Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • I don’t think Economic Principles is correct in the first place better to use artificial economic principle.

    If it would have followed economic principles than why the BUST..!!!! and that too to the CRAZY extent that we have seen.

    The reason being artificial demand….fueled excessively by Greed from all players.

    1. Builders who built and increased the prices….
    2. Banks who gave loans on easy terms since they made relatively lower risk returns (Since Prices of RE went on going up.. no one was defaulting.. and the ones that did not like the loan sold of the houses and paid off the loans and kept the remaining profit)
    3. Common man who seeing the prices multiplying like crazy did not want to miss the BUS. And so more and more people lured by making a quick buck and leading a lavish life started to get into RE even if they could not afford it… (Banks were willing to give them loans cause Banks want to make money as well).

    Add to this the following.


      More greed by the Bankers who wanted to earn more and more money to own fleets of Audis, Porches etc.… after all GREED is the driver right..
      Builders who again wanted to make huge amounts of money.. so they kept on increasing the prices..after all they too like to have a fleet of Beemers and Mercs in their garages.
      More and More people who wanted to make quick money and atleast own one Beemer or Merc.
      This was an artificial demand so I would not say it was artificial economic principle that was in place.

      The problem now is… if the prices were up due to higher Demand…. The builders are not reducing the prices… when the demand is lower… THAT IS THE PROBLEM WITH BUILDERS…
      Using ECONOMY as the BHRAMA Aastra to increase prices in times of BOOM and giving it a cold shoulder and being too reluctant in reducing prices in times of BUST.



      SORRY for the large post but please consider the below example

        Rice, Jowar, Dal etc. when hoarded in Gowdowns to increase scarcity and so to increase prices and then selling these commodities is regarded as BLACKMARKETING and is an offence.
        Holding Flats not selling them and claiming no supply so prices will not reduce and infact increase prices and then sell…. What should that be called?
        VKVKVKVKVKVKVKVKVKVK
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  • As per the market analyst CNBC:

    After recent fall of real estate price, people started showing some interest and some of them was buying as the Real Estate price came to some Realty. But as soon as the Greedy Builder see some money they are again Increased the price for Higher Margin. This leads to fall in demand again.
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  • Originally Posted by rahulbhagwat
    Hello Members,

    While I like and wish and think that the prices will come down a lot, one
    thing perplexes me, can anybody answer that.

    We are thinking that Indian, particularly Pune builders are holding onto
    the prices irrationally and they have jacked it up to irrational level
    themselves in first place.

    However, RE going up irrationally (200% to 300%) has happened world over
    in last 4 years. This cannot be done by a cartel (there cannot be such
    a wide spread cartel that is). It probably means it went up due to
    the economic principles (demand-supply-affordability-stability).

    So why blame Pune builders only (or why hold them responsible).

    Even in US, the prices have not gone down too much (please check R2I
    forum blog discussing RE prices in bay area). The prices do need to come
    down, but how and when god only knows.

    I am just seeking answers from members who have better data, analysis or
    thoughts on this.

    It is true that prices rose everywhere; but look at the following facts:-

    Japan RE prices are 30 year low,

    Dubai RE prices have fallen by 60%+. Now, Qatar is offering Dubai assistance & is giving soft loans:D,

    In US, prices have fallen more than 50%, in some areas of Las Vegas, prices have dipped by over 70% from it's peak yet isn't finding any buyers,

    In NYC, RE prices dipped, so did the rentals, both in residential as well as commercial areas. Have a look at Staten Islands & Queens (many Indians stay here);

    In UK the prices have dipped. HSBC housing arm, HSBC Direct (if I am not wrong) exited the RE segment.

    In terms of economics; the avg. personal per capita income in New Jersey is $40,500 as per 2003 census. Compared to the earnings, the RE prices have not zipped the way they did in Pune or India as a whole.

    Why the sub-prime crisis at first place?

