patrick.net

Forgot to share some information I found. Page 50 of this summary seems to disagree with the 90% of millionaires assertion above, but without more detail is not definitive.

http://www.northerntrust.com/pws/jsp/display2.jsp?TYPE=interior&XML=pages/nt/0605/1147987494825_694.xml

http://www.ustrust.com/ust/Pages/Insights-on-Wealth-and-Worth.aspx

FunTime says

Mathematics are not in agreement with the idea that buying houses or land leads to wealth. There is a long period, relative a life span, of debt usuallly associated with the purchase which means the period of compound interest will necessarily be short.

And property taxes are working against you. If there's a structure on the property, there are insurance costs too.

FunTime says

It seems clear that the most wealth has been built through business, though.

Most wealth comes from Crony Capitalism and outright legal theft.

Jean says

Dunnross,

I like your previous comment. It is true that it takes a couple of illegal immigrants 3 months to build a property. I live in LA and see it all over the place. And then they are sold at a 500k or more profit to phd's who will work all of their life to pay it off-or 30 years at least. So true!

Yes, but pundits will always tell you that the land is worth more than the house. Now, you tell me, what's the value of a postage stamp lot, if you can't grow food on it or mine for gold? In fact, these land regulations in Cali metropolitan areas should render most of these tiny lots almost worthless. You can't even kill a rat in your own back yard, without the green peace declaring you Public Enemy #1.

robertoaribas says

Yes, land in downtown San Fran, Wall street, etc. should be free...

Yes, it should. All you have to do is empty all the shelves in the supermarkets for 3 days and close off the bridges. Sounds familiar?

Yes, its so much better to pay rent for your entire life. Ill pay a mortgage for 30 years... Prob 17 at my expected payoff rate... Rather than a lifetime of rent.

robertoaribas says

No, it doesn't sound familiar. I'm not familiar with any time ever when say London, Paris, NY, San Fran, hell even Phoenix suddenly had free land....

Back in May 1862, President Abraham Lincoln passed the first law that granted land to most people, the Homestead Act. The Homestead Act entitled immigrants, freed slaves and Americans to 160 acres of undeveloped land to increase the expansion to the west.

Robber Baron Elite Scum says

I can't wait to see the expression on the faces of you cockroaches when home prices crash 99% and shit hits the fan into cannibal anarchy.

Ironic, my family just had this precise same conversation. Don't buy into the rents rising bullshite that is the shite they want the masses to believe to jump in and buy. It's all going to hit the fan and it isn't going to be pretty.

dunnross says

In fact, these land regulations in Cali metropolitan areas should render most of these tiny lots almost worthless.

YOU GOT IT in fact what you have stated is the truth. They have the mass suckers trading big bucks for worthless shite.

Reality is that very little property is truly exceptional, very very little.

FunTime says

Mathematics are not in agreement with the idea that buying houses or land leads to wealth.

He is full of it. Only few people have made big money in real estate historically and those few have been part of a bigger manipulation. You will never make big money buying a God damn house or two. That is the sucker shite they want the dreamers to believe in.

Mathematics and science prove the facts and the facts are clear. Anyone pushing money to be made in real estate is in the business of selling bullshite.

Jean says

It is true that it takes a couple of illegal immigrants 3 months to build a property. I live in LA and see it all over the place.

It's true in my area as well. Some of these illegals are asking upwards of $40/hr to put mud on the walls. I have started a different way of bidding on these house projects. "My illegals are better or cheaper than yours". LOL I have them bid on the total job. Since they don't have a contractors license they can't put a mechanics lien on the house. On my last subcontract job (fixer) I watched carefully and figured that the labor cost was $3.50/hr! 4 illegals for four 10 hr days. Recently, I was able to get a lawn service for $40/month (it takes them 1 hour for the front lawn), so this one is still making $10/hr. In this hood, average lawn service runs $ 150-200/month

Sounds like the OP is coming to realize where his income is in relation to those around him. House prices ultimately return to a simple relationship with local incomes. Rents return to a similar relationship with local incomes much more quickly.

The total cost of labor in most houses is significantly higher than 3 people for 3 months. More like 12 people for 3 months. Then you add in the cost of land and materials... And historically, people spend about 1/4-1/3 of their labor on their housing, not the 100% implied by "their labor". Suddenly... paying to own a house over 15 or 30 years doesn't seem so crazy.

