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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  • Originally Posted by realacres
    http://www.bloomberg.com/news/2010-09-03/roubini-says-swiss-franc-and-dollar-may-beat--in-any-new-recession.html

    “If there was a double-dip recession, increasing risk aversion, some assets are going to be preferred, and will be one of them,” Roubini said today in an interview on Bloomberg Television’s On The Move with Francine Lacqua. “But in that situation, things like the dollar, the yen, the Swiss franc have more upside in a situation of rising risk aversion because they are much more liquid than the market.”

    Unable to understand this logic Is it another ploy of US to avoid other countries & individuals not to buy gol_d (man, why has mod banned this word, go_ld?? :(). When Fed is in process of printing more & more $$, how will it appreciate further??:bab (38):

    “Job creation is going to be very, very mediocre,” he said in an interview in Cernobbio, Italy. “It’s going to feel like a recession even if we’re not in a recession.”

    I feel that further Indian growth will be more or less domestic market driven rather than global. Again the exports growth would be limited to Asia-Pacific region, with US & EU stagnated.


    Nice link Real, but incomprehensible - did not understand why.

    Still I am betting on Rupee depreciation against the dollar in the long term - given the real productivity differences between the 2 countries - and am buying Rupee g-old
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  • Why was there an error in stating Q1 GDP?

    A really good article informing how India's GDP growth nos. are far less than reality:-

    The highlight in the Indian economic news space this week was the fiasco regarding the GDP numbers. Probably for the first time the government had to announce a revised GDP number because of obvious errors in the first number.

    On August 31, at 11 am, the Central Statistical Organization or CSO, which calculates the numbers, announced that GDP for the first quarter of FY11 grew at a decent 8.8%. But curiously other numbers in that release showed a very poorly growing economy. For instance gross capital formation grew by only 3.7% year on year and private consumption by 0.3%.

    The most damning was that GDP counted according to market prices grew by only 3.7% though counted according to factor cost GDP had grown by 8.8% So what's the difference between the 2 GDP nos.

    After a lot of angst from economists and the press, a red faced government made the changes and said that the GDP at market prices grew by not 10.2% but by 3.7%


    Get complete details here:-

    http://www.moneycontrol.com/news/economy/why-was-thereerrorgdp-_482787.html
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  • The 2 points are independent of each other ...

    Originally Posted by puser
    Excellent. All the while keep telling people that how conditions are bad to buy a house and how world is at the brink of total collapse at the same time indicate that "there are enough greater-fools behind me to keep the prices rising well above current sky-high levels".

    Its now hard to trust veracity and genuineness of your comments, opinions, suggestions or advises

    No offense intended, if hurt unintentionally sorry for the same.



    Don't get emotional puser.

    The 2 points stated by you are independent of each other. In fact, when the world is at the brink of economic disaster, you will find the greatest number of people talking of the coming boom, impervious of the facts on the ground.

    So, the fact in India is, despite many people shouting from the rooftops about prices being stupidly high, do you find any dearth of people lining up to buy at any cost? If this is not classical "Greater-fool" situation, what is?

    Besides, I was only saying, between US and India, India is preferable considering there is at least some demand!

    And what has all this got to do with "veracity" of my "claims"? Get a grip on yourself and you might make some sense. Also, using seemingly high-sounding words does not in itself lend virtue to what you say; it also needs to make sense. Also, please read carefully what others write so you don't get the wrong picture about what they are saying.

    Sorry if I hurt you. No offence meant. :)

    cheers
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  • Originally Posted by wiseman
    Don't get emotional puser.

    The 2 points stated by you are independent of each other. In fact, when the world is at the brink of economic disaster, you will find the greatest number of people talking of the coming boom, impervious of the facts on the ground.

    So, the fact in India is, despite many people shouting from the rooftops about prices being stupidly high, do you find any dearth of people lining up to buy at any cost? If this is not classical "Greater-fool" situation, what is?

    Besides, I was only saying, between US and India, India is preferable considering there is at least some demand!

    And what has all this got to do with "veracity" of my "claims"? Get a grip on yourself and you might make some sense. Also, using seemingly high-sounding words does not in itself lend virtue to what you say; it also needs to make sense. Also, please read carefully what others write so you don't get the wrong picture about what they are saying.

