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Robert Shiller Destroys The Idea Of Investing In A House

By noshow   Follow   Thu, 7 Feb 2013, 11:07am   2,125 views   50 comments
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http://www.businessinsider.com/robert-shiller-home-investment-a-fad-2013-2

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1. edvard2 Follow Befriend 34 threads 2,111 comments

   11   1:32pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   Mobi says Houses do generate fixed income just like company profits. I do not hate long term investment in stocks but it is just my opinion that stocks are generally overvalued at this point. Opinions seldom make good investments. If you look at the long term trend, stocks have tended to return around 7-8% annually- again over the long term. That might not sound like much, but give it 30-40 years and the effects of compounding could very easily make someone a millionaire by the time they retire. I say this because I have family members where this totally happened, where all they did was invest maybe 10% of their income in boring 401ks and mutual funds, and when they were 60 they were set. They didn't buy houses, gold, or stuffed animals. They just invested in plain old fashioned stocks.

2. SFace Follow Befriend (2) 61 threads 1,306 comments Premium

   12   1:37pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   Protected   edvard2 says If you look at the long term trend, stocks have tended to return around 7-8% annually- again over the long term. That might not sound like much, but give it 30-40 years and the effects of compounding could very easily make someone a millionaire by the time they retire. A REIT index generally outperformed the stock index. basically the return comes from the cash flow generated + appreciation. So the premise that stocks do better than real estate is completely false. If you buy a house, you have to layer in price escalation along with the housing dividend. (Housing dividend is the rent avoided or profit of rent received).

3. gbenson Follow Befriend 16 threads 389 comments

   13   1:41pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike   Stocks are just a frigging high frequency casino at this point. Unless you are able to trade in milliseconds, you are going to get the gross end of the stick.

4. Mobi Follow Befriend 1 threads 241 comments

   14   1:45pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   Stock gain was choppy as a function of time. Most of the recent gain came from 82-00. Will a bull market like that comes back in the near future? I kind of doubt.

5. Mobi Follow Befriend 1 threads 241 comments

   15   1:48pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   gbenson says Stocks are just a frigging high frequency casino at this point. Unless you are able to trade in milliseconds, you are going to get the gross end of the stick. You can simply buy the S&P index and do not fight with the machine. But that assumes it does not come up with a big crash, which may take years to recover.

6. edvard2 Follow Befriend 34 threads 2,111 comments

   16   2:32pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   Mobi says Stock gain was choppy as a function of time. Most of the recent gain came from 82-00. Will a bull market like that comes back in the near future? I kind of doubt. Blur your eyes for a minute. What do you see when you look at the chart you posted? A consistent upwards projection and one that has been doing so since 1902. Are there ups and downs? Sure. But as I said, the trend has gone up over the long term and done so at a fairly reliable clip. Its all about averages. If you were to compare a chart like this to a chart of how real estate has performed over the same period, you'd see the difference.

7. Mark D Follow Befriend 64 threads 486 comments Simi Valley, CA

   17   2:43pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike (1)   who says buying a home is an investment? he's arguing a point no one has made. what a pointless article.

8. Hysteresis Follow Befriend (2) 14 threads 648 comments

   18   2:49pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike   robertoaribas says Hysteresis says companies generate profit. houses do not. good grief. Do you think before you type? what the hell do you call rent? the context of the article was clearly as a primary resident being an investment. shiller even said rentals were a sensible investment. i know you can't read, like to argue and call people names because you have nothing better to do, so i'm not sure why i bother explaining. anyway, i guess you're back on my ignore list.

9. Nobody Follow Befriend 10 threads 274 comments San Jose, CA

   19   3:04pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   What? My house was an investment? How could that be? I am just going to live here. This is what happens when the immigrants who can only see the real estate as an investment and have no respect for people or human rights come here in mass.

10. gbenson Follow Befriend 16 threads 389 comments

    20   4:11pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   edvard2 says A consistent upwards projection My 401k begs to differ..