    The banks lent heavily to even those people who income was not sufficient to buy a house. People took huge loan based on the theory that they would continue to get increment of atleast 12-15%/annum for next 10 years with ease, similar to what IT guys in India did; ICICI leading the pack.

    Due to down turn, banks put attachment on these houses reduced the prices & kept on sale, yet no one was buying eventually making several banks go bankrupt. Same would have happened here if PSU banks wouldn't have existed!!

    In US, there is social security which we don't have in India which aggravates the problem here further. You need to fend yourself, no Govt. help buddy, nor any 401(k). 5.5 million people's unemployment benefits from US Govt. is expiring in Dec 09. The fiscal deficit is heading towards $ 2 trn in coming year which will go to $20 trillion by 2019. China heading downwards & it's inflated books means no further purchase of US treasury bonds by China, which makes US economy more worrisome (Japan already being in coma). The Fed is simply printing more & more notes, similar to what RBI is doing to some extent. This puts pressure on inflation making adverse impact on the already hit economy. If it continues, the situation would be like WW2 scenario of Japan where people used to carry sackful of yens to get a loaf of bread:D.

    Have a look at this news:-

    http://www.nationalpost.com/news/story.html?id=1929632

    India's fiscal deficit is heading towards 7%, poor monsoons means another loss of 0.5-1% in GDP growth rate. Last but not the least, forget about RE of other nations; prices have fallen by 40-55% in Mumbai, Delhi-NCR, Bangalore, Chennai & Hyderabad. So, RE prices dipped across metros & tier-1/2 cities except for Pune where we are seeing gradual price reduction than a bust like other cities. The basic reason is that the Pune RE is dominated not by corporate/professional builders but Pawar & Co. of NCP. Nowhere you would find entire realty sector driven by politicians which makes Pune case special. The good news though remain that state elections are approaching & NCP is now feeling heat of economic recession & loss in Lok sabha polls; as I came to know that they are finding it hard to raise funds. The only good news for them (& bad for us) is rising sugar prices.
    Lavasa has stopped taking new bookings, Nanded City internal problems are pending etc etc. Several builders have started FD schemes:D indicating severe cash crunch. Simply observe the pace of work on construction site near you & you will see the true picture.:)

    No money, No RE. It is as simple as that;).

    Btw, well said VK. Liked that.
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  • Originally Posted by realacres
    It is true that prices rose everywhere; but look at the following facts:-

    Japan RE prices are 30 year low,

    Dubai RE prices have fallen by 60%+. Now, Qatar is offering Dubai assistance & is giving soft loans:D,

    In US, prices have fallen more than 50%, in some areas of Las Vegas, prices have dipped by over 70% from it's peak yet isn't finding any buyers,



    Though I agree with you on most points comparing India or Pune with developed countries like US or Japan is not correct. For that metter comparing Pune with Mumbai is also not correct as mumbai is more developed than Pune. We have huge population and better home is everyone's need. people are migrating to pune from all over the place for job and need house to stay. I think people who are buying now are first time buyer and investors are away from RE.
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  • Dont rule out the black money buying as well...In India what I think politician & builder use their black money in RE to make it white & govt official & businessman also invest their black money in RE buying ...so in nutshell in india Black money dominate in RE & for a person investing black money in RE it doesn't matter rate is up by 200-300 per sq ft....

    In NCR almost 50% RE buying was due to black money only...

    Originally Posted by mahesh pune
    Though I agree with you on most points comparing India or Pune with developed countries like US or Japan is not correct. For that metter comparing Pune with Mumbai is also not correct as mumbai is more developed than Pune. We have huge population and better home is everyone's need. people are migrating to pune from all over the place for job and need house to stay. I think people who are buying now are first time buyer and investors are away from RE.
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  • Thats why

    Vk & mahesh u r right on spot.

    Thats why RE is the holy cow to change white to black and vice versa.
    And its totally unregulated, a good source of unofficial funding to all diverse activities including elections. So none wants to change the equation.

