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Dearest Friends and Colleagu
From: Dr. Apu P. Bhat
Satellite Tel: Note:Do not send emails.You can contact me directly on the tel.number or by sending me a satellite message stating your telephone number and email address contact on this number just given to you using the link online below. www.thumbupyourass.com you will see send a satellite message to my sat.tel.number- 881-631-410-574
Attn:President/C.e.o.
Strictly Confidential and Urgent Business Proposal.
Re: Transfer Of Usd $21,500.000{Twenty - One Million, Five Hundred Thousand Us Dollars Only.
I am a member of the Federal Government Of Nigerian National Petroleum Corporation (N.N.P.C). Sometime ago, a contract was awarded to a foreign firm in the Petroleum Trust Fund (P.T.F.) BY MY COMMITTEE.
This contract was over invoiced to the tune of us$ 21.5Million Dollars. This was done delibrately. The over - invoicing was a deal by my committee to benefit from the project. We not want to transfer this money, which is in a suspense account with the P.T.F. into any oversea account, which we expect you to provide for us.
Share:
60 % of the money would be for my partners and I. 30 % of the money would be yours, for providing us with logistics, which, would include a safe bank account, where we shall facilitate funds transfer into, as soon as documentations are concluded over here. 10 % of the money has been mapped out from the total sum to cover any expenses that might be incurred during the course of the transaction, (both local and international expenses).
If interested in assisting us, please contact me via my secured satellite tel number- 881-631-410-574, specially procured for this project, using the text message..
It may interest you to know that a similar transaction was carried out with one Mr. Patrice Miller, President of Crane International Trading Corp., of 153 East 57th St., 28th floor, N.Y.10022, Telephone: 212-308-7788 and Telex: 6731689. The deal was concluded and all covering documents, forwarded to Mr. Miller to authenticate the claims. Once the funds were transferred, Mr. Miller presented to his bank, all the legal documents and remitted the whole funds to another bank account, and disappeared completely. My colleagues and I were shattered, since such opportunities are not easy to come by.
Please, if you are interested in assisting us carry out to the fullest capacity, this transaction, we would require the following information from you which would enable us make formal application to the various ministries / parastatals, for the release and onward transfer of the money to your account.
1.Your Full Name, Company's Name, Address, Telephone and Fax Numbers. 2.Your Bank Name, Address. Telephone and Fax Number. 3.Your Bank Account Number and Beneficiary Name - You must be the signatory.
Please, note that we have strong and reliable connections at the Central Bank Of Nigeria and other Government Parastatals, hence assistance in this regards, would not be a problem. At the conclusion of this transaction, we shall use same contacts to withdraw all documents used in the course of this, to avoid any trace whatsoever that may ever arise, to you or to us, now and in the nearest possible future.
It might also interest you to know that we are mere civil servants who do not want to miss this opportunity, hence, we want this money transferred out, as soon as possible, before the newly democratically elected government ever think of making enquiries as regards the various activities of the past military government.
Kindly contact me as soon as possible, whether or not you are interested in this deal, so that whereby you are not interested, it would give us more room to scout for another partner. But if you are interested, kindly contact me via above email, telephone or fax, so that we can swing into action, as time is not on our part.
I wait in anticipation of your fullest co-operation. Yours Faithfully,
Dr. Apu P. Bhat
Send me your email address and tel.numberif interested for re- verification that you actually received this mail.
I don't know
My personal choice is to keep renting until it's cheaper to own.
It has been awhile ! I don't know either Patrick, and that is OK !
i should be happy the value of my condo in Dallas has gone up, but so has my taxes !
I want to sell and yes, later, I can find something somewhere.
And ! I am very happy in this new apartment ! A repeat of the pics.
Ciao. David
Also, as someone who is a veteran of bear blogs, the biggest attribute you can have IMO is self awareness. I too was in denial, as we all were. We were all so wrapped up
Jason, to be fair, not all of us were bears, either. 10 years ago I was 3 years into my first real job out of college. Try saving 20% for a (then) $700k apartment in Brooklyn in your first adult years out of school. And there were none of those famous FHA freebie loans for that kind of purchase. The all-cash (in the city, anyway) environment of 2009-2013 in LA eradicated any purchasing power of a 20% DP. That was the point we realized $250k was a lot of cash to have saved and we could just move to Bumblefuck, Mississippi and retire with that kind of money.