11. dublin hillz Follow Befriend 11 threads 775 comments Dublin, CA

    21   4:16pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   It is a mistake to compare primary residence to perfomance of stocks/bonds/mutual funds. The primary purpose is to compare expected lifetime housing costs. Speaking of which a typical apartment in bay area is now over twice as much as in the 1990 and a typical market value of an owner occupied dwelling is twice what it was in 1990 which is consistent with theory that housing appreciated with rate of inflation in the long term. I believe that it's only appropriate to compare historical returns of real estate with stocks/bond/funds for investment properties, not primary residences.

12. robertoaribas Follow Befriend (23) 55 threads 3,810 comments Scottsdale, AZ robertoaribas's website

    22   4:23pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   I moved to the south bay in 1987. Hermosa beach specifically. I shared a 2 bedroom really crappy little apartment on manhattan ave, right off the beach, my share of the rent was like 450, or 500 + 1/2 the bills. Down the street, there were 2 bedroom 2 bath condos in Redondo for under $100K. (interest rates were like 15 or more %). Had I bought then, I could have refinanced a few years later anyways... Do you think I'd be upset today, if I had bought then, and kept it the rest of my life?

13. SoftShell Follow Befriend 1 threads 459 comments Abilene, TX

    23   8:46pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   How much did Rover pay?? robertoaribas says I moved to the south bay in 1987. Hermosa beach specifically. I shared a 2 bedroom really crappy little apartment on manhattan ave, right off the beach, my share of the rent was like 450, or 500 + 1/2 the bills

14. Raw Follow Befriend 10 threads 694 comments

    24   9:13pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike   Call it Crazy says ....."As usual, Shiller was reluctant to declare that home prices had bottomed. He explained that the housing market is a speculative one and that there's no telling which way prices would go tomorrow. He also explained that there wasn't much reason to believe that home prices would appreciate back to levels seen during the last cycle." He is saying two different things in the same paragraph. I think he personally believes home prices should be crashing, not skyrocketing as they are. He understands numbers, not human emotions.

15. Mick Russom Follow Befriend (2) 7 threads 530 comments Belmont, CA

    25   9:28pm Thu 7 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   robertoaribas says good grief. Do you think before you type? what the hell do you call rent? rent is what most of you pay off your subsidized loans with.

16. Mobi Follow Befriend 1 threads 241 comments

    26   11:01am Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike   edvard2 says Mobi says Stock gain was choppy as a function of time. Most of the recent gain came from 82-00. Will a bull market like that comes back in the near future? I kind of doubt. Blur your eyes for a minute. What do you see when you look at the chart you posted? A consistent upwards projection and one that has been doing so since 1902. Are there ups and downs? Sure. But as I said, the trend has gone up over the long term and done so at a fairly reliable clip. Its all about averages. If you were to compare a chart like this to a chart of how real estate has performed over the same period, you'd see the difference. I did not argue that housing is better investment than stock generally. What I care is the entry point. I want to wait till the next pullback to decide entering the stock market or not. Also, it is not fair to compare nominal price inflation between stocks and housing since you can leverage in housing with much less risk.

17. thomaswong.1986 Follow Befriend 15 threads 2,845 comments

    27   11:16pm Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike   Mobi says since you can leverage in housing with much less risk. you might want to re-check recent history on that 'less risky' move...

18. thomaswong.1986 Follow Befriend 15 threads 2,845 comments

    28   11:18pm Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike   robertoaribas says . Down the street, there were 2 bedroom 2 bath condos in Redondo for under $100K. lol! no wait.. that cant be true..everyone says CA especially SoCal was always really really expensive. how else could those surfers afford that crazy lifestyle...

19. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    29   11:54pm Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike   Protected   thomaswong.1986 says Mobi says since you can leverage in housing with much less risk. you might want to re-check recent history on that 'less risky' move... He's right. You're wrong. A home that earns $2000 a month in rent but can be financed with an 20/80 mortgage with a PITI of $1400 is almost entirely risk free. In fact compared to a 50/50 leverage in the stock market, it isn't even close. A person out on full margin in the stock market is a moron by comparison, especially if he doesn't have the cash to handle margin calls. What you are attempting to misdirect the conversation with is real estate speculation at the height of the bubble, a situation which no longer applies to the vast majority of the United States. Since there is no such thing as a margin call in real estate, and rents are almost always stable or climbing, an investor can simply wait out a bad market even if it takes 10 years. Of course nothing in life is risk free, and there's always the possibility of catastrophic collapse in the real estate market, however if this happens then being leveraged in stocks cannot help you. You're twice as fucked as someone holding title to real property. Or did you forget 2009?