    Black mkt & investors have been hand in hand to pump the RE to astro levels. Bldrs had to also use the huge margins somewhere.

    But the scenario is changing slowly.

    Property Headlines
    White Deals Gain Momentum In The Property Market
    Good news for all those who are looking to buy property. The obnoxious black money, or the unaccounted cash component, for buying a flat is slowly fading out with buyers. Across all Indian metros, one can purchase more and more properties through the accounted money or white, thanks to the changed profile of the buyers and the government’s base price policy. According to industry experts, today as much as 80% of the buyers in top cities such as Mumbai, New Delhi NCR, Bangalore, Chennai and Ahmedabad are salaried, whereas businessmen and speculative investors dominated the market when the real estate boom was at its pinnacle. This growing market of the salaried class has forced sellers to accept white money in a market where demand still trails supply.
    18 Aug 2009 indianrealtynews.com


    So, actual buyers will finally come to mkt , demand real prices and drive the mkt.
    The Blacks & investors can sell to each other, and continue to profit.

    PS: VK the eco principle seems to elude Bldrs, who shamelessly hoard peoples money to buy more properties, launch new schemes, instead of completing the ongoing projects.
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  • To put it in perspective ...

    Realacres,

    It is important to reduce these terms to real numbers so people get a feel of it ...

    I hear a lot of rates being quoted in Pune, say Rs.4000 per SFt. And a reduction from 4k to Rs.3200 seems to be a BIG reduction.

    To put it in perspective, California is already seeing a median decline of nearly 70%. That would put the Rs.4000 price down to Rs.1200 per SFt. So, a 1200 SFt home at 4k priced at roughly 48 lakhs would have come down to 14.40 lakhs.

    So, Rahul, it is not true to say that world over prices have not come down. Not only that. Prices are slated to come down at least another 20% to 30% from these levels before they bottom out.

    So, it would be safe to assume that final bottoms in most US and EU countries hit badly would be priced at the Rs.9.60 lakh mark down from 48 lakh mark - an incredible 38.40 lakh loss on a 48 lakh house.

    So, our Indian homes have quite a way to go before the bottom is in. It will take another few months for the builders to start giving up. When that happens you will see the rush to the exit by builders and you will also see how quickly prices come down if you are a buyer with cash! :D

    Patience.

    cheers
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  • Wiseman,

    Do you think that story of one country can be applied as it is in other country as well????

    Situation in US and india is entirely different...In india RE involve hell lots of factor,not only principal of economy...In india RE involve hafta to be given to politician/underworld/police/municipal corporations/many other govt departments, so what I see price what we see can at the max go down further 20% not more than that...Still, in india so, many ppls are ready with cash waiting for another 10% drop & once that happen you will see ppls will buy RE again, like it was a year ago...

    Many ppls here say that prices will go down, buy not give any time frame,what you think that price can go down till ridiculous level like 1200 sq ft anywhere in pune(under PMC or PCMC limit)...if yes then please give us a time frame as well....coz nobody can wait for lifelong to get those dream rate like 1200 rs /sq ft..

    Originally Posted by wiseman
    Realacres,

    It is important to reduce these terms to real numbers so people get a feel of it ...

    I hear a lot of rates being quoted in Pune, say Rs.4000 per SFt. And a reduction from 4k to Rs.3200 seems to be a BIG reduction.

    To put it in perspective, California is already seeing a median decline of nearly 70%. That would put the Rs.4000 price down to Rs.1200 per SFt. So, a 1200 SFt home at 4k priced at roughly 48 lakhs would have come down to 14.40 lakhs.

    So, Rahul, it is not true to say that world over prices have not come down. Not only that. Prices are slated to come down at least another 20% to 30% from these levels before they bottom out.

    So, it would be safe to assume that final bottoms in most US and EU countries hit badly would be priced at the Rs.9.60 lakh mark down from 48 lakh mark - an incredible 38.40 lakh loss on a 48 lakh house.