What I realized is that my need to live and work in big cities was the biggest impediment to my home ownership. I don't regret it; my career would have gone nowhere if I hadn't left the sticks and started (with nothing) in New York. With maturity, I now see the big city as a place I don't need anymore. But I have a few years left in me before we can go off into the sunset for early semi-retirement.
As the great Jody Chunder once said on this very site (I'm paraphrasing and forget his exact, elegant wording), I lived and worked in the city and all it ever got me was chair-ass, a bruised liver, and a broken heart. Amen, brother.
David9, always good to see you check in.
Whatever happened to ol Uncle Jody of Victorville fame?
Is it true he retired to Pahrump?
Our grandparents did not compete with Chinese money or the massive population we now have, nor did they prize metro-city real estate the way we do today
Heh, I'm reading some good, old histories of the original settling of Central California.
Ca. 1890 Somebody named E.B. Perrin owned land around Fresno by the square mile:
https://www.raremaps.com/gallery/enlarge/24804
His 9+ sections in the NE of that map are worth up to $5M an acre now . . .
And that's around 6,000 acres, LOL.
Somebody named Bullard bought 72,000 acres at around 25c an acre back then, around $500,000 in total in 2015 dollars.
Now 2 nice acres of it will set you back $1M . . .
https://www.redfin.com/CA/Fresno/6475-N-Sequoia-Ave-93711/home/58375844
But this was utterly useless land back then, when the town had more land (~8,000 sections within a 50 mile radius) than the people (all 3,000 of them) could use.
Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with a 20% downpayment.
20% is in the past like balloon and assumable mortgages are now.
Now it's 5% and pay some more points to avoid PMI.
3X factor was based on the 8% mortgage rates. Now they're well under half that.
Landlords say a safe price is set by the rental market; annual rent should be at least 9% of the purchase
price, or else the price is just too high. Yet in affluent areas, both those safety rules are still being violated. Buyers are still borrowing 6 times
their income with tiny downpayments, and gross rents are still only 3% of purchase price.
Two things; 10 year rates have collapsed:
So what was 9% gold-standard cap rate is now a 2% cap rate.
Plus CPI is still the landlord's best friend:
Rents never, ever go down, not since 1930 at least. You want to own your customers by the balls, buy RE.
I just bought a home for $195,000.00 (closing next friday hopefully) Tax is $1200 a year, insurance $500. non owner occupied loan 25% down, 4.375%.
My payment is less than $900 a month.
I showed it to potential renters at $1950 a month, and have several interested, may have an app and deposit tomorrow. Have about $5000 in rehab to do, and promised to convert the carport to a garage, which is easy since it only needs one wall and the frame around the door on the front.
Yeah real estate is a terrible buy.
that's a cheap house with excellent cashflow.
did i ever say you should not buy such a house?
Sharingmyintelligencewiththedumbasses says
I just bought a home for $195,000.00 (closing next friday hopefully) Tax is $1200 a year, insurance $500. non owner occupied loan 25% down, 4.375%.
My payment is less than $900 a month.
I showed it to potential renters at $1950 a month, and have several interested, may have an app and deposit tomorrow. Have about $5000 in rehab to do, and promised to convert the carport to a garage, which is easy since it only needs one wall and the frame around the door on the front.
Yeah real estate is a terrible buy.
Price of 8 x gross income for a house is one hell of a return. Is it an old home?
Price of 8 x gross income for a house is one hell of a return. Is it an old home?
of course it is old! 1960's. the pipes are in fine shape, roof needs about $2500. Landscape has some problems and it is overgrown, original owner or heir selling it, so it needs serious updating, but that's what I do. Agent/seller screwed up selling it. I could clean it up, get it to pass a home inspector and make $20K+ instantly.