20. yup1 Follow Befriend 10 threads 379 comments

    30   11:59pm Fri 8 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (2)   Raw says He understands numbers, not human emotions. Yeah that is why he wrote a book called Irrational Exuberance http://www.irrationalexuberance.com/ He is explaining it is all about emotions and that the numbers don't add up and you are arguing he doesn't understand emotions. Dumbass!

21. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    31   12:16am Sat 9 Feb 2013   Share   Quote   Permalink   Like (3)   Dislike   Protected   yup1 says He is explaining it is all about emotions and that the numbers don't add up and you are arguing he doesn't understand emotions. Dumbass! Robert Shiller doesn't understand emotions, in fact he's a really shitty guru. I have no idea why people worship him or even give him one shred of credit for financial advice. "Often people ask me whether I coined the term irrational exuberance, since I (along with my colleague John Campbell and a number of others) testified before Greenspan and the Federal Reserve Board only two days earlier, on December 3, 1996, and I had lunch with Greenspan on that day. I did testify that markets were irrational" ~ Robert Shiller from his book "Irrational Exuberance"

22. yup1 Follow Befriend 10 threads 379 comments

    32   12:19am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike (1)   iwog says and rents are almost always stable or climbing, an investor can simply wait out a bad market even if it takes 10 years. Of course this is only if you follow your extremely short version of history. Rents have collapsed at various times in history during financial crisis.

23. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    33   12:20am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike   Protected   yup1 says Of course this is only if you follow your extremely short version of history. Rents have collapsed at various times in history during financial crisis. Show me a single example and support it with actual data. I think you're wrong, but I'll give you an opportunity to show otherwise.

24. yup1 Follow Befriend 10 threads 379 comments

    34   12:21am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike (3)   iwog says Robert Shiller doesn't understand emotions, in fact he's a really shitty guru. I have no idea why people worship him or even give him one shred of credit for financial advice. Pull up the same graph for the Nasdaq fuckface, and then go join the other dumbass!

25. yup1 Follow Befriend 10 threads 379 comments

    35   12:25am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike (3)   iwog says Show me a single example and support it with actual data. I think you're wrong, but I'll give you an opportunity to show otherwise. The Great Rent strike of 1932. I will let you google that yourself FlammingFuckFace! You might want to check out what is happening with rents in Spain NOW also.

26. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    36   12:29am Sat 9 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected   yup1 says iwog says Robert Shiller doesn't understand emotions, in fact he's a really shitty guru. I have no idea why people worship him or even give him one shred of credit for financial advice. Pull up the same graph for the Nasdaq fuckface, and then go join the other dumbass! No problem:

27. yup1 Follow Befriend 10 threads 379 comments

    37   12:31am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike (1)   http://www.pie-mag.com/articles/2459/spain-s-2011-house-prices-down-6-rents-still-in-free-fall/ http://news.kyero.com/2013/01/28/home-rental-prices-in-spain-fell-by-4-7-in-2012/ http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2CB8KFfL3tw Spain Bitch!

28. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    38   12:32am Sat 9 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected   yup1 says The Great Rent strike of 1932. I will let you google that yourself FlammingFuckFace! You might want to check out what is happening with rents in Spain NOW also. You mean a temporary rent strike in a few apartment buildings in the East Bronx? That's not an example of rents collapsing and it is certainly not an example that indicates a market failure or even a trend. Try again. yup1 says Spain Bitch! BTW I don't really care what is happening in Spain. Conditions here are radically different. Besides it's only a decline of 8%. That wouldn't even make a dent in the example I gave.

29. yup1 Follow Befriend 10 threads 379 comments

    39   12:35am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike   I guess that is because what is happening in Spain is what would be happening here without the Fed.