    So, our Indian homes have quite a way to go before the bottom is in. It will take another few months for the builders to start giving up. When that happens you will see the rush to the exit by builders and you will also see how quickly prices come down if you are a buyer with cash! :D

    Patience.

    cheers
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  • Originally Posted by ash7979

    Situation in US and india is entirely different...In india RE involve hell lots of factor,not only principal of economy...In india RE involve hafta to be given to politician/underworld/police/municipal corporations/many other govt departments



    I second that :)

    RE is very complex in India than in States. Here we have no transparency in deals. Agreement is always builder-sided. They have top-notch property lawyers with them. And even govt is with them :)
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  • Originally Posted by m_square
    I second that :)

    RE is very complex in India than in States. Here we have no transparency in deals. Agreement is always builder-sided. They have top-notch property lawyers with them. And even govt is with them :)


    They Bribe govt (I mean all levels in govt offices), so why govt will be with you, why not with them
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  • ^^ right...

    to bhai log maano hamari baat....

    If you get a good deal then go for it.. dont wait for rate cuts which are very uncertain now ....
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  • Ashish, I'm not the Govt!

    Originally Posted by ash7979
    Wiseman,

    Do you think that story of one country can be applied as it is in other country as well????

    Situation in US and india is entirely different...In india RE involve hell lots of factor,not only principal of economy...In india RE involve hafta to be given to politician/underworld/police/municipal corporations/many other govt departments, so what I see price what we see can at the max go down further 20% not more than that...Still, in india so, many ppls are ready with cash waiting for another 10% drop & once that happen you will see ppls will buy RE again, like it was a year ago...

    Many ppls here say that prices will go down, buy not give any time frame,what you think that price can go down till ridiculous level like 1200 sq ft anywhere in pune(under PMC or PCMC limit)...if yes then please give us a time frame as well....coz nobody can wait for lifelong to get those dream rate like 1200 rs /sq ft..



    Hi Ash,

    I agree with you that each country has specific and different characteristics which define their respective RE. And that what applies to US will be different from that for India. In fact I already keep saying that things in India will not get that bad as in the US.

    But consider this. Back in the 1995-98 RE slump in Bangalore, especially, I have seen RE on MG Road, no less (THE hottest area in B'lore then and now) come down from 12500 to 2500 per SFt and even at 2500 there were no buyers. To top it, there was no worldwide recession, the world was in boomtime and India was just starting to ramp up on the IT arena. And the 1995 peak prices were reached only by end-2004, early-2005 and that too because of the RE bubble being blown across the world and in India too. If that had not happened, probably prices would have taken much longer to reach 1995 bubble prices. In any case, since early 2005, prices went as high as 24000 per SFt and have come down much lower since!

    The point I'm trying to make is this. Situation today is probably much worse than in 1995! So, how can this bubble burst in any way better than in 1995?

    There are a whole lot of youngsters who have joined the workforce after 2001, who have been brought up on too-easy and too-much money in IT/BPO and have splurged all of these in such a way that over 96% of them do not even have money saved for 2 months living in case they lost their job. This is a result of a large survey which I read about around 6 months ago. Situation may be worse now.

    Now, a lot of people in India are living in this fantasy (like their counterparts in the US till recently) that home prices never come down, even when they are too unaffordable for most people. They do not know of a decline as recently as 1995 (when they were probably in school/college and their needs were met by their parents!). Most RE bought in the last 5 years (2004 onwards) are probably not more than 20% equity in the hands of the buyers (means only 20% of the original price of property has been paid up). It only takes prices to fall to 25% and the person to lose his/her income even for 6 months for them to not only lose the home to seizure by the bank, but also to lose their initial deposit as well as the additional principal payment as well as all the money paid up as interest!!! In short, they stand to lose their entire lifesaving in one shot as well as land up on the streets!!!