I just moved to Seattle and was looking for houses to rent. I found that rental homes were more expensive than I expected (4br2ba 2000sf going for $2400-$2600/month back in May/June). So I bought. 6br/2.5ba 3300sf for 2 years of savings + $2200/month PITI. With the amount I can set aside every month I can pay off the place in 10 years.

Ultimately, if other people are paying too much for teardowns, let them. Move to a location where people aren't paying so much for crap home, live farther away from the city center, continue to rent, whatever it takes.

Elite SCUM-

You are going to be like my pet idiot. Really, I find fun and humor in this and that is why I do it, enjoying my coffee on a Sunday AM.

Who cares how long it takes to build a house? It is all about supply and demand curves. But I do not want to make this a lesson of economics.

I am a civil engineer and I do want you to take just a moment to think about the infrastructure and the manufacture of everything. Where do you get your water pressure from? What happens when you flush a toilet? **Magically** we have a world of conveniences. Think about how cheap it is to buy PVC pipe or a sheet of drywall or a 2x4. It is economy of scale.

Now imagine you do not have any of these resources. What could you possibly build in 30 years with all of your efforts? So do not slander technological advancements which allow you to have so much more benefit for so much less cost.

And if you are spending every nickel of income for 30 years, that is because you are an idiot. I chose to spend a very small portion of my income on a 15 year note. And I will drag it out with minimum payments as long as I own the place because the interest is so amazingly low. Sorry, starting to sound like a math lesson again. Cheers!

freak80 says

FunTime says

It seems clear that the most wealth has been built through business, though.

Most wealth comes from Crony Capitalism and outright legal theft.

Except for ours of course ;)

civilsid says

Who cares how long it takes to build a house?

Yeah. Who cares if you waste 30 years of your life for something built in 1-5 years?

Makes sense.

civilsid says

It is all about supply and demand curves.

True. Realtor®'s are not there to give an equal exchange.

civilsid says

But I do not want to make this a lesson of economics.

You should because you need one. Serf...

civilsid says

I am a civil engineer

I am a criminal

civilsid says

I do want you to take just a moment to think about the infrastructure and the manufacture of everything.

The infrastructure & manufacture of a Realtor® is interesting.

civilsid says

Where do you get your water pressure from? What happens when you flush a toilet? **Magically** we have a world of conveniences. Think about how cheap it is to buy PVC pipe or a sheet of drywall or a 2x4. It is economy of scale.

Now imagine you do not have any of these resources

Then imagine a monster shit on a Realtor®'s face.

civilsid says

What could you possibly build in 30 years with all of your efforts?

Enough capital to mass murder 99% of the population.

civilsid says

So do not slander technological advancements which allow you to have so much more benefit for so much less cost.

A Realtor® & a illegal immigrant construction worker never made any technological advancement.

Their work I have found to be quite sloppy.

I never made any slander of sewers & water infrastructure. Stop making things up, smart-aleck.

civilsid says

And if you are spending every nickel of income for 30 years, that is because you are an idiot

I already said that. You are guilty of Copyright® Infringement.

civilsid says

I chose to spend a very small portion of my income on a 15 year note.

When you have no income within that 15 year period, you will spend money you don't have.

civilsid says

And I will drag it out with minimum payments as long as I own the place because the interest is so amazingly low.

That's because the price is so high. The price is the interest itself.

Fractional Reserve Lending allows us banker criminal scum to charge degenerate smart-aleck sap idiots like you interest in a concealed manner while you proudly cheer and boast around to other peasants how the banker hardly charged you interest.

Hahahaha.... You dumb sap.

civilsid says

Sorry, starting to sound like a math lesson again.

Yeah. Don't get into the math lessons. I don't want a sap peasant like you to think too much. It's better for us Bankers that way to defraud you.

civilsid says

Cheers!

Anytime Serf...

I can't belive that people are still arguing whether real estate is going up or down, as if it had any significans whatsoever.

