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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  • Our standards of hygiene are different from theirs.. is a classic quote.. Indian Politicians/ builders are so used to people not questioning about providing basic infra and also meeting deadlines and all this is new ..

    I think it is time to put our hands to the heart and sing.. All izz Well ..
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  • Originally Posted by RAJESHP

    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.



    Rajesh P, please google and look up "if you pay peanuts, you get only monkeys". Obviously your teachers did not do a very good job of educating you.

    Going from that to "all teachers are monkeys" - only exposes your taleban/RSS mentality - who misunderstand everything thanks to their deficient education, take umbrage on imagined insults, become needlessly angry and resort to violence.

    Very similar to what happened with Shashi Tharoor for his "cattle class and holy cows" comment - nobody understood it, but were happy to misunderstand it, and shout "he thinks we are all cattle - he is unsulting cows" etc.

    Signs of poor education.

    FYI I am a teacher (although at college level), my mother was a maths teacher, my father taught physics at intermediate level before taking up a govt job, my grandfather was a physics professor and my wife is a teacher - and a damn good one - who is currently preferring to sit at home and teach only our own children - because of the deficiencies in what claims to be one of the countries best schools.

    Coming back to topic, check out

    http://money.cnn.com/2010/09/15/real_estate/california_home_price_rebound/index.htm

    There are many other signs of early recovery including housing starts data released today
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  • CommentQuote


  • It's may or may not be a bubble story as yet,
    but it certainly is double or triple story w.r.t. RE prices.
    CommentQuote
  • Thats because they only see our brightest ...

    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:
    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



    Santosh,

    You have basically the creamy layer which went out there (especially in the 60s, 70s and 80s) and therefore, when you see half a million IIT and other Grads who have additionally PHd'd out of Stanford or wherever, you can overlay this segment onto the general Indian population and say, ! All Indians are geniuses!!!

    And so, they assume (must be the dumber ones there) that this IIT must be education heaven since so many IIT'ians are rising to the top, launching Net companies, etc, etc.

    How many of these guys have actually come down and sat in our classes and come to that conclusion.

    So, when our school textbooks have such terrible bloomers and out teachers don't know enough to correct them, we are not far off the mark saying that this approach will soon see us at the bottom of the educational ladder.

    Let us not keep kidding ourselves with "Jai Ho"s about how great we are when the rot is so obvious. Just like today's article in MSN where Some American Thinktank stated that India was the World's third superpower country behind US and EU (that cretin considers the EU as a country?!).

    And I was mentioning out loud that we must be the world's only superpower in its entire history which can't even build out a Games Village on time (after being given ALL THE TIME IN THE WORLD!)

    Lets get Real ...

    cheers
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  • Originally Posted by wiseman
    Let us not keep kidding ourselves with "Jai Ho"s about how great we are when the rot is so obvious. Just like today's article in MSN where Some American Thinktank stated that India was the World's third superpower country behind US and EU (that cretin considers the EU as a country?!).

    And I was mentioning out loud that we must be the world's only superpower in its entire history which can't even build out a Games Village on time (after being given ALL THE TIME IN THE WORLD!)

    Lets get Real ...

    cheers


    We're Jay-Ho (irresponsible & day-dreaming) super-power. Can NOT create even basic things like good toilets, bridges and pavements :o
    CommentQuote
  • Originally Posted by wiseman



    Let us not keep kidding ourselves with "Jai Ho"s about how great we are when the rot is so obvious. Just like today's article in MSN where Some American Thinktank stated that India was the World's third superpower country behind US and EU (that cretin considers the EU as a country?!).

    And I was mentioning out loud that we must be the world's only superpower in its entire history which can't even build out a Games Village on time (after being given ALL THE TIME IN THE WORLD!)

    Lets get Real ...

    cheers


    My point was instead of swinging pendulum to far left or right let’s find some center. We have to find right balance in our education system. Current central education minister is just pondering higher education where as his focus should be been primary education for all, along with quality of education. I agree with your point that books should be written with little more responsibility. If we don’t play this correct we will be repenting about lost generation after 40 years.

    I am too frustrated with mediocrity of people who are governing us. It pains to see that few politicians hijacked CWG event and faltered us all. Amazing many times we compare ourselves with China. Please people see what china did with Olympic and what we are left with CWG mess that to be with 28 thousand core bill.

    Despite all these still I love my country because I have hope that slowly but surely we will be one of the developed nation.
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  • Originally Posted by amjamirs2
    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.


    Yes and same is the case with any profession. There is always a mix of good and not so good.
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  • Originally Posted by Venkytalks
    Rajesh P, please google and look up "if you pay peanuts, you get only monkeys". Obviously your teachers did not do a very good job of educating you.

    Going from that to "all teachers are monkeys" - only exposes your taleban/RSS mentality - who misunderstand everything thanks to their deficient education, take umbrage on imagined insults, become needlessly angry and resort to violence.


    Yuuukkkkk, is all I can say! your words are speaking for yourself.

    I was unaware of this phrase/idiom and thought you are calling teachers as monkeys. I was offended and did not like this statement, because I have multiple people as teachers in my family.

    There was a polite way to reply, but you choose.... the above.:bab (45):
    CommentQuote
  • Japan Land-Price Declines Slow for First Time in Three Years

    http://www.bloomberg.com/news/2010-09-21/japan-land-price-declines-slow-for-first-time-since-2007-as-buyers-return.html

    Property price slow decline is making news in Japan.