    Do not underestimate the seriousness of this global recession. In my understanding, we are yet to see the real nasty part of this depression globally and we may yet see another 2-3 years of situation even worse than what we saw in 2008. I'm not trying to unnecessarily scare people. But after seeing 25 years of working life (that too in IT which had the maximum money - I have seen Infosys from when it was a 30 lakh pa turnover company and Mohandas Pai used to come to office in his Vespa scooter! very down-to-earth guy), I do not think young people appreciate the delicate situation we are all in today. And they may not even be adequately equipped in terms of financial understanding to appreciate all of this. We guys of that era are still very kanjoos guys and that is how people amass riches, not by this VC-funded, find a greater fool model of business development. Not anymore! A lot of people need to change their mindset from the boomtime one to the depression one - no one says its easy, especially when, in the short time one has been earning, one has never seen bad times!

    So, to come back to the point. I go with the rule, "Plan for the Best, Prepare for the Worst" and this seems to be a sound rule, especially in these very troubled times. Plan to have lots of cash on your hands over the next 2-3 years with at least 6-9 months of living expenses just in case. And to make this cash really go the distance it would be much better not to have a 40k EMI like a millstone around your neck!

    These are NOT normal times, and especially NOT boom times. But youngsters are still thinking and investing like it is normal times. So, I will not expect you to wait forever (when you are young, you are impatient).

    Real wealth is made (and RE is, in the final analysis, also seen as the biggest wealth of anyone's life) only when you buy it at the right price. I strongly believe that today's prices ar not the right price and that prices will come down and since it is RE, it will come down over many months and even years. My own target is probably 2011-12! Could even take longer!!! :D

    I plan to wait (in fact, I think we are early enough in this slump that we are even now trying to sell RE so as to stock up on cash and diversify into safer assets!).

    Each person may go ahead as per your decision after considering all factors which only they can make as they will be finally responsible for it!

    BTW, DLF brought down prices to 1850 / SFt. This is not too far away from 1200!!! So, its not as if its impossible for one to see 1200 rattes in the not-too-distant future! :D

    cheers
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  • Wiseman,
    I totally agree with what you said.

    Originally Posted by ash7979

    Situation in US and india is entirely different...In india RE involve hell lots of factor,not only principal of economy...In india RE involve hafta to be given to politician/underworld/police/municipal corporations/many other govt departments, so what I see price what we see can at the max go down further 20% not more than that...

    Ashish,
    In US the bribes are much more than that of India. The only difference is the way in which they are taken. Classic case here is that of Pawar:D. Though everyone knows, it is hard to prove. So, sophistication in US is much higher than India. Coming to underworld, from 40s to early 90s, the Mafia had strong grip on labor unions, construction, hotel, transport & even senators & congressmen were on their pay-roll. Look how the Gambino Family (family means gang in italian underworld:- Mafia) ruled the construction industry in NYC & Chicago. Hence, all bad omens are there too, but not that visible coz Mafia used to believe in the principle of cosa-nostra.
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  • Wise words from a wiseman

    Except not sure of the timeline...

    What is perplexing is the level of support you see for a small price drop. I don't know if it is just the clientele of this forum or outside; but I have seen this type of feeding-frenzy (aka 'herding') whenever someone posts a 5-8% price dip.

    Is the support to even the slightest RE decline because :
    a.The glut of not-so-white money eager-willing to go in RE,
    b.Unrealistic appetite for risk , OR
    c. Significant non-resident money who missed the earlier bus
    -or- something else?

    If this sentiment for support goes beyond the audience of this forum, we can see a gradual decline till IT/BPO/offshore manuf become in-vogue again. On the other hand, if there is a herding instinct, we can surely witness a stampede towards exit.

    For those who have been through bubbles - are there any similar parallels?
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  • There is one major difference in owning RE in US and India. The property taxes are pretty high in US. In India if you buy with cash, there is no expense for owning the property, while in US you have to pay between 1-3 % as property tax every year which is pretty high. Many of the properties in Michigan are sold for this reason for $1000. Also some of the municipal services like garbage(maybe even gas/elec) are compulsory.
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