Why would people have as their single largest financial investment an asset which is illiquid, expensive to sell, bought on extreme margin, and comes without a stop-loss feature?
July 09, 2006
HousingPanic Stupid Question of the Day
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24 comments:
sense of security.. that I'm content without.
Greed
because it is a house, and you have to live in it, and there is a mortgage deduction, so it makes alot of sense to borrow to buy it.
I made a bundle by selling my house in florida and moving to an under valued maket. But who the heck wants to live in an apartment, they blow. There are no apartments on the lake i live on. You only go around this way once,might as well enjoy it while you can. Don't worry so much about money you can't take it with you when you die.
The concept of leverage is a very attractive feature of real estate (using other people's money to buy property, along with little to none of your own money). It's the reason why guys like Bloomberg and Trump are billionaires, at least for now. The downside is that leverage can work in the opposite direction, i.e. your initial investment is subject to the potential of high returns and high losses.
Another unique feature is that while some purchase real estate for investment purposes, others purchase real estate for completely different reasons. If I'm a seller of a property who initially bought the property as an investment, I could end up selling that property to someone who simply wants that property for the features that the property provides. Potential future appreciation of the property is secondary to them.
In my opinion, the concept that someone has the potential to purchase a property, do absolutely nothing to maintain that property, and sell to someone else at a much higher price is the biggest reason why people, especially specuvestors, purchase real estate. It's like they have a chance to win the lottery --- to make a lot of money simply because market forces have driven the market higher. They don't have to understand why the price went up so much, they just need to find the greater fool.
Speculation, easy money and greed.
How is profiting from real estate any different than selling anyother product? Many products don't require "maintenance."
We live in a capitalist society where market sets the price.
If you sell backscratchers and suddenly everyone wants one, wouldn't you hike up the price?
I know that's simplifying things but the concept is the same.
that cat is wearing pajamas. Get some glasses
Because it is a place to live. Kleiph is Home-O-phobic.
Wow, the bitterness or disgust or whatever it is is palpable. All the negatives focus on the speculation, the greed, etc. You can't live in a stock and you have to live somewhere so it is every bit as dishonest to focus on the investment aspects only as it is to focus on the lifestyle aspects in isolation.
I disagree about the backscratcher thing. The problem with it is that if you dont own a backscratcher, i sure as hell wouldnt rent one. you have to either rent a place to live or own it. people today have taken out insane loans to pay for something they hope goes up in price as an investment. if the price of a stock goes way up, people can just leave and let others stay in that market. everyone has to be in the housing market as either a renter or a homeowner. when the housing market goes up, it effects everyone, and you dont have a choice to walk away. you either live with expensive rent, or live with an insane loan.
Because people have been conditioned to think of their home as an "investment", which on its face is silly and ridiculous. If you really think your home is an investment, then it's worth is what you could rent it for less depreciation and maintenance costs. Take your typical $750K McMansion and apply those criteria -- it's "value" drops quite a bit doesn't it?
Homes have intangible benefits in our daily lives and certainly require us to make significant financial decisions, but for most people they are not investments in the true sense of the word.
Because you have to live somewhere, and the potential for dollar hyper-inflation is scary.
You are in good shape if you have locked in a reasonable, affordable mortgage payment. You might be screwed if you're renting and dependent upon others for housing.
Keith, you better pray that the world does not lose faith in the dollar. What happens if your rent starts going up +20% per year, and your income doesn't? What happens if your non-gold investments collapse in price? What happens if all those dollars you cashed out your house for become basically worthless?
I'll stay in my bubblified house, thank you, and just eliminate the rest of my non-tax-deductible debt.
Idiot's, oh no my rent will explode to the upside! What IS exploding to the upside is housing inventory!! Rental ads are also exploding to the upside as the f'd homeowners try to save themselves. It won't sell so now what. Sure stay in your house and don't go outside, the bubblemonster might spare you...Tax break, Ha,Ha...That's the ticket..
They did it because they were scared they'd be priced out. FEAR induced by a lying NAR.
And because brokers sold not-so-smart people a bill of goods about how much house they could afford= GULLIBITY and WISHFUL THINKING.
The home that people reside in that they purchase is NOT an investment.
Yeah, um, I don't see the connection between a falling dollar and rising rents. Rents are heavily tied to wages and they simply won't rise beyond what people making service industry wages can support. A falling dollar would raise the price of imported goods, but real estate is not an imported good.
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