    Some excerpts:

    The nationwide average price dropped 3.7 percent in the 12 months ended June, compared with a 4.4 percent decline a year earlier, the Ministry of Land, Infrastructure, Transport and Tourism said in a report released yesterday. Prices have fallen for 19 straight years.
    CommentQuote
  • Assured 100 times Return

    Man, excellent way of making 10-100 times the money invested, that too assured. Now can anybody beat this? Even biggest investment gurus won't!!
    Attachments:
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  • Govt to unlock 30k acres in NCR

    The National Capital Region (NCR) may soon have 30,000 acres of land available for residential construction, if the government's steps in this direction bear fruit. The Centre is attempting to fast-track the resolution of disputes over NCR title deeds, which force developers to stay away. NCR is estimated to be short of 5 lakh housing units, and demand is growing at 1 lakh units a year.
    The move will spark price correction, releasing over 2 million housing units. The exercise piloted by the urban development ministry and implemented by the NCR planning board, will be kicked off by year-end.
    The exercise will unlock land in three states: eight districts in Haryana (Gurgaon, Rewari, Faridabad, Sonepat, Rohtak, Panipat, Jhajjar and Mewat); five districts of Uttar Pradesh, (Ghaziabad, Bulandshahar, Meerut, Baghpat and Gautam Budh Nagar) and one district (Alwar) in Rajasthan. The government plans to seek help from local bodies to identify and verify land ownership, after which independent agencies will cross-check data.
    "This is good for developers who can get land and good for consumers who can get residential units at lower prices. But one has to see how it is implemented. India doesn't have a very good history in implementing such policy initiatives. One also has to see how soon the free land can be made available for developers," Abhishek Kiran Gupta, head-research, Jones Lang LaSalle, India said.
    "In any big transaction, the problem of title deed arises at some point. We are trying to work out a formula. Various suggestions have come in. The exact strategy will be worked out in some time," an urban development ministry official said.
    The ministry plans to advise states to create an ad hoc title deed in the name of the claimant to facilitate the transaction. "This should not be difficult as in villages and small towns, everyone is aware of who owns which land. The only problem in some cases is that official records are not available. This exercise will help do away with this problem," said an official from the Haryana housing board.


    http://in.biz.yahoo.com/100921/203/bawa4n.html
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  • Originally Posted by RAJESHP
    Yuuukkkkk, is all I can say! your words are speaking for yourself.

    I was unaware of this phrase/idiom and thought you are calling teachers as monkeys. I was offended and did not like this statement, because I have multiple people as teachers in my family.

    There was a polite way to reply, but you choose.... the above.:bab (45):


    Sorry Rajesh P.

    I did not want to hurt your feelings - and I thought I was being polite

    If you look at the words you highlighted and think about it,

    "only exposes your taleban/RSS mentality - who misunderstand everything thanks to their deficient education, take umbrage on imagined insults, become needlessly angry and resort to violence."

    You did misunderstand,
    You did take umbrage
    And you did become angry - you kept referring to monkeys in both of your follow up posts and you still appear angry judging by the icon you have posted above :).

    Anyway, I once again apologise for the strong words which might have been needless.

    It never ocurred to me that you had actually taken my words literally, I thought it was just your way of expressing disagreement and saying our teachers are best.
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  • We all love our country ...

    Originally Posted by informsantosh
    My point was instead of swinging pendulum to far left or right let’s find some center. We have to find right balance in our education system. Current central education minister is just pondering higher education where as his focus should be been primary education for all, along with quality of education. I agree with your point that books should be written with little more responsibility. If we don’t play this correct we will be repenting about lost generation after 40 years.

    I am too frustrated with mediocrity of people who are governing us. It pains to see that few politicians hijacked CWG event and faltered us all. Amazing many times we compare ourselves with China. Please people see what china did with Olympic and what we are left with CWG mess that to be with 28 thousand core bill.

    Despite all these still I love my country because I have hope that slowly but surely we will be one of the developed nation.


    Santosh,

    We are in full agreement.

    Everyone loves his/her country (with few exceptions). But sometimes, when part of our country is affected by a Cancer, to save the rest, you have to perform surgery. This surgery should be done immediately to our stalwart politicians like you-know-who.

    We can always outsource it to Saudi Arabia to get the job done cleanly! They will come, setup the infrastructure, do the job and leave the place cleanly - unlike the unclean, filthy mess we have created.

    Deep down, I was very much in favor of the Games not going through. Because this is the only way for the s*** to hit the fan and for the country to get enough rage to hang the perpetrators and recover the money.

    People said that it would be too much of a shame and therefore we must somehow see the Games through. My response is, is this any less shame that a WhiteMan comes to this country and calls us filthy, unclean savages? I think this is worse. Therefore, we must have a failure, responsibility must be fixed, people must go to jail and money must be seen to be recovered. Otherwise, we will become like America is becoming, right? :)

    I'm middle-path too. But sometimes, to stem the rot from spreading further, we must take the extreme path (and some innocent bystanders too will get affected). We have been taking the middle path for last 60 years and see where it has brought us. Today, a Kalmadi (and most other politicians) think they are so big that a Rajdeep cannot ask them if they will resign if the Games does not go through. If we delay any further it will become too late and we will become anothe country like Haiti or Ivory Coast.

    cheers
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  • informsantosh

    If you are too frustrated with mediocre people governing our country, are you willing to take the plunge and run for an election?

    wiseman

    Granted all points. Things are not what they should. How do we solve it ?

    My take on this is, this is the best we get. I don't think we can perform any better than what we are doing.
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