    Sorry if I hurt you. No offence meant. :)

    cheers



    Well I am not hurt, thank you for concern. You have been saying how buying at this stage of time is wrong but you are ready to buy in India :D. Anyway thanks for your opinion, rest of people reading your contents can take their own call, I need not say more :bab (45):
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  • Originally Posted by puser
    Well I am not hurt, thank you for concern. You have been saying how buying at this stage of time is wrong but you are ready to buy in India :D. Anyway thanks for your opinion, rest of people reading your contents can take their own call, I need not say more :bab (45):


    I still remember in one post "Wiseman" said Dow will see level of "1000" (one thousand) when Dow is at around 10000 (Ten thousand) right now....

    So, I am waiting for that come true in my or this Forum's life time....Vaise on a Public forum anybody can say anything...but one has to "attached" a timeline if you are predicting something or one should not make any tall comments (read Predictions)...So, Wiseman are you ready to take challenge and write any new prediction with "Timeline" attached to it(Or wanna attach a time-line to your Dow at 1000 level Prediction NOW)?? or you just wanna write anything with icing of some graph from some free graphs site to fool ppls over here or maybe to fool yourself...
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  • To each his own ...

    Originally Posted by ash7979
    I still remember in one post "Wiseman" said Dow will see level of "1000" (one thousand) when Dow is at around 10000 (Ten thousand) right now....

    So, I am waiting for that come true in my or this Forum's life time....Vaise on a Public forum anybody can say anything...but one has to "attached" a timeline if you are predicting something or one should not make any tall comments (read Predictions)...So, Wiseman are you ready to take challenge and write any new prediction with "Timeline" attached to it(Or wanna attach a time-line to your Dow at 1000 level Prediction NOW)?? or you just wanna write anything with icing of some graph from some free graphs site to fool ppls over here or maybe to fool yourself...



    Ash,

    There are those who like to look in front of a car, however hazy the visibility, and drive.

    And there are those who like to look in the rear-view mirror and drive hoping the road ahead will be exactly like the road behind. The visibility wil be 20/20 so they are happy about a clear vision of the future exactly like the past.

    I prefer the first, even if, at times I am wrong. Would you like to follow the second? :D

    The DOW 1000 is the worst case in my entire setup. You should not cherry-pick what you want and twist it out of context. That should be left to journalists - maybe you are one!

    The entire setup according to Elliott Wave Theory (and the entire theory is based on PROBABILITY, NOT CERTAINTY; maybe you should read up a good book on probability theory).

    In the coming decline,a break of the previous bottom has a very high probability of over 80%. This should take place in 2011 or early 2012.

    The target for the next bottom is between 5000 and 6000 on the DOW.

    In the very bad scenario where no effort by the FED to pump up the economy works, the DOW is expected to go as low as 3000.

    The Worst Case scenario of a situation as bad as the Great Depression of the 1930s will see the DOW crack 1000.

    All GREAT BOOMS have retraced 100% of the rise in history. This boom should be no different and there will be retracement of the DOW to around 1000 levels which is where the boom started.

    Timeframes for the 1000 level could be anywhere around 2016 or later. At this level of discussion it is not critically important about the time level. Simply knowing the possibility and taking early action will see a person protect oneself and profit hugely from the coming debacle.

    This will obviously be accompanied by a destruction of the current $$$ and gol.d (and silver) taking off to as yet unimaginable levels. There will be a painful, drawn-out global depression and all countries will be affected to different levels. You think all this is impossible. I think it is inevitable. To each his own.

    cheers
    CommentQuote
  • Originally Posted by wiseman
    Ash,

    There are those who like to look in front of a car, however hazy the visibility, and drive.

    And there are those who like to look in the rear-view mirror and drive hoping the road ahead will be exactly like the road behind. The visibility wil be 20/20 so they are happy about a clear vision of the future exactly like the past.

    I prefer the first, even if, at times I am wrong. Would you like to follow the second? :D

    The DOW 1000 is the worst case in my entire setup. You should not cherry-pick what you want and twist it out of context. That should be left to journalists - maybe you are one!

    The entire setup according to Elliott Wave Theory (and the entire theory is based on PROBABILITY, NOT CERTAINTY; maybe you should read up a good book on probability theory).

    In the coming decline,a break of the previous bottom has a very high probability of over 80%. This should take place in 2011 or early 2012.

    The target for the next bottom is between 5000 and 6000 on the DOW.

