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....
Read more
Reply
12597 Replies
Sort by :Filter by :
  • Originally Posted by aaj123
    Really? Why don't you go for a career change and become a govt teacher in that case? You will also do full aish and have no tension. Or are the entry barriers to this aish job too high? LOL


    not my type of job man.. lacks style and travelling

    RajeshP: I am talking abt the teachers in govt schools man..
    CommentQuote
  • Lower Mumbai..

    Is this a jest?
    Originally Posted by sandeepnair
    Any body here who can help me in calculating EMI for a Home Loan of 20 lacs? I'm Planning to buy one in the Lower mumbai. :)
    CommentQuote
  • Originally Posted by puser
    I am just writing what a common layman would otherwise say; giving a different viewpoint.

    People can afford interest rate who got a deal of 8 % fixed fr 3 years and then next floating'; many people would repay lot of loan during these 3 years making EMI level to what it was at less interest rate.

    Obviously that would affect their lifestyle and savings; but unless someone is multi-crore pati and buying 40lakh flat; only then savings would not affect

    Man, how on earth do you expect people taking loan for 15-20 yrs can repay most of it in 3 years? Had this been the case, why would have they taken loan of atleast 85% of agreement value?? Why not make more downpayment in the beginning itself??:bab (38):

    Man, when more than 60-70% take home income is going in EMIs, how is it possible to repay most of the loan in 3 yrs??

    * PS:- Situation for people taking loans on double incomes would be even worse as they have excessively over-leveraged in most cases.

    Wiseman,

    I completely agree with you on US scenario. Situation is getting bad by the day than we see & for ITGs, this is the right time to focus more on savings rather than putting in money in RE.
    CommentQuote
  • Originally Posted by RAJESHP
    If general people think all these about teachers, Its very sad and disheartening to know.

    The other side of the story is there are several schools in India (govt) where teachers get payments regularly, but in reality, the schools don't exist!!:bab (45): Infact, Sadashiv Amrapurkar (marathi actor) who works with a NGO informed that several schools, roads are only on paper in Mah state, payments are made but no infra lies at site. This is the situation:o.

    Btw, I don't understand why govt school teachers are put on election duty?:bab (38):

    Coming to textbooks, man, these keep changing everytime a new govt comes. Infact, here you will read only good things about Gandhi-Nehru. Go to UK & see the scams committed by these two rottenheads.
    CommentQuote
  • Attachments:
    CommentQuote
  • Thanks frugality. Good article.

    On a side note, can you please help me here .. I'm trying to attach some imageshack images on a couple of threads, but I am not successful I've tried with the 'Insert Image' on the HTMLArea editor. Is it something related to #of posts ? How do I get images in a thread ?
    CommentQuote
  • Originally Posted by realacres
    The other side of the story is there are several schools in India (govt) where teachers get payments regularly, but in reality, the schools don't exist!!:bab (45): Infact, Sadashiv Amrapurkar (marathi actor) who works with a NGO informed that several schools, roads are only on paper in Mah state, payments are made but no infra lies at site. This is the situation:o.

    Btw, I don't understand why govt school teachers are put on election duty?:bab (38):


    may be true and no comments on this.

    I was talking about respect we have to teachers in general.
    I want to challenge all these smart and intelligent humans, who consider teachers job, full time pass and call them monkey, to try and take a class themselves and see how they are treated by students in the class. That will also test their own skills and show them mirror, where they can see what they are capable of.


    Originally Posted by realacres

    Coming to textbooks, man, these keep changing everytime a new govt comes. Infact, here you will read only good things about Gandhi-Nehru. Go to UK & see the scams committed by these two rottenheads.



    No comments on the history, I was challenging "outright false and misleading facts" published in computer science text books.

    Still waiting on wiseman to provide evidence to all the allegations he made. I see no reason why he should not be able to publish all the details, I asked, since the text book belongs to his own son.

    I want to see the evidence to believe this, else that info is a piece of crap.:bab (45):
    CommentQuote
  • Originally Posted by rendezvous
    On a side note, can you please help me here .. I'm trying to attach some imageshack images on a couple of threads, but I am not successful I've tried with the 'Insert Image' on the HTMLArea editor. Is it something related to #of posts ? How do I get images in a thread ?