Found this blog post; absolutely amazing.
I totally agree to this premise - I reached the same conclusion independently.
We bought our "rather modest" townhouse at $370K. However the rental market here shows that the maximum we can rent it out for is $2200 - realistically, it's $2K. And we won't be guaranteed a 100% occupancy either. Even at my current 30 year mortgage at a low interest rate of 3.6%, my rent barely exceeds (by some $150) my total housing payment including taxes and HOA dues. There isn't enough cushion to do any repair works or even account for low occupancy.
Worse yet, rental income is subject to taxes and since we are in 28% bracket, we are sure to east a lot of them. The only way I can offset them is to start using depreciation from year 1, which gives me maybe a few years of "break even" income, after which I will have to start paying more in taxes. The only hope is that rent increases every year, but unfortunately, my experience in this area shows it's either the same or even decreasing! And this is a prime area, near malls, highways and even a great school district. It's baffling why rents wound't be higher, but a major housing frenzy in a neighboring town perfectly explains it actually.
Yeah...people are buying $700K-$900K newly constructed houses like there's no tomorrow. People even on single income with salaries barely into 6 figures are doing it (they have 2 kids to boot too). We see the resale market in the same town, and houses are being sold at $100K less than their asking prize clearly showing that the bubble is losing air even now. More interestingly, we can rent houses bought at $550K at as little as $2200. These people will bleed money on rentals. But apparently, no one cares. Having a loot-at-me house trumps personal finances.
We have decided to be rational in an irrational market. This town has a lot of our irrational friends, so we will rent one of their houses when we sell ours.
We bought our "rather modest" townhouse at $370K. However the rental market here shows that the maximum we can rent it out for is $2200 -
Rule of thumb 100 months rent is the price of the house. Over that doesn't pay off unless you are gambling on appreciation. Fast and easy way to tell if it's a renters market or an owners market. Having 2200 in rent on 370k is a big renters market. http://affordanything.com/2016/04/28/one-percent-rule-gross-rent-multiplier/
The only way I can offset them is to start using depreciation from year 1, which gives me maybe a few years of "break even" income,
You don't have any choice in depreciation. The IRS requires it. Then they claw it back when you sell the house.
We have decided to be rational in an irrational market. This town has a lot of our irrational friends, so we will rent one of their houses when we sell ours
Yep good call. Downside is in a renters market rentals are frequently much harder to come by because no one is making much or any money renting. You wind up renting from people looking to sell the house but won't tell you that. You are paying for the privilege of being a caretaker without knowing it.
I ended up buying when I came back to the states even though the market where I live favored renting. Where I am the taxes are so high and renter protection laws are so onerous, 6 months to evict is common, that people would rather put houses on the market and wait however long it takes for a sale rather than rent them out. Carrying a deadbeat $1500 a month tenant (who might trash the house moving out) for 6 months at with 600 a month taxes and 200 a month water/sewer on top of a mortgage is a real loser.
We have decided to be rational in an irrational market. This town has a lot of our irrational friends, so we will rent one of their houses when we sell ours.
You will be sorry.
Rule of thumb 100 months rent is the price of the house.
There is no such rule, there is a formula which depends on the interest rates. If your monthly expense is 90% of the income you are good.
Bob makes his own rules.
Rule of thumb 100 months rent is the price of the house.
There is no such rule, there is a formula which depends on the interest rates. If your monthly expense is 90% of the income you are good.
Bob makes his own rules.
I've known about it for 40 years since I first starting working with managing rentals for someone else. It's called the 1% rule. I guess these guys are just making it up too.
https://www.thebalance.com/rental-property-investing-for-beginners-453821
http://affordanything.com/2012/01/25/income-property/
http://samsrealestateclub.com/the-1-rule/
http://www.doughroller.net/real-estate-investing/the-1-solution-to-real-estate-investing/
There a a couple hundred more articles describing the 1% rule. Google them.
Whatever dude, I own enough rental units myself. I always get 1% or I don't buy a rental property. I'm starting to buy in a market now where it's more like 1.7-1.8%. That's crazy out of balance. There aren't many of those markets out there.
