150? Not sure what the units are .... but in just 5 years it would appear most of the damage has already been done.
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Old 08-26-2010, 02:03 PM   #50
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Well ... the graph data (top line) ends at 2005. Prices have tanked anywhere from 30-50% in my hood. So in 2010 the line is hovering ~150? Not sure what the units are .... but in just 5 years it would appear most of the damage has already been done.
I saw this updated The Economist graph over on the "How to Survive a Zombie Economy" thread:

I suspect the recent uptick in US prices is due to that $8k credit that just expired, and that the graph line will turn down once again.
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Old 08-26-2010, 02:13 PM   #51
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I saw this updated The Economist graph over on the "How to Survive a Zombie Economy" thread:

I suspect the recent uptick in US prices is due to that $8k credit that just expired, and that the graph line will turn down once again.
Reasonable assumption, but UK and Oz bumped up in sympathy while Spain moved in concert with Canada?
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Old 08-26-2010, 02:50 PM   #52
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*evil Bender laugh* Renting - it's the only way to go! Home ownership is too onerous, you can't come out ahead owning property, paying someone for the privilege of living in their place is the smartest option as landlords exist just to lose money. Bwaahaha.


Well, I think it does matter WHERE you live... I can tell you that here, renting a house costs a LOT more than owning... it would cost me twice as much to rent my house than what I am paying for all items... other places I can see that renting has advantages... NYC is one..
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Old 08-26-2010, 03:12 PM   #53
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Reasonable assumption, but UK and Oz bumped up in sympathy while Spain moved in concert with Canada?
I don't pretend to be a real estate investment guru, just a novice. Anyway, after doing some googling just now, I found at this Web site this info regarding Australia's recent housing price upturn:
In response to the crisis, the government introduced a huge stimulus package, worth AU$10.4 billion (US$7.24 billion), around 1% of GDP, in October 14, 2008. This included the First Home Owner Boost SchemeFirst Home Owner Grant from AU$7,000 (US$6,419) to AU$14,000 (US$12,838) for existing dwellings, and to AU$21,000 (AU$19,257) for newly constructed homes.

Due to its success, the FHOB scheme was extended from its original September expiry date till end-December 2009, though the grant amounts were reduced.

The FHOB was very successful in stimulating the housing market. By the end of August 2009, the FHOB had helped more than 153,000 Australians buy their first home. By July 2009, first home buyers had risen 73% from the same period last year.
As for the UK, this site provides this commentary:
While the UK suffered the after-effects of a massive house price bubble, it avoided the triple whammy the US, Ireland and Spain went through. Not only did they allow house prices to rip, but also fostered a massive building boom and widespread fraudulent buying and lending. Now they are left with hundreds of thousands of empty homes that depress prices and rob consumers of the springboard for spending – property wealth. There are obvious long-term benefits with lower house prices, especially for the young, but in the short term the situation only adds to economic woes.
Also see HousePriceCrash.UK, for another spin on UK prices, including: "One in four UK first-time-buyers are considering buying property overseas and 70 per cent have abandoned plans to buy UK property due to high prices. Australia topped the list of most popular destinations for first-time-buyers, data from Moneycorp’s third biennial report has shown."

Just food for thought.
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Old 08-26-2010, 05:35 PM   #54
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We have the "blip" upward here (MA) ... speaking to my realtor: lots of "community development" programs are pushing foreclosed houses with rehab costs built in. Also many people are gaming the bailout programs (selling to relatives).

Basically alot of "stimulus" but I am not quite sure what is being stimulated. Pushing on a string IMO.
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Old 08-26-2010, 06:34 PM   #55
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Reasonable assumption, but UK and Oz bumped up in sympathy while Spain moved in concert with Canada?
Yes, but viewed in isolation that graph could be said to be misleading. In 1995 both the UK and the Australian markets were relatively depressed and only just begining to recover from downturns. I don't know about the other markets, but unless they were in the same position (i.e. relatively depressed) then the comparison is suspect.

Of course, this does not mean that prices are or are not "high" at present or that they may or may not go lower but it does make me wonder how much should be read into the graph.
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Old 08-26-2010, 06:55 PM   #56
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... add the US to the relatively depressed market (1995) ...


Back on the "upward blip" ... forgot to mention the FHA 203k program - where niave first time home buyers are forced to WAY OVER PAY (built into the purchase price) for basic rehab costs. NO fault of the contractor .. they wait MONTHS to get paid and the paper work is ridiculous.

Just more pushing on the string.
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Old 08-29-2010, 02:27 PM   #57
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I definitely won't consider it an investment in the sense of something that will ever earn me a monetary return, however. It will be an "investment" in my quality of life.

Josh
Yes I consider such purchases as lifestyle investments. Any gains are purely a matter of chance or good fortune.
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A house is not an investment, but....
Old 08-30-2010, 09:54 AM   #58
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A house is not an investment, but....

Calmloki, I like your point. My wife and I have owned four homes in the last 15 years. I owned two myself before that. In all but two, we always made some little money. In the other two, we were loss protected as a result of a company transfer. What we noticed though is that even when we made money on a house, all our time and effort on upgrades plus real estate taxes ate away at the gain. Our most recent house we sold about a year ago and again made money on it. It was our dream home, so we had been doubling on the equity and walked away with a considerable sum in equity. What was very interesting is all that money only earned a 6% return which is the interest rate on the note. So you could view it as a lost opportunity to invest in stocks, which I did until.................... the market crashed, and then I was so happy that I had a little more balance in my portfolio than I even knew. All that equity was protected when my 401k, IRA, and other stock investments went down about 40%. Only in the last year have the stocks clawed their way back up to parity. So, I don't think its wise to put all your eggs in one basket. Good luck.
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Old 09-05-2010, 08:29 AM   #59
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I consider mine is an investment.

Bought in 1993. Paid off mortgage in 1997, just shy of my 48th birthday.*

While the returns may not be great, it's still valued at > 2x what I paid for it in 1993. I plan to be able to sell it at retirement, take half the proceeds, and buy a new house in a new, lower cost location, upon retirement; I'll take the other half (mostly as a tax free gain) and consider it as one big cushion for the future (that is, I'm not considering it in my buildup of funds upon which to generate an income stream in the future).

To me, an investment can do one of two things: generate monetary returns (e.g., CDs, bond funds, etc.) or avoid monetary expenses (e.g., house payment, rental payment).

So, in a nutshell, while I consider it an investment, I don't look to it to generate future income streams.

YMMV.

* I have taken two small equity borrowings subsequent to paying it off: one of <5% of value to help purchase a parent's house which will be repaid when they pass from this world, and very recently, another <5% for a home improvement project which was a cash flow decision -- it's being paid off over 2 years.
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Old 09-05-2010, 10:55 PM   #60
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I never considered my house an investment, but here I am, house is all paid off, over $400K in equity, even with a 20% drop in housing prices.

I was happy to see the tax valuation drop, my property taxes went down.
Even in the worst situation, I can't see housing values drop to even 3x what I paid.
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