    Try "attachments" it should work.
    CommentQuote
  • Thanks Rajesh .. I just checked and the image also worked ! Tx !
    CommentQuote
  • Originally Posted by RAJESHP
    may be true and no comments on this.

    I was talking about respect we have to teachers in general.
    I want to challenge all these smart and intelligent humans, who consider teachers job, full time pass and call them monkey, to try and take a class themselves and see how they are treated by students in the class. That will also test their own skills and show them mirror, where they can see what they are capable of.


    I feel there are both good an bad teachers in our schools.
    The good teachers are always respected by students whereas bad teachers are treated roughly by students.
    Its not like all teachers are bad and they do timepass.
    CommentQuote
  • Check this out ...

    Originally Posted by RAJESHP
    These are some very serious allegations. I am sure along with me every one is also interested in knowing complete details about this.

    Please let us all know the
    1) Publication
    2) Author names
    3) Book name and page number where and what this wrong info is written.
    4) Scan the page and upload the image here and let us all know why that portion is wrong.(Very important)



    I'm not doing this for fun. Having been in this business for over 25 years (and taught this stuff at some levels for quite a bit of the time), its really painful to be asking my kids to mug up the stuff and vomit it out in the exams simply because, if they actually write the correct stuff, they would be termed wrong and given zeros!!!

    Please refer the following Texbook.

    Understanding Information Technology - Class VI
    Arya Publishing Company

    Authors :

    1. Vijay Kumar Pandey (BCA, Diploma in Computers, HOD, Computer Science, Rajendra Vidyalaya, Sakchi, Jamshedpur, Jharkhand)

    2. Dilip Kumar Dey (BSc, BEd, Diploma in Computer Science, Faculty, Computer Science, same institution)

    With so many PHds in Com.Sc on this forum itself, did they think the best one could do is take a couple of Diplomas in ComSc to actually write some of the most important intro books in this country? Kapil Sibal should be looking into these things instead of praising himself on TV ramming his prejudices down the countries throats.

    Just a few kms away is one of the Best IT Depts in the country meeting the IT needs of some of the biggest industries in this country (Tata companies like Tisco, Telco, etc) and just a few kms on the other side is XLRI with some of the better guys in the business (at least at academic levels).

    Do you really think they couldn't find better authors for critical books which are taught in the so-called Best schools in this country?

    More hillarious, mind-numbing excerpts from the book later!!!

    But to give you a trivial example:

    Infact Internet is made-up two words, i.e, International + Network ...

    This is on page 59 on "Introduction to Internet". So, I went about trying to figure out how they arrived at this bloomer. Appears they did a Google on it and struck on Answers.com with some unknown person stating tersely (1-liner and no basis) that Internet originated from International + Network. No basis, no nothin'! Answers.com?!

    Funny part of this is that, if they had simply done a search on Answers.com they would have struck genuine in the following excerpt from http://en.wikipedia.org/wiki/History_of_the_Internet

    The specification of the resulting protocol, RFC 675 - Specification of Internet Transmission Control Program, by Vinton Cerf, Yogen Dalal and Carl Sunshine, Network Working Group, December, 1974, contains the first attested use of the term internet, as a shorthand for internetworking; later RFCs repeat this use, so the word started out as an adjective rather than the noun it is today.

    MAy not mean much to people, but this book is full of such gems. Of course it all goes into building a generation of misguided and misled youngsters with their head full of the wrong stuff and with the belief that they are genuinely world-class! I feel for these kids who are put to such risk by our system.

    cheers
    CommentQuote
  • Here in pune there are whole groups of educated people who prefer to educate their children themselves instead of sending them to schools.

    http://www.alternativeeducationindia.net/


    Originally Posted by wiseman
    I'm not doing this for fun.
    CommentQuote
  • Originally Posted by aditi sharma
    Here in pune there are whole groups of educated people who prefer to educate their children themselves instead of sending them to schools.

    http://www.alternativeeducationindia.net/

    Man, Indian education system sucks big time:o. In UK, the kids are given formulas alongwith the answer sheet. This is just to see whether the kid can apply the knowledge taught to him rather than checking the mugging capacity of the child:o. Man, in school, I had learnt by heart some maths sums just because I used to get confused with formulas to be mugged up!!:D

    Btw, I am not seeing helmak these days. I was waiting for reply on Kumar builders & Mont Vert where he is regular investor. No comments from him on your link of Mont Vert builder having case filed against him by CID as well.