In my own place to live I've done very well with renting and banking the difference between the rental amount and cost of owning when owning is really out of line. or buying when it's out of whack the other way then renting when I move on. You can do whatever you want with your money. Sounds like you are one of the people who only asks what the cost per month is.
yup 1% rule is a quick calc.. those who want higher profit margin/ROI will do well at getting a property at 90% expense rate.. but can be harder to come by thru conventional means (listings) in a seller's market (good luck).
anyone who's gonna spend their money and time on re will really want to put in their dd to ensure their rough/quick calcs check out tho!
but ya, Bob isn't pulling numbers outta his hat ;)
i see some good points, some outdated (written during the bubble era). but 3. seems incorrect. historically there has been no relationship between mortgage rates and home prices.
do you have data backing up your "high-rates -> low prices" rule?
Thanks for the comments everyone - agreeing or disagreeing likewise.
This blog post has already made a lot of terrific points. The one that stood out to me was: "It's better to buy a house at a low price and a high interest rate than otherwise". It's so counterintuitive and yet, so absolutely bang on money. It was almost a Eureka moment for me when I really understood this. Low interest rates means your future is being screwed, but this is the very thing that nearly everyone is taking on and running away with $800K mansions with. Can you say the world is irrational? Nearly everyone advised me buy a house "because interest rates are low"...no sheep, you buy when rates are high and refinance when they get low. It's almost like someone who buys stocks when the markets are riding all time highs and sells them in fear when the market tanks. This is absolutely not how to make money, and all the people who have $800K houses at 3.5% interest rates are thoroughly screwed.
30 years. It's. A. Long. Long. Time. No one is going to live in that house for 30 years. It's a super expensive over-leveraged rental that's got no wiggle room for renegotiation of the terms of contract. I would trust this logical economic fact over the primal fear that "I might be sorry for not buying today".
As for us, the moment we made the decision, I felt almost liberated. I haven't felt so good in quite a few years. I am almost thankful that the size of our mistake was a mere $370K and not $800K. Thankfully, our income has shot up to the point, where I can pay off my current house in just under 3 years if I want to. The mere thought that we could rent and would not have to buy a huge mansion has suddenly opened up a lot of possibilities in our lives. It's a whole subject of discussion altogether.
Maybe it's not the right decision, and maybe all the people who bought mansions today will be millionaires. But, maybe not.
"This blog post has already made a lot of terrific points. The one that stood out to me was: "It's better to buy a house at a low price and a high interest rate than otherwise". It's so counterintuitive and yet, so absolutely bang on money. It was almost a Eureka moment for me when I really understood this. Low interest rates means your future is being screwed, but this is the very thing that nearly everyone is taking on and running away with $800K mansions with. Can you say the world is irrational? Nearly everyone advised me buy a house "because interest rates are low"...no sheep, you buy when rates are high and refinance when they get low. It's almost like someone who buys stocks when the markets are riding all time highs and sells them in fear when the market tanks. This is absolutely not how to make money, and all the people who have $800K houses at 3.5% interest rates are thoroughly screwed."
Except, as Mark said, it's 100% false. Housing prices do not move opposite of interest rates. History proves this.
"This blog post has already made a lot of terrific points. The one that stood out to me was: "It's better to buy a house at a low price and a high interest rate than otherwise". It's so counterintuitive and yet, so absolutely bang on money. It was almost a Eureka moment for me when I really understood this. Low interest rates means your future is being screwed, but this is the very thing that nearly everyone is taking on and running away with $800K mansions with. Can you say the world is irrational? Nearly everyone advised me buy a house "because interest rates are low"...no sheep, you buy when rates are high and refinance when they get low. It's almost like someone who buys stocks when the markets are riding all time highs and sells them in fear when the market tanks. This is absolutely not how to make money, and all the people who have $800K houses at 3.5% interest rates are thoroughly screwed."
Except, as Mark said, it's 100% false. Housing prices do not move opposite of ...
Did interest rates go as below as 3.5% ever in the history? As a first generation immigrant who has lived in the US for 16 years, I don't have enough context and I haven't really lived through the experiences of various eras.