    In the very bad scenario where no effort by the FED to pump up the economy works, the DOW is expected to go as low as 3000.

    The Worst Case scenario of a situation as bad as the Great Depression of the 1930s will see the DOW crack 1000.

    All GREAT BOOMS have retraced 100% of the rise in history. This boom should be no different and there will be retracement of the DOW to around 1000 levels which is where the boom started.

    Timeframes for the 1000 level could be anywhere around 2016 or later. At this level of discussion it is not critically important about the time level. Simply knowing the possibility and taking early action will see a person protect oneself and profit hugely from the coming debacle.

    This will obviously be accompanied by a destruction of the current $$$ and gol.d (and silver) taking off to as yet unimaginable levels. There will be a painful, drawn-out global depression and all countries will be affected to different levels. You think all this is impossible. I think it is inevitable. To each his own.

    cheers


    ALl this is nonsense, lets wait out 2011, 2012 to find out the truth.
    CommentQuote
  • You Seems to be Confused!!!

    Originally Posted by wiseman
    Ash,
    There are those who like to look in front of a car, however hazy the visibility, and drive.

    And there are those who like to look in the rear-view mirror and drive hoping the road ahead will be exactly like the road behind. The visibility wil be 20/20 so they are happy about a clear vision of the future exactly like the past.

    I prefer the first, even if, at times I am wrong. Would you like to follow the second? :D

    All GREAT BOOMS have retraced 100% of the rise in history. This boom should be no different and there will be retracement of the DOW to around 1000 levels which is where the boom started.
    cheers


    First you say that you dont see in rear view mirror & then giving examples of Great Booms in History have retraces 100% of the rise in History..

    So, you decide do you believe in history or not?? you quote history where you feel convenient about that & in other case you say you don't wanna see in rear view mirror:D:D

    As far as about probability theory is concerned, you make maximum money when odds are agaist you (I mean the probability of occurring that scenario is very very rare)..like in a cricket match b/w Zim & India, probability of Zim winning is very very rare & if you bet in Zim then you make maximum money, so do you always bet on Zim???

    I mean to say, Probability of DOW at 1000 would be like Zim wining cricket match against India, do you Bet on that or Advice others also to do that???(write about that in public forum, where not necessary everybody have that level of knowledge like you have).

    I feel that you are one of the most knowledgeable & most experience member on this forum, So I would like to request you that please use this knowledge & experience to educate (guide) others than terrifying others with such extreme examples:):)

    I hope you take it positively:)
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  • Buy 'redevelopment' flat only after due diligence

    But buying a house in a redeveloped or under redeveloping society is a tad different from a regular home buying exercise.

    Read more:-

    http://economictimes.indiatimes.com/markets/real-estate/realty-trends/Buy-redevelopment-flat-only-after-due-diligence/articleshow/6477404.cms
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  • Why wait?!

    Originally Posted by pcpune
    ALl this is nonsense, lets wait out 2011, 2012 to find out the truth.


    When you have already decided that its nonsense, why do you want to wait till 2011/12.

    Simply go out and buy-buy-buy like there is no tomorrow just like Rakesh-bhai is advising you!:D

    cheers
    CommentQuote
  • Thanks Ash!

    Originally Posted by ash7979
    First you say that you dont see in rear view mirror & then giving examples of Great Booms in History have retraces 100% of the rise in History..

    So, you decide do you believe in history or not?? you quote history where you feel convenient about that & in other case you say you don't wanna see in rear view mirror:D:D

    As far as about probability theory is concerned, you make maximum money when odds are agaist you (I mean the probability of occurring that scenario is very very rare)..like in a cricket match b/w Zim & India, probability of Zim winning is very very rare & if you bet in Zim then you make maximum money, so do you always bet on Zim???

    I mean to say, Probability of DOW at 1000 would be like Zim wining cricket match against India, do you Bet on that or Advice others also to do that???(write about that in public forum, where not necessary everybody have that level of knowledge like you have).

    I feel that you are one of the most knowledgeable & most experience member on this forum, So I would like to request you that please use this knowledge & experience to educate (guide) others than terrifying others with such extreme examples:):)

    I hope you take it positively:)


    Ash,

    You are right. Its confusing. The future is not exactly like the past. Anyone who has seen India in 1980 and now will probably tell you that its no use predicting what we will be like 20 years later.

