Posted on 09/09/2012 2:17:46 PM PDT by blam
U.S. Housing Market Is The Most Awesome Opportunity In American History
Housing-Market / US Housing
Sep 09, 2012 - 11:14 AM
By: DailyWealth
Dr. Steve Sjuggerud writes: The situation we're facing today can be boiled down to a few very simple points... And the result is an awesome investment opportunity.
It is possibly the greatest investing opportunity in American history...
I'm talking about the housing market.
Real estate investor Jason Hartman interviewed me this week on his radio show (available soon at www.JasonHartman.com). And I made my case.
My points were simple:
1. Housing prices have fallen more than they ever have in our lifetimes – by far. Today, houses are selling for well below replacement cost.
2. Meanwhile... housing prices are up for five-straight months. It sure seems like they've bottomed.
3. Mortgage rates are at record-lows – around 3.5% today. With low home prices and low interest rates, houses are more affordable than ever. But the story gets better...
You have a huge "tailwind" for rising prices, courtesy of the government.
First, Federal Reserve Chairman Ben Bernanke will not raise rates for years.
You see, he will only raise interest rates when inflation gets too high or when the economy is booming (specifically, when the unemployment rate falls too far). We are not in danger of either of those things happening right now – and we won't be in danger for a couple years.
So interest rates will stay low for longer than anyone can imagine... And these record-low interest rates should be like lighter fluid on a fire. It's taken a while to get started... But with higher home prices over the last five months, the fire is now lit.
Second, I can't think of an asset that has more government incentives than the home you live in.
Let me show you what I mean...
You can deduct the interest on your mortgage off your taxes. You get to keep up to $500,000 in capital gains on your home without having to pay any capital gains taxes. And on roughly 90% of home loans, the government has literally made those loans possible (through government-sponsored entities like Fannie Mae and Freddie Mac).
In short, the government wants you to own a home... This is simply adding more fuel to the fire.
And for most regular folks, your home is a much better use of your savings than stashing your money in stocks...
Buy what you understand. When you own a home, you know what you've got – the earth under your feet isn't going out of business. But you could easily buy shares of a company that goes out of business. So today, I suggest putting your savings into your primary residence.
In sum, I believe that starting today, single-family home prices will soar higher than anyone can imagine in the next couple years.
The gains in housing prices will surprise everyone – and you certainly haven't missed it yet. This trend is just beginning. And it will last for years to come.
I believe we have the most awesome opportunity in American history in single-family homes – right now. Do your best to take advantage of it...
Better. Yes, this has been going around but it is over blown. We should not spread it anymore.
I have seriously looked into investing in a rental property several times. I am still looking. But, what has stopped me thus far is PROPERTY TAXES. Property taxes (including school taxes) have gone sky high and are likely heading higher. What you save in mortgage payments are made up in property taxes and then some. When the annual taxes are $10K for a 3 bedroom condo valued at $120K, there is something wrong. Oh, and add on another $100/month for an association fee.
Taxes DO tend to be lower on older construction. Unfortunately, that is what requires the most up front work to get it up to snuff for renting.
Tell me. If I get 10 more, I'll feel fortunate.
The second link from a Forbes article is much better and documents what you mention. It’s obvious I got had by an email chain. Thanks for getting me to check.
Greek bonds are an equally exiting investment
It is certainly NOT the investment of a lifetime. It is a good solid buy and hold opportunity, that has the bonus of improving your cash flow and moving some of your money into a different asset class than paper. That's enough, too.
If you don't have to burn it down and rebuild it every few years.
So the author is exaggerating.
Excellent points. The sneaky new program to sell foreclosed properties in bulk to institutional investors got my attention earlier. You’ve added several more to the pile.
Excellent points. The sneaky new program to sell foreclosed properties in bulk to institutional investors got my attention earlier. You’ve added several more to the pile.
“In short, the government wants you to own a home...”
How’d that work out the last time we heard that?
As John Boy & Billy would say (on fm99.7 The Fox)...
“Not too goooood...”
Pretty good time to buy if you are going to stay. . Houses are very cheap and interest rates are low. A 300k mortgage at 3.5 % was unthinkable just a few years ago. Just don’t buy in an unstable neighborhood. Get the worst house on the best block for a bargain and hunker down. The long term trend is down, but this is as good as it will get.
Wow. Thanks. I was thinking about a Mcmansion. In NJ they are throwing them away. Hmmm,...that picture is sobering. Didn’t think it all the way through. Thanks.
I have been trying to buy a house for a year in the 135k to 145k range. The banks aren’t interested in selling houses at there current market value and in fact keep inventory off the market to pump prices. And I am a cash buyer. Same crap every time on a short sale. Owner takes the offer, bank nixes it.
VF...great summary. And you’re exactly right about the boomers.
It’s like a snake that’s swallowed an ostrich egg, with the egg just reaching the end of its internal journey. And, its gonna hurt when it comes out.