I can only say this though: Today's rates are tremendously low - made artificially possible by the Fed's prime rate. People have stretched their monthly payment to buy a $800K house that requires a 2 hour one way commute to work. I can logically see if and when rates rise, prices will fall. Maybe the fall won't be as steep as 2009, or maybe the price will just stay flat as interest rates rise very slowly. Whether you bleed in one go or bleed slowly, the bleeding will be there, because I cannot honestly see a $800K-1M house appreciating, or some working family paying upwards of $5K rent for it.
Housing prices do not move opposite of interest rates. History proves this.
If (1) the market is not cheap, and (2) wages do not keep with rates, then rising interest rates will put downside pressure on housing prices. You don't need history to prove this. Common sense is enough.
"If (1) the market is not cheap, and (2) wages do not keep with rates, then rising interest rates will put downside pressure on housing prices. You don't need history to prove this. Common sense is enough."
I'm just saying that it's amazing that common sense has never prevailed for the last 100 years of housing data history. You'd think if something was true, 100 years of data would be enough to show it.
"I can only say this though: Today's rates are tremendously low - made artificially possible by the Fed's prime rate. People have stretched their monthly payment to buy a $800K house that requires a 2 hour one way commute to work. I can logically see if and when rates rise, prices will fall. Maybe the fall won't be as steep as 2009, or maybe the price will just stay flat as interest rates rise very slowly. Whether you bleed in one go or bleed slowly, the bleeding will be there, because I cannot honestly see a $800K-1M house appreciating, or some working family paying upwards of $5K rent for it."
Yes, rates have been very low in the past. The Fed doesn't set prime rate.
Everyone can logically see prices falling when rates rise, because they can't see all the interdependencies at work. Rates don't rise in a vacuum. When rates rise, it's almost always because incomes are rising as well. And the effect of incomes outweighs the effect of rates.
Bob makes his own rules.
I've known about it for 40 years since I first starting working with managing rentals for someone else. It's called the 1% rule. I guess these guys are just making it up too.
That gross rent multiplier changes from area to area, and property to property. It can only be used as part of an analysis.
You should know that.
In my own place to live I've done very well with renting and banking the difference between the rental amount and cost of owning when owning is really out of line. or buying when it's out of whack the other way then renting when I move on. You can do whatever you want with your money. Sounds like you are one of the people who only asks what the cost per month is.
I look at the "Cap Rates" much better than the GRM. Even the Cap Rates vary with area, but still a better analytical tool than the GRM.
"I can only say this though: Today's rates are tremendously low - made artificially possible by the Fed's prime rate. People have stretched their monthly payment to buy a $800K house that requires a 2 hour one way commute to work. I can logically see if and when rates rise, prices will fall. Maybe the fall won't be as steep as 2009, or maybe the price will just stay flat as interest rates rise very slowly. Whether you bleed in one go or bleed slowly, the bleeding will be there, because I cannot honestly see a $800K-1M house appreciating, or some working family paying upwards of $5K rent for it."
Yes, rates have been very low in the past. The Fed doesn't set prime rate.
Everyone can logically see prices falling when rates rise, because they can't see all the interdependencies at work. Rates don't rise in a vacuum. When rates rise, it's almost always because incomes are rising as well. And the effect of incomes outweighs the effect of rates.
That is totally incorrect. Rates rise because "inflation" rises. True, in a healthy economy, rising inflation would mean people's income rises too. But the US has been printing money for a while now to offset all the junk securities from the 2009 era, and the resulting rising inflation will not necessarily mean rising incomes.
We are due for high inflation and high interest rates, and it remains to be seen if this economy has enough jobs to push people's incomes higher. I hear the minimum wage workers are protesting today on streets for $15/hour...
P.S. 30 year mortgage rates in fact have already jumped by 0.5% - I refinanced at 3.5% just 6 months ago; now that rate is at 4% from the same institution. I will watch closely the summer of 2017 and report the findings on this thread.