    Btw, thanks for the link frugal but I am sure than of 1/4th black economy of GDP, 90% must be dominated by ministers & their cronies themselves .
    CommentQuote
  • Jai Ho!

    Ironically we all are bashing our current educational system and developing countries wants to learn from us. At least in election fever USA president chime about how India and China are surging ahead by producing more graduates.
    I am not education expert but some of the points:
    1. In many speeches US president is praising India’s educations system. And our education minister Mr Sibal (Harvard Graduate) wants to dismantle it and follow USA.

    2. We need better teachers no doubt about it. After 90’s economic liberalization very few talented people are opting for teaching profession.

    3. Because of surge of tuitions and extra coaching noble profession of teaching has become money spinning machine.

    4. Developed countries have luxury where many successful professionals return to educational institutions. I have hardly seen that trend. Always we are running behind accumulating wealth for our next seven generation. Bill Gates is donating all his fortunate for noble cause instead of giving to his three kids.

    5. Slowly we have to move away from British era of education system where they just wanted to churn out clerks for running their empire. Let’s start specialization from 10th grade instead of pushing until +2 (12th grade)

    6. Today’s need is not just writing and mugging things but reading and analytical skills.

    7. Also lets have some layered education as per IQ’s of student, In most education system we put all students in same system and everyone is competing with everyone.

    8. Developing countries education stress on generating worker/coolies (IT/Manufacturing). So they loose on innovation side of job.

    9. Developed world education system, just focus on creating special talented people and they loose on generating coolies who are also needed for doing low level jobs and they turn to immigrants to clean the mess.

    10. I kind of agree with books. It’s really important we should have best book writers. Otherwise every other day main bridges will be failing as out education have just taught engineers how to do ‘Jugad’ and corruption and how not carry out bridge construction.

    11. Lets enforce some moral policing in school, we should start appreciating our freedom and respecting our great nation.

    Bottom-line : There are many things which we can improve but please have rational thoghtprocess about that instead of mocking failed western policies.
    Enough of cribbing, I am curious how CWG turns out after finding stray dog on sportsman’s bed.
    I am sure even after failure of all these things we will not learn anything.

    Jai Ho! Composer did not have time to write better song for his country for CWG and have time to do world tours.


    :D
    CommentQuote
  • Originally Posted by informsantosh
    Ironically we all are bashing our current educational system and developing countries wants to learn from us. At least in election fever USA president chime about how India and China are surging ahead by producing more graduates.
    I am not education expert but some of the points I would like to point out here
    1. In many speeches US president is praising India’s educations system. And our education minister Mr Sibal (Harvard Graduate) wants to dismantle it and follow USA.

    Fact is many kids in US are dropping out of the universities because of which there is talent crunch. It is not that our education system is great but it is like study so that you get good job & wife/hubby:D. You know what type of standard Bharati Vidyapeeth has?? The seats are sold 1-2 years in advance & I know atleast 4 cases for the same. Man, MIT (US) beats all the IITs combined hands down. It is only the Indian brains which makes look out education system to be good. I don't understand the need of having one language compulsory for 2nd year Bsc:bab (38):.

    * The SPELLBEE competition which is held in US is being won by PIO or by the kids of Indian origin for last 4 consecutive years:). This is Indian brains man & not US education system.

    I agree to rest of the points though.

    Bottom-line : There are many things which we can improve but please have rational thoghtprocess about that instead of mocking failed western policies.
    Enough of cribbing, I am curious how CWG turns out after finding stray dog on sportsman’s bed.
    I am sure even after failure of all these things we will not learn anything.

    Jai Ho! Composer did not have time to write better song for his country for CWG and have time to do world tours.

    Apart from dog, a overhead foot bridge collapsed injuring 29 with 5 of them being critical:(. I don't know what type of crap song this time Rehman came up this time despite taking INR 5 Cr for the song:bab (38):. He is one of the finest music directors this country has & the current song definitely doesn't suite the standard of ARR especially after listening to the theme music of Worldspace Sat Radio & Airtel; it looks more like Anu Malik!!:D

    Btw, I will be very happy if these CWG fail.
    CommentQuote