如山’s real life story is very inspirational to many CNDers, I am one of them.
I am practice 如山’s core concept now - buying properties at deep discount (30% after fix) and then re-fi. I will report the results once the re-fi is completed. Please share your success and frustration.
Here is a typical case. One 3 bed 2 bath house, bought at about $150K (after all repaires). All expense (PITI) is about $1000, rean is $1600, cash flow $600 per month. Even the house price continues to fall (I do not think so in my area), I have nothing to worry (cash on cash return 20%).
Three years, same house sold for about $500k. The PITI would be $3000 (two time the rent).
the market tends to go extrem, that's the exemple of both.
The price and rent looks like most areas of California costal areas. Let’s look at the $400K condo. To own this condo, the monthly carrying cost is about $2000 (PITI, 5% rate). If the average house income is below $6000 (assumption: 33% income goes to house), I think this is over heated market. At this price, it is ok for primary residence. For investor, it is very risky.
评论者:beijing7750 2009-07-20 18:01
House prices depend on many factors, such as historic value (SF bay area always has higher price than most other areas), employment rate, P/E ratio (price/rent ratio), etc. I prefer to use P/E or P/R predict house price. When comparing to historic P/E value, if renting is much cheaper than owning, this means house is over priced. If owning is much cheaper than renting, that means house is under priced – this is also the case I described in previous poster. I already see multiple offers in areas when owning is much cheaper than renting, last week there was a house with 25 offers in 3 days. Market is efficient in long term not short term.
Sorry for typing in English. Just want to throw out what’s on my mind. The most important question we’re facing right now is, deflation or inflation?
Bernanke is hellbent on reflating. Back in 2003 he said in his speech that when everything else failed, the central bank should set a nominal price level target (instead of inflation rate target). This is similar to what Paul Krugman said before. To create inflation expectation in a deflationary environment, everybody has to believe that central banks will print money like no tomorrow and inflation is immediate.
Today Bernanke said they have an exit strategy. Does he want people to believe his words? I know I don’t. If everybody believes what Bernanke says, it’s self-defeating the recent efforts by Fed. If Bernanke is to succeed, we will have massive inflation. But then, will Bernanke get reappointed? What if US$$ collapsed before the price level target is hit? Political anger will be boiling.
What bothers me is, what about wages? I just don’t see how wage will improve, despite the swing in commodity prices. I might be off the topic here, but I actually think this is the paramount question for investment. Since obviously there is no clear answer, everything we do, buying, or sitting on hands, is a gamble.
never say never, rewind just a decade to the Clinton years, high grow plus high tax rate resulted in a big surplus, under a democratic president! so it can be done...
That's why I am trying to make my equity half in stock market, half in real estate, and half in US$, half in CA$, and a minor 5% in RMB...
Any other ways to diversify risk exposure? I take comfort in the thought that the worse scenario is we still have another 20% to go on the down side?
评论者:Tom007
不明白你的这个结论“又一个证据房市还没到底”,Why?
"很多人都在想去美国买房子" --> "又一个证据房市还没到底"? Can you please educate me?
评论者:panyca
The bottom is here when everybody is too scared to buy...
When "很多人都在想去美国买房子", greed is not completely trumped by fear...
However, few can grab the bottom at the exact moment. As long as the downside is less than upside, I will edge in gradually.
评论者:Venus...
准确地说, 阵痛还没开始. 前面是false labor
美国的贸易赤字照目前的速度减下去, 全球的贸易结构就得大洗牌. 金融系统的原有的结构性危机仍然没变, (暂不提toxic assets still on the balance sheets hidden by mark to fantasy accounting).
29 年之后, 证券法经过几年的酝酿才出台. 金融改革会是今后五到十年的重点.
评论者:Tom007
panyca 写道: The bottom is here when everybody is too scared to buy... ——[True, and I agree. And even in this scenario when everybody is too scared to buy, there are always smart people like 如山, 潘教, and so many CNDers, keep buying, and even people from Canada "很多人都在想去美国买房子" --- at the bottom]
When "很多人都在想去美国买房子", greed is not completely trumped by fear... ——[But "很多人都在想去美国买房子" is not necessarily the opposite of everybody is too scared to buy, right? So how this can prove that "又一个证据房市还没到底" ?]
Oh, yeah, Michigan has the highest unemployment rate in the country. However, I do believe Michigan is near the bottom, if not at the bottom. It was in one-state recession way before the country due to the decline of auto- and manufacturing sectors. I don't think the housing market here will recover in the next year or two. I am bracing for a long long winter. My horizon is 10 year +.