No not really. There is a very small sliver of people that might pay a tax on a home sale.
I really HATE to a person dispelling something about the healthcare monstrosity; but here are the facts:
http://www.bankrate.com/finance/real-estate/new-tax-home-sales.aspx
Fact is, there's a lot of good investment opportunities after a bubble's finally deflated. Not great ones, but good ones. Gold was **** in 1982, but it still rose from $300 to above $450 over five years. Not as good as stocks, but it still rose. And speaking of stocks...had it been 1990 and someone recommended investing in stocks, I would have been an enthusiastic scoffer. I bought into the "nasty '90s" meme hook, line and sinker.
Needless to say, someone recommending picking through the wreckage from the tech bubble in '02 would have been met with many a scoff too - but there were some buys out there. They just took some effort (and skepticism) to find.
Residential real estate is a different breed of cat, in part because it's both an investment and a long-term consumption good. As an investment, it requires active management - which may include getting in the car and fixing the plumbing yourself. The rule of thumb is that the monthly rent minus Principal repayment, Interest, Taxes and home Insurance (PITI) should be 1% of the purchase price or more. In other words:
Monthly Rent - (Mortgage Payment + Monthly Property Taxes + Monthly Home Insurance) should >= (Purchase Price) / 100.That 1% per month is enough to provide a reserve for maintenance, depreciation, etc. plus an adequate profit. If the net rent is less, then it's not worth the bother.
As a consumption good, the calculation is simpler. I suggest this as a rule, although it's more abitrary than the above. Can a person making $40,000 per year shoulder the mortage cost him- or herself and have enough to live a cheapsake but decent life? This rule cuts out all but the Levittown wonders, but those are affordable in a way that we haven't seen in decades.
Needless to say, this criterion's not as simple as it sounds. A lot of properties in that affordability range are in "zombie towns" with dubious employment prospects. With real estate, location is crucial.
[While I'm on the subject, someone making a decent living online has a real advantage, as long as the locale is physically safe.]
Obviously, this little ditty is aimed at youngsters who want to buy their first home. The few with the knack for landlording, although it'll take decades, might make a fortune.
Oh, one more thing. It would help a lot if said youngster-landord was a combat veteran...
Fact is, there's a lot of good investment opportunities after a bubble's finally deflated. Not great ones, but good ones. Gold was **** in 1982, but it still rose from $300 to above $450 over five years. Not as good as stocks, but it still rose. And speaking of stocks...had it been 1990 and someone recommended investing in stocks, I would have been an enthusiastic scoffer. I bought into the "nasty '90s" meme hook, line and sinker.
Needless to say, someone recommending picking through the wreckage from the tech bubble in '02 would have been met with many a scoff too - but there were some buys out there. They just took some effort (and skepticism) to find.
Residential real estate is a different breed of cat, in part because it's both an investment and a long-term consumption good. As an investment, it requires active management - which may include getting in the car and fixing the plumbing yourself. The rule of thumb is that the monthly rent minus Principal repayment, Interest, Taxes and home Insurance (PITI) should be 1% of the purchase price or more. In other words:
Monthly Rent - (Mortgage Payment + Monthly Property Taxes + Monthly Home Insurance) should >= (Purchase Price) / 100.That 1% per month is enough to provide a reserve for maintenance, depreciation, etc. plus an adequate profit. If the net rent is less, then it's not worth the bother.
As a consumption good, the calculation is simpler. I suggest this as a rule, although it's more abitrary than the above. Can a person making $40,000 per year shoulder the mortage cost him- or herself and have enough to live a cheapsake but decent life? This rule cuts out all but the Levittown wonders, but those are affordable in a way that we haven't seen in decades.
Needless to say, this criterion's not as simple as it sounds. A lot of properties in that affordability range are in "zombie towns" with dubious employment prospects. With real estate, location is crucial.
[While I'm on the subject, someone making a decent living online has a real advantage, as long as the locale is physically safe.]
Obviously, this little ditty is aimed at youngsters who want to buy their first home. The few with the knack for landlording, although it'll take decades, might make a fortune.
Oh, one more thing. It would help a lot if said youngster-landlord was a combat veteran...
Please...either correct me or set me straight. “
Well I make my living as a mortgage lender; so my bias is obvious!
You certainly don't want to buy a home and watch the value drop.
But thinks have stabilized in much of the country. But buying a home should be about having a stable place for your family and not trying to make a large profit on the value going up. But that can be a very nice thing when it happens.
Having your place with the stability that offers is very nice to have.
Especially if you plan to be in one area a long time.
If your housing payment is at or below what you pay for rent then it makes the decision much easier.
On the flip side there costs to home ownership that buyers don't always think about that a landlord pays. Siding, roofing, windows and other things need replacing eventually.
Housing prices will not recover their value in real terms for at least 70 years, if ever. The demographic tide is now going out for housing...
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