That gross rent multiplier changes from area to area, and property to property. It can only be used as part of an analysis.
You should know that.
That's why I said rule of thumb. It's a place to start. Obviously I don't buy properties for investment or make a rentvsbuy call by just looking at the rent vs house prices in the general neighbourhood. But the grm for overall area market lets me have a general idea if I want have a to look or not bother. When I got out of tx (great returns in late 90's then insurance and property taxes went insane) los vegas was a screaming bargain basement. Now I see some other markets that are much better and will start shifting out of vegas.
I look at the "Cap Rates" much better than the GRM. Even the Cap Rates vary with area, but still a better analytical tool than the GRM.
Maybe, maybe not. It depends on whether the books you are looking are truly reflective of actual expenses or cooked up with capital expenditures to puff up numbers for a sale. Almost impossible to verify just going through a P&L. You would have to dig through the actual receipts, even then it can be deceptive.
Cap rates works much better for commercial buildings or apartment complexes than individual houses for rent. I don't do commercial any more. It's not hard to find a rental property manager that's good. It's very hard to find a commercial property manager that's good. I don't know why that should be. Maybe I know a lot more about the right questions to ask rental property managers and how to review their operations.
"That is totally incorrect"
No, it's really not. If money printing were to cause the price of goods to rise, it would be exactly because that printed money reached people's pockets as income. Supply and demand dictates that prices rise when demand outstrips supply. This can only happen when people have money.
"If (1) the market is not cheap, and (2) wages do not keep with rates, then rising interest rates will put downside pressure on housing prices. You don't need history to prove this. Common sense is enough."
I'm just saying that it's amazing that common sense has never prevailed for the last 100 years of housing data history. You'd think if something was true, 100 years of data would be enough to show it.
What a dumb comment. Tell me when during these 100 years conditions (1) and (2) have been satisfied, and interest rates have been rising.
We have too much debt, interest rates won't rise. And house flipping is too large a part of the economy, imo
"What a dumb comment. Tell me when during these 100 years conditions (1) and (2) have been satisfied, and interest rates have been rising"
I think you're missing the point. You are assuming a scenario that doesn't happen.
Supply and demand dictates that prices rise when demand outstrips supply. This can only happen when people have money.
The main driver for house prices besides foreign investors was the downward readjustment of the interest rates so the monthly payments stay the same or don't increase too much. Rates have been artificially extraordinarily low for a while, when the unwinding continues unaffordability will weigh on the market. People don't have 'more' money, their monthly payments have been artificially "deflationed" while the house price itself has been artificially "inflationed".
Laughable - net net people may barely break even, but likely most will have less money after accounting fort the inflation in housing, healthcare, education and childcare. Most have been SHAFTED by ACA premium and deductible increases, those alone may eat their salary "increase".
"Laughable - net net people may barely break even, but likely most will have less money after accounting fort the inflation in housing, healthcare, education and childcare. Most have been SHAFTED by ACA premium and deductible increases, those alone may eat their salary "increase"."
OK fine. Here are real income gains:
Sure looks like real income has gone up quite a bit since 2012
Ask any Realtor about 'cash purchases' it's what they look for. Whatever percentage is reported, I personally would question. IMO, the RE market doesn't even care, currently, about the mortgage customer.
You are assuming a scenario that doesn't happen.
1. So you admit that the conditions that I specified never existed? Here goes your 100 history argument out of the door.
2. Now that we have established 1, we can have a more meaningful discussion - will these conditions exist in the future? Namely, IF rates start rising, is it likely that household incomes will keep with up with them? What effect will it have on housing affordability given it's current level?
joeyjojojunior,
Your graph proves my point. Last time rates were rising, household incomes were keeping with inflation.
"1. So you admit that the conditions that I specified never existed? Here goes your 100 history argument out of the door."
I don't know. I'd have to go back through history and check all the data. But my guess would be that has never happened in the past and will never happen in the future. The 100 year argument is showing you that the idea that when rates rise, prices fall is absolutely incorrect. Which is what the discussion was about.