US cities may have to be bulldozed in order to survive
The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.
Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.
The radical experiment is the brainchild of Dan Kildee, treasurer of GeneseeCounty, which includes Flint.
Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.
Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.
Most are former industrial cities in the "rust belt" of America's Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.
In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside.
"The real question is not whether these cities shrink – we're all shrinking – but whether we let it happen in a destructive or sustainable way," said Mr Kildee. "Decline is a fact of life in Flint. Resisting it is like resisting gravity."
评论者:Tom007
Venus,
How about the housing market? Is it improving? You still think the housing price in the U.S. has two years to decline?
Today's/Yesterday's news:
Home Resales in U.S. Increased More Than Forecast
July 23 (Bloomberg) -- Home resales in the U.S. rose in June for a third consecutive month, spurred by tax incentives, lower borrowing costs and foreclosure-driven declines in prices.
Purchases climbed 3.6 percent to an annual rate of 4.89 million, stronger than forecast and the highest level since October, the National Association of Realtors said today in Washington. Median prices fell 15 percent.
The gain in sales confirms Federal Reserve Chairman Ben S. Bernanke’s remarks this week that the worst housing slump in eight decades appears to be moderating. ...... BTW, as you may already know, the Canadian Central Bank has declared that Canadian economy will end the recession this quarter and will increase by 3% next year.
评论者:Venus...
Tom,
Really there isn’t anything changed. The pace of decline is slowing, it does not mean the price has stopped declining, or the price will bounce up sharply, or resume 4% annual appreciation rate.
Soon in NAR news you will see the median price rising. It will not be caused by the bounce in housing market, but the changes in ‘mixes’ of the houses sold. Right now 30-40% sales are distressed sales, and those distressed sales mainly are low end houses. Later on this year the distressed sales will be higher range houses, mid-to-high level houses, they will pull up the mean price. You might even continue to see the number improvement, since distressed sales will taper off two years later and ‘normal sales’ will dominate. But be forewarned, these ‘normal sales’ will be nowhere near the level of 2006.
I don’t know much about Canada. Good for you. US is a different story. Other than Obama’s economic advisor, is there anyone predicting 3% of GDP for US next year?
评论者:Tom007
Thanks for your explanation, Venus. It makes good sense.
However, when things do happen as you described here, they will likely be interpreted as improving and encouraging, and will attract more people into buying, perhaps at higher prices than what Rushan, panca, etc, are paying now.
PurestCrystalClear 2009-07-24 13:24
The housing market is improving. My sister finally sold her house after over 1 year on the market. But the selling price is 26% lower than what she paid 4 years ago.
评论者:Venus...
Can you share a bit more details on house price range and roughly which region? Thanks a lot,
PurestCrystalClear
Midwest. Bought 225K 4 years ago, sold 165K. She changed job over a year ago, and the house has been vacant since. She just thought to rent the house two weeks ago.
Can you share a bit more details on house price range and roughly which region? Thanks a lot,
评论者:Venus...
Tom,
Really there isn’t anything changed. The pace of decline is slowing, it does not mean the price has stopped declining, or the price will bounce up sharply, or resume 4% annual appreciation rate.
Soon in NAR news you will see the median price rising. It will not be caused by the bounce in housing market, but the changes in ‘mixes’ of the houses sold. Right now 30-40% sales are distressed sales, and those distressed sales mainly are low end houses. Later on this year the distressed sales will be higher range houses, mid-to-high level houses, they will pull up the mean price. You might even continue to see the number improvement, since distressed sales will taper off two years later and ‘normal sales’ will dominate. But be forewarned, these ‘normal sales’ will be nowhere near the level of 2006.
I don’t know much about Canada. Good for you. US is a different story. Other than Obama’s economic advisor, is there anyone predicting 3% of GDP for US next year?
Thanks for your explanation, Venus. It makes good sense.
Tom007
However, when things do happen as you described here, they will likely be interpreted as improving and encouraging, and will attract more people into buying, perhaps at higher prices than what Rushan, panca, etc, are paying now.
Putongren 2009-07-24 19:04
Those statistics have to always be viewed with a grain of salt. What improvement should those who play in the real estate market use? I'd say none of those statistics. You have to think about this, if I buy a house today, can I sell it for a better price without major improvement? If the answer is year, then you have a price appreciation. The only statistics supposed to answer this question is the Case/Scheiling (spelling?) index. But the calculation of that index is a black box. We don't how they derive their numbers. It has to be derived because you really don't have many houses sold twice in two years, let alone in two months.