30. yup1 Follow Befriend 10 threads 379 comments

    40   12:37am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike   To say Robert Shiller does not understand human emotion when he wrote a book on it is pretty fucking clueless.

31. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    41   12:38am Sat 9 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected   yup1 says To say Robert Shiller does not understand human emotion when he wrote a book on it is pretty fucking clueless. I already proved that Robert Shiller was a fool in 1996 when he told Alan Greenspan about irrational emotion driving the stock market. Usually when you fail that badly, only morons give you a second chance. You can write a book on quantum mechanics, but it wouldn't really mean anything would it.

32. yup1 Follow Befriend 10 threads 379 comments

    42   12:45am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike   You proved nothing, as usual.

33. KILLERJANE Follow Befriend (3) 12 threads 600 comments

    43   6:42am Sat 9 Feb 2013   Share   Quote   Permalink   Like (2)   Dislike   Circle jerking is a sport here! Copyright 2013

34. buy short term Follow Befriend 1 comments

    44   9:46am Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike   I think the political climate is what will make the housing market appreciate in at least the short term future. Most polls show that the majority of people consider jobs to be the most important need of the country. However, 4 years of priming the pump and a depreciating dollar hasn't done much in that arena where demographics, world trade and overpriced domestic labor costs have worked against creating domestic jobs. So the only option that the president has is to divert attention away from his failures by pushing things like gun control, immigration and domestic consumption like houses.

35. Raw Follow Befriend 10 threads 694 comments

    45   10:10am Sat 9 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike (1)   yup1 says iwog says Show me a single example and support it with actual data. I think you're wrong, but I'll give you an opportunity to show otherwise. The Great Rent strike of 1932. I will let you google that yourself FlammingFuckFace! You might want to check out what is happening with rents in Spain NOW also. You had to go back 80 years during the "great Depression" to try and prove your point. Not very convincing. *** Posts with profanity like this need to be automatically deleted.

36. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    46   2:28pm Sat 9 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected   Most real estate investors know that rents are relatively stable. "Rents never go down" is a cliche that is not strictly true, however it is close enough to make intelligent decisions about buying rental property.

37. robertoaribas Follow Befriend (23) 55 threads 3,810 comments Scottsdale, AZ robertoaribas's website

    47   2:53pm Sat 9 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   iwog says Most real estate investors know that rents are relatively stable. "Rents never go down" is a cliche that is not strictly true, however it is close enough to make intelligent decisions about buying rental property. Rents could go down, but then again, if you look over a 100 year time period, they've gone up a hell of a lot more, and a hell of a lot more often, then they've gone down. I like those odds, long term.

38. yup1 Follow Befriend 10 threads 379 comments

    48   7:23pm Sat 9 Feb 2013   Share   Quote   Permalink   Like (1)   Dislike   Raw says *** Posts with profanity like this need to be automatically deleted. Fuckoff!

39. Dan8267 Follow Befriend (16) 764 threads 7,710 comments Boca Raton, FL Premium

    49   7:38pm Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike   Protected   iwog says Robert Shiller doesn't understand emotions, in fact he's a really shitty guru. I have no idea why people worship him or even give him one shred of credit for financial advice. I don't look to him for investment advice, but he seems good at macro-economics. Based on the graph below, I would have to agree with Shiller's 1997 conclusion that the market was irrational and overly exuberant. Of course, markets can remain irrational longer than you or I can remain solvent. I'm glad someone is thinking about the big picture. We can't all be chasing the quick dollar.

40. iwog Follow Befriend (48) 274 threads 12,571 comments 47 male Lafayette, CA Premium

    50   9:23pm Sat 9 Feb 2013   Share   Quote   Permalink   Like   Dislike   Protected   Dan8267 says I don't look to him for investment advice, but he seems good at macro-economics. Based on the graph below, I would have to agree with Shiller's 1997 conclusion that the market was irrational and overly exuberant. Of course, markets can remain irrational longer than you or I can remain solvent. It was a 1996 conclusion. Anyone investing that advice was slaughtered.

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