The economic model has for decades been based on borrowing from the future. Endless economic growth is a necessity in order to service the ever growing debt, and this is impossible in a world of finite resources, and an ever growing human population demanding a larger and larger share of these. We have now reached it’s limits. Due to the inescapable rise in the energy and commodity prices, the cost of essential goods will rise. This in turn will lead to massive un-employment as even a slight reduction in peoples discretionary spending has a disproportionate effect on an economy which to a large degree is based on non-essential industries and businesses. Salaries inevitably decrease due to the deteriorating employment situation, forcing desperate people to work for less, resulting in a dramatically lower standard of living for the masses who will struggle to be able to afford the bare minimum to maintain life. On the flip side, people with surplus wealth will do better than ever, since prices on non-essential goods will fall dramatically as too many non-essential goods and services will chase too few customers. This situation lasts until the deteriorating economic situation eventually renders most assets worthless, leaving many “have’s” wiped out. This is already happening in Greece and Spain, where people have literally gone from being wealthy to being homeless in a matter of months, having lost everything! Civil unrest will break out as people get more and more desperate, as is again already the case in Greece and Spain, and will soon be in the UK, France and all the rest.

Meanwhile in the US, gangsters like J. Corzine, protected by his corrupt friends in congress, steal 1,6b with impunity, Wall Street hands out 162b in bonuses from money that the finance “industry” (which produces nothing), has in effect, extracted from the real economy or stolen from the tax payers, and the population, unlike the one in Europe, is armed to the teeth, 40mil Americans need food stamps to survive. All this is a recipe for societal mayhem on a scale that most Americans cannot even imagine possible, unlike Europeans, not having seen anything like it in their history. A dramatic re-alignment of society, with a much, much smaller income/wealth gap, along with a reduced standard of living across the board, is the only way by which we can avoid a total break down. I may be accused of being a socialist for saying it, but I’m a realist, not a socialist, with a family history of surviving or succumbing to revolutions, all of which were preceded, and caused, by a much too wide gap between the classes, such as we see now. In fact, every time the gap has grown too wide, revolutions have ensued. The difference between “then” and “now” is that economies could expand, whereas now they can’t, due to limited natural resources unable to sustain economic growth in an absurdly overpopulated world.

Only to the degree that people acknowledge that we not experiencing a regular, cyclical recession or even depression, but the inescapable end of a far greater, world-wide monumental philosophical/economic cycle, and only trough a voluntarily re-alignment, can we avoid a total and utter destruction of our civilization. Clinging on to the current model will only make the inevitable collapse so much more chaotic and painful. A total change of course is inevitable, and we can either accept this fact and try to adapt to it voluntarily, rather than denying it, and being forced in to it, with all the disadvantages this implies. Sadly, this pre-occupation with Obama or Romney, indicate that people are in denial as to the real situation, and this does not bode well.

avdltd says

Endless economic growth is a necessity in order to service the ever growing debt, and this is impossible in a world of finite resources, and an ever growing human population demanding a larger and larger share of these. We have now reached it’s limits.

Exactly one of the reasons why I have advocated the mass murder of 99% of the world's population.

It usually starts by the 99% chopping the heads off the 1%. but it never ends there. It typically ends when the people who started the mayhem get THEIR heads chopped off, and by that time a substantial reduction of the population has already taken place. The whole thing could be avoided byu people haveing fewer or no kids, and a redistribution of wealth in a direction contrary to the one that has been going on for the last decades, where the "common" wealth has been extracted, and has been placed in the pockets of a few, well connected, oligarchs.

Wow. RBES's response to civilsid is so spectacularly full of fail, it's difficult to know where to begin. It seems like he's so hostile to the idea of a fiat currency that it's a complete mystery to him how the world's economies have functioned for so long without collapse (and so it must be around the corner).

Fiat currency works if the issuing bank fulfills it's one obligation: keep changes to the amount of money (M3) in circulation gradual. And because fiat currency works (and historically, works significantly better than precious metal currencies), it's how world economies are going to continue for the foreseeable future.

"The price is the interest itself."

This statement makes no sense. The interest on loans today is 3.5%. That price for renting money is ridiculously low. If you have a recent mortgage in the US (like me), we're taking a handout from the US government because that's free money.

Now, if RBES meant to say that the price is the inflation, well then he's wrong on that side too, because if inflation is in the future, then you should be going into fixed interest rate debt just as fast as you can. A few years of 18% inflation and I can write a check to pay off my house (since owning stock in valuable companies is a hedge against inflation, and my pay is likely to rise with inflation...). Inflation hurts lenders and helps debtors.

The problem arises when you buy now @ 3.5% and need to sell later (avg. house held for 5 years) when interest rates rise. You are then handcuffed.

Unless you vow to never move and be able to always have a job where you are, then you'l be okay.

Cracker box that only lasts a few decades? True of most Americans.