    But, like it or not, while the future will not exactly mimic the past, this world follows certain natural cycles and these long term cycles seem to be inviolate. One of them says that all speculative bubbles burst and retrace 100% of their speculative boom segment.

    I did not invent it. Just seem to somehow believe it.

    Also, though I'm repeating this from an earlier post, there is no need to panic. In fact, being prepared for the worst (while hoping for the best) blunts the blow when bad things happen and permit persons to cope better with crisis. So, as I see it, this kind of "wild" writing may actually guide people to get cautious and go slow and maybe hold cash on the side to take advantage of crashes when they happen.

    cheers
    CommentQuote
  • Originally Posted by ash7979
    First you say that you dont see in rear view mirror & then giving examples of Great Booms in History have retraces 100% of the rise in History..

    So, you decide do you believe in history or not?? you quote history where you feel convenient about that & in other case you say you don't wanna see in rear view mirror:D:D

    As far as about probability theory is concerned, you make maximum money when odds are agaist you (I mean the probability of occurring that scenario is very very rare)..like in a cricket match b/w Zim & India, probability of Zim winning is very very rare & if you bet in Zim then you make maximum money, so do you always bet on Zim???

    I mean to say, Probability of DOW at 1000 would be like Zim wining cricket match against India, do you Bet on that or Advice others also to do that???(write about that in public forum, where not necessary everybody have that level of knowledge like you have).

    I feel that you are one of the most knowledgeable & most experience member on this forum, So I would like to request you that please use this knowledge & experience to educate (guide) others than terrifying others with such extreme examples

    I hope you take it positively:)



    Surely as he says you are journalist ;)

    Most of alive people today know Great Depression just by books and all have seen more booms then depressions

    So what you see in your rear view mirrors are minor bumps.... and mostly smooth road.

    But some Drivers have memories of No Road as you see in Pak Flood Pics.
    and when they see very heavy rains only then such memory refreshes and they become alert ... not fearful .... and starts looking forward with Caution....

    check out today's IE Krugman's article


    by the way out of context ... see this link
    http://www.darkroastedblend.com/2006/11/most-dangerous-roads-in-world.html :)

    even tougher for UAZ ATV to cross
    CommentQuote
  • Originally Posted by ash7979

    So, you decide do you believe in history or not?? you quote history where you feel convenient about that & in other case you say you don't wanna see in rear view mirror:D:D



    LOL :D :D. Always though ppl have stopped reading anything past two or three lines of wiseman long posts. Last 2 years haven't seen anything coming true.
    CommentQuote
  • Originally Posted by wiseman
    Ash,

    You are right. Its confusing. The future is not exactly like the past.
    cheers


    More LOL :D :D :D . I would take it as "Sorry guys. I was confused all along for all these years and have been pouring same through my posts."

    Originally Posted by wiseman

    So, as I see it, this kind of "wild" writing may actually guide people to get cautious and go slow and maybe hold cash on the side to take advantage of crashes when they happen

    :D now this is ultimate. Ok. I know I have read past 3 lines the post. But realized you get gems only after diving deep .. gems of comedy in this case :D
    CommentQuote
  • Great article on roads ...

    Originally Posted by frugality
    Surely as he says you are journalist ;)

    Most of alive people today know Great Depression just by books and all have seen more booms then depressions

    So what you see in your rear view mirrors are minor bumps.... and mostly smooth road.

    But some Drivers have memories of No Road as you see in Pak Flood Pics.
    and when they see very heavy rains only then such memory refreshes and they become alert ... not fearful .... and starts looking forward with Caution....

    check out today's IE Krugman's article


    by the way out of context ... see this link
    http://www.darkroastedblend.com/2006/11/most-dangerous-roads-in-world.html :)

    even tougher for UAZ ATV to cross


    People who talk badly av=bout Indian infra should go out and see such roads.

    I had one such experience in the Congo a couple of year back where there was literally no road and due to rains the loose mud was many inches deep where even high-riding, jeep-type vehicles got bogged down.

    In those countries, most people fly from town to town in old Russian Antonov transports (AN-24s) and I have seen people rushing to board them just like in our private bus stands. I believe these planes frequently take off with standing passengers who hang on to a wire stretched across (like in our buses). There are frequent crashes not surprisingly.

    We are much more lucky riding Volvo buses at such cheap prices.

    cheers
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