"2. Now that we have established 1, we can have a more meaningful discussion - will these conditions exist in the future? Namely, IF rates start rising, is it likely that household incomes will keep with up with them? What effect will it have on housing affordability given it's current level?"
You have it exactly backwards. Rates will NOT rise until income rise first. That's my point--your scenario hasn't happened in the past and won't happen in the future. If you disagree with that statement, please give me one reason why rates will rise if incomes are stagnant.
"joeyjojojunior,
Your graph proves my point. Last time rates were rising, household incomes were keeping with inflation."
That's my point too. They ALWAYS do. Your scenario is nonsensical.
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On the other hand, in some poor neighborhoods, prices are now so low that gross rents may exceed 10% of price. Housing is a bargain for buyers there. Prices there could still fall yet more if unemployment rises or interest rates go up, but those neighborhoods have no bubble anymore.
The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's pretty safe to buy for yourself because then rent could cover the mortgage and ownership expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:
annual rent / purchase price = 3% means do not buy, prices are too high
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy, prices are reasonable
So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same. Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling housing prices. Subtract HOA from rent before doing the calculation for condos.
Although there is no way to be sure that rents won't fall, comparing the local employment rate (demand) to the current local supply of available homes for rent or sale (supply) should help you figure out whether a big fall in rents could happen. Checking these factors minimizizes your risk.
The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.
It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.
The Fed exists to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages. If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.
As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost. The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get
paid back.
And of course the banks can simply sell millions of bad loans to Fannie and Freddie at full price, putting taxpayers on the hook for the banks' gambling losses. Heads they win, tails you lose.
It is necessary that YOU be forced deeply into debt, and therefore forced into slavery, for the banks to make a profit. If you pay a low price for a house and manage to avoid debt, the banks lose control over you. Unacceptable to them. It's all a filthy battle for control over your labor.
This is why you will never hear the president or anyone else in power say that we need lower house prices. They always talk about "affordability" but what they always mean is debt-slavery.
The simple fact is that the renter - if willing and able to save his money - can buy a house outright in half the time that a conventional buyer can pay off a mortgage. Interest generally accounts for more than half of the cost of a house. The saver/renter not only pays no interest, he also gets interest on his savings, even if just a little. Leveraged housing appreciation, usually presented as the "secret" to wealth, cannot be counted on, and can just as easily work against the buyer. In fact, that leverage is the danger that got current buyers into trouble.
The higher-end housing market is now set up for a huge crash in prices, since there is no more fake paper equity from the sale of a previously overvalued property and because the market for securitized jumbo loans is dead. Without that fake equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.
It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is kept unfairly high because of the Realtor® lobby's corruption of US legislators. On a $300,000 house, 6% is $18,000 lost even if housing prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.
From The Herald:
"We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize."
House price inflation has been very unfair to new families, especially those with children. It is foolish for them to buy at current high prices, yet government leaders never talk about how lower house prices are good for American families, instead preferring to sacrifice the young and poor to benefit the old and rich, and to make sure bankers have plenty of debt to earn interest on. Your debt is their wealth. Every "affordability" program drives prices higher by pushing buyers deeper into debt. Increased debt is not affordability, it's just pushing the reckoning into the future. To really help Americans, Fannie Mae and Freddie Mac and the FHA should be completely eliminated. Even more important is eliminating the mortgage-interest deduction, which costs the government $400 billion per year in tax revenue. The mortgage interest deduction directly harms all buyers by keeping prices higher than they would otherwise be, costing buyers more in extra purchase cost than they save on taxes. The $8,000 buyer tax credit cost each buyer in Massachusetts an extra $39,000 in purchase price. Subsidies just make the subsidized item more expensive. Buyers should be rioting in the streets, demanding an end to all mortgage subsidies. Canada and Australia have no mortgage-interest deduction for owner-occupied housing. It can be done.
The government pretends to be interested in affordable housing, but now that housing is becoming truly affordable via falling prices, they want to stop it? Their actions speak louder than their words.
Next Page: Eight groups who lie about the housing market »
The Housing Trap
You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.
115 pages, $12.50Kindle version available