However I aspire to something more.... durable. Made with stone, you may have seen a few structures hundreds of years old dotting the landscape in the EuroZone. Build your own!

oracle of Kypseli says

when you buy now @ 3.5% and need to sell later (avg. house held for 5 years) when interest rates rise

Not another glib "when interest rates rise" comment. Just when/how is that going to happen anytime in the next 15 years??

Vicente says

However I aspire to something more.... durable. Made with stone, you may have seen a few structures hundreds of years old dotting the landscape in the EuroZone. Build your own!

If you've got enough coin you can buy one of these places up in the thousand islands.

Giving up all your savings while paying rent in retirement only to be severely depleted financially at the end is no more dignified. The landlords will not spare you when they will be able to rent to some 20/30 something - and trying to compete with them on fixed income will not be a picnic.

Ppl, you can work/rent in expensive areas: Boston, NYC, DC, Chi, etc, and buy a home in the countryside for retirement.

I'd bought mine in western MA for less than $250K, between Rte 495 and Amherst/No'. It's all paid off now and I rent for contract assignments, whenever I spend long periods of time within one of the metro areas. In contrast, ppl are buying circa Boston for $650K to $800K, with the hopes that they never get laid off. I need a little more than *hope* when jobs are moving to Texas and the Carolinas, all of the time.

Sure, the nice semi-rural enclaves like Burlington VT or Saratoga Springs NY are pricey but c'mon, within 1/2 hr of those places, prices drop like a rock. Ask Freak80, if you don't believe me. You can find home for $100K in upstate NY.

avdltd says

The economic model has for decades been based on borrowing from the future. Endless economic growth is a necessity in order to service the ever growing debt, and this is impossible in a world of finite resources, and an ever growing human population demanding a larger and larger share of these. We have now reached it’s limits.

Scary isn't it?

Rin says

Ask Freak80, if you don't believe me. You can find home for $100K in upstate NY.

Correct. In Corning/Elmira, smallish houses in good condition can be had for a little over $100k. But you have to watch out for the property taxes. And there's a big "risk" factor. What if Corning, Inc. goes to Texas or Mexico? Ever been to Binghamton?

"The economic model has for decades been based on borrowing from the future. Endless economic growth is a necessity in order to service the ever growing debt, and this is impossible in a world of finite resources,"

Well said avdltd!

This is why our financial system is evil.

If, that is, you consider it evil to cause extinction of species, destruction of ecosystems, needless suffering of billions of people and animals all to make a minute percentage of humans obscenely rich.

freak80 says

What if Corning, Inc. goes to Texas or Mexico?

I think we've already seen this situation with Buffalo, which has lost nearly a million residents, since the early 70s.

An $90K home there, back in the 80s, is around the same today.

Thus, if the Buffalo housing range is $85K to $120K, I don't see a big deal in losing in ranges like that vs never being able to move for work, esp when one plunks down $700K to be in a nice town, next to Boston but then sees his entire sector (see Mutual Funds or Telecom), get sent to the Texas Triangle. And yes, many of the big companies have been leaving the northeast for the lower costs of living states.

Rin says

I think we've already seen this situation with Buffalo, which has lost nearly a million residents, since the early 70s.
An $90K home there, back in the 80s, is around the same today.

Yep. It's pretty much the same deal here.

"Building equity" is kind of a moot point here. I would never expect appreciation...even nominal appreciation. When accounting for inflation, prices have been going down.

But even so, here you can get a lot more house for the buck when compared to renting. It *might* actually be best to put a little money down as possible, since "equity" is moot. Especially with interest rates so low.

Yes, If I did that I'd be "renting", i.e. paying interest to my bank. But if I can get a lot more house renting from a bank compared to renting from a landlord, why not?

It's pretty much the complete opposite of the CA RE situation.

freak80 says

It's pretty much the complete opposite of the CA RE situation.

Well, Cali has got these main issues ... the greater SoCal Area: LA to San Diego or Bay Area: SF to SV areas are too far from their respective low costs countrysides. Thus, it's basically not really possible to live in, let's say San Bernadino or the Central Valley, and work in LA.

My location allows me access to CT, Rte 495/outer Boston, & parts of RI, without needing to rent a crash pad sublet, for work itself, though for Boston & Providence, I do expense sublets during my stints there, from Mon to Thurs, to minimize commuting times.

I suspect that many of my former Bostonian colleagues, once they get the whack, will be renting rooms in their homes to folks like me, so that they don't get foreclosed on.

freak80 says

Yes, If I did that I'd be "renting", i.e. paying interest to my bank. But if I can get a lot more house renting from a bank compared to renting from a landlord, why not?

The thing here is that even if you lose your job., you can move to let's say Boston, split an apartment with a student, and still pay off your upstate NY mortgage, metro Boston rent [for whatever time your job lasts], and save money for retirement. When you retire, you'll have a nice home in NY state with money in the bank.

Rin says

freak80 says

What if Corning, Inc. goes to Texas or Mexico?

I think we've already seen this situation with Buffalo, which has lost nearly a million residents, since the early 70s.

An $90K home there, back in the 80s, is around the same today.

Thus, if the Buffalo housing range is $85K to $120K, I don't see a big deal in losing in ranges like that vs never being able to move for work, esp when one plunks down $700K to be in a nice town, next to Boston but then sees his entire sector (see Mutual Funds or Telecom), get sent to the Texas Triangle. And yes, many of the big companies have been leaving the northeast for the lower costs of living states.

Remember what Delaware Avenue was like in 1900? And look at it now.

Rin says

The thing here is that even if you lose your job, you can move to let's say Boston, split an apartment with a student, and still pay off your upstate NY mortgage

Hmmm...good point. But why Boston? Too expensive!!

Of course I'd need to pay someone to maintain the place.

Hey Roberto, do you have a private jet?

freak80 says

Hmmm...good point. But why Boston? Too expensive!!

Well, you can sub Boston for Chicago, Metro NYC, DC, or any other high priced town/city, where there may be better paying jobs but where it isn't worth, buying into the mania of the locals, just to be upside down on your home, when your job gets sent to Texas or Manila.

Rin says

Well, you can sub Boston for Chicago, Metro NYC, DC, or any other high priced town/city, where there may be better paying jobs

I'm a mechanical engineer working in the energy sector, so there's always Houston. Dirt cheap there thanks to lack of environmentalists & related land-use restrictions. I'd move there in a heartbeat except I have family in the Northeast. And there's not much scenery down there.

Reader says

Remember what Delaware Avenue was like in 1900? And look at it now.

Buffalo NY is a perfect example of a casuality of the decline/fall of manufacturing in America. Unlike Mo'town with primarily automobiles, Buffalo had a mix of various manufacturing products and was suppose to be the new city of the 20th to 21th centuries. Well, that vision came to an end, starting in the 60s, but the real slide started in the 70s, when everything went away.

Think about it, in 1970, Buffalo and Boston both had 2 million denizens. Today, Buffalo shrank by a million whereas Boston grew by a million (or two), if you count all the ex-burbs.

All and all, I think that this points a bit to where the highly touted service (or even production) sectors will be headed, when most work can be done either online or in automated, robotic facilities. High priced northeast cities will lose their shine.

freak80 says

so there's always Houston.

The Texas Triangle is my backup plan, if my current hedge fund activities don't get me to retirement in 5-7 years and/or that I don't attend medical school in eastern Europe.

It's really the only high population areas where I'd buy into real estate, as job markets there are viable but like you, I'm a northeast Yankee at heart so I can't see myself in TX, other than as a long term business trip.

War says

Rin says

Buffalo NY is a perfect example

Buffalo demonstrates what happens to ALL cities. If you think some city is immune, you're fooling yourself.

Yes, there's so such thing as immunity, however, I believe Buffalo is a near perfect example of a once great early 20th century development, gone to the dogs at century's end. Realize, Michigan's Detroit is a singular industry town with minimal diversification outside of it, ala Gary Indiana with US Steel Corp. They were poised for an implosion when Japan Inc started selling cars. And when ancient Rome a/o Constantinople fell, they were invaded and overwhelmed by outside forces. No one's invaded the Niagara region since the War of 1812.

Buffalo's decline coincided with the rise of *New* Boston, from a blue collar/old New England city. This was linked to the raise of white collar work in electronics (Teradyne, Digital Equipment Corp, etc), finance/insur (J Hancock, Fidelity, etc), and defense (MITRE, Raytheon, etc). Later, adding biotech and more health care avenues, as the decades progressed. Today, many eastern MA stalwarts are in decline, with a few of the startups, adding much fewer headcount than before. Defense is the last stable industry, however, the headcount is moving to TX.