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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  • So real.. Is the PEEGATE Pawar going to have an impact on Maha Politics.. The drought is created by these goons by diverting water to power and sugar factories..

    Congress has lost support in urban areas.. It seems they are keen to destroy their rural base too...
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  • How ponzy schemes work - navi mumbai is a good example

    Read below articles and see how New Mumbai RE was hyped with promise of new airport and prices doubling up in one year, CIDCO which owns most of the land in New Mumbai raked in the moolah selling land as high as 75000 per square meter

    The international airport was first announced by Cidco in 1993. "Since the last many years, Cidco displayed the new airport in its booklets, because of which land prices shot up,"

    On Palm Beach Road, builders quoted Rs 18,000 to 22,000 a square foot (super-built-up) for flats and said that the price would double when the airport came up. Today, there are no buyers."
    Now suddenly in just couple of days prices have dropped from Rs 60000 to Rs 45000 per square metre.

    http://www.google.com.sg/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&ved=0CDsQFjAA&url=http%3A%2F%2Ftimesofindia.indiatimes.com%2Fcity%2Fmumbai%2FProperty-rates-nosedive-in-Navi-Mumbai%2Farticleshow%2F19450804.cms&ei=NLBkUfy2Dsf5rAf71oDACA&usg=AFQjCNH_YFl2A00N_b4GVjUwK-AcguMYBQ

    http://www.google.com.sg/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=9&cad=rja&ved=0CHIQFjAI&url=http%3A%2F%2Fwww.moneycontrol.com%2Fmccode%2Fnews%2Farticle%2Fdownload.php%3Fautono%3D501095&ei=NLBkUfy2Dsf5rAf71oDACA&usg=AFQjCNGdf9J1njBoGsUwCG0aaWS_NffQqA
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  • Sharp Plunge in Property Rates in Navi Mumbai

    Sharp Plunge in Property Rates in Navi Mumbai
    ==================================

    Navi Mumbai, the planned Satellite Township in Mumbai is witnessing a major shake-up in the property market. sometime back properties in this area were selling like a hot cake where investors, real estate players, politicians and buyers were waiting to get a piece of it, in turn making the property prices high. Now, the prices have taken a sharp plunge as the chief minister of the state, Prithviraj Chavan announced that the government has not fixed the timeline of construction work of the proposed infrastructure in Navi Mumbai, reports Nauzer Bharucha of TNN.


    Off late, Ulwe in Navi Mumbai has emerged as a hot property destination for real estate investment in India. The forthcoming international airport and the SEZ land are driving the realty growth of Ulwe. But work on international airport is likely to delay further which in turn has nosedived the property prices in Navi Mumbai.


    Cidco the nodal agency for the international airport project was first announced about the project in 1993. "Since the last many years, Cidco displayed the new airport in its booklets, because of which land prices shot up," said Arvind Goel, President of MCHI, Navi Mumbai. But the agency is yet to acquire some more land for the project and so, the project work cannot start at the moment due to the incompletion of the land acquisition process, said CM in the state assembly.
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  • How masses are misled

    Read below articles by siliconeindia, first article was published on 28th March 2013 saying Navi Mumbai as the next big premium residential locality in India.
    Then within 12 days on 9th April they say that there’s a sharp plunge in Navi Mumbai property rates?
    Looks like the second article came up after Times of India news.
    This is what you call a carefully orchestrated financial scam which is completely illegal.


    http://www.google.com.sg/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=9&cad=rja&ved=0CHgQFjAI&url=http%3A%2F%2Fwww.siliconindia.com%2Frealestate%2Fnews%2FNavi-Mumbai-Indias-Next-Big-Premium-Residential-Locality-nid-144164.html&ei=9LVkUZ6yGYeQrge_-4Bo&usg=AFQjCNHz5nOcZtiSUwg3CWVE1FY_JHy89g

    http://www.google.com.sg/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=3&cad=rja&ved=0CEUQFjAC&url=http%3A%2F%2Fwww.siliconindia.com%2Frealestate%2Fnews%2FSharp-Plunge-in-Property-Rates-in-Navi-Mumbai-nid-144907.html&ei=BLVkUeDBIIOJrQeCvIH4Cg&usg=AFQjCNHDG9ytAdOEvu79wR_hhD7eni3sCg
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  • What is a Ponzi Scheme? How Do Ponzi Schemes Work?

    Question: What is a Ponzi Scheme? How Do Ponzi Schemes Work?

    Answer: A Ponzi scheme is a scam investment designed to separate investors from their money. It is named after Charles Ponzi, who constructed one such scheme at the beginning of the 20th century, though the concept was well known prior to Ponzi.

    The scheme is designed to convince the public to place their money into a fradulent investment. Once the scam artist feels that enough money has been collected, he disappears - taking all the money with him.
    Five Key Elements of a Ponzi Scheme


      The Benefit: A promise that the investment will achieve an above normal rate of return. The rate of return is often specified. The promised rate of return has to be high enough to be worthwhile to the investor but not so high as to be unbelievable.
      The Setup: A relatively plausible explanation of how the investment can achieve these above normal rates of return. One often-used explanation is that the investor is skilled and/or has some inside information. Another possible explanation is that the investor has access to an investment opportunity not otherwise available to the general public.
      Initial Credibility: The person running the scheme needs to be believable enough to convince the initial investors to leave their money with him.
      Initial Investors Paid Off: For at least a few periods the investors need to make at least the promised rate of return - if not better.
      Communicated Successes: Other investors need to hear about the payoffs, such that their numbers grow exponentially. At the very least more money needs to be coming in than is being paid back to investors.
      Steps in the Ponzi Scheme

      Ponzi Schemes are quite basic but can be extraordinarily powerful. The steps are as follows:

        Convince a few investors to place money into the investment.
        After the specified time return the investment money to the investors plus the specified interest rate or return.
        Pointing to the historical success of the investment, convince more investors to place their money into the system. Typically the vast majority of the earlier investors will return. Why would they not? The system has been providing them with great benefits.
        Repeat steps 1 through 3 a number of times. During step 2 at one of the cycles, break the pattern. Instead of returning the investment money and paying the promised return, escape with the money and start a new life.
        How Big Can Ponzi Schemes Get?

        Into the billions of dollars. In 2008 we saw the fall of arguably the largest Ponzi scheme in history - Bernard L. Madoff Investment Securities LLC. The scheme had all the ingredients of a classic Ponzi scheme, including a founder, Bernard L. Madoff, that had a great deal of credibility as he had been in the investment business since 1960. Madoff had also been the chairman of the board of directors of NASDAQ, an American stock exchange. The estimated losses from the Ponzi scheme are in between 34 and 50 billion U.S. dollars. The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations.". The Madoff scheme collapsed; Madoff had told his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations."
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  • Sebi-Sahara case: Subrata Roy, others summoned tomorrow - PONZY SCHEME

    Sebi-Sahara case: Subrata Roy, others summoned tomorrow - The Economic Times
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  • This thread has become a negetive news folder :)
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  • Originally Posted by wiseman

    Just because the sector is RE does not mean a Ponzi Scheme cannot be played in it.

    cheers


    Good. So how a Ponzi scheme be played in RE ?
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  • Dear Gold Buyers

    Sad news (GS rarely gets it wrong on oild & gold)



    Goldman Sachs has cut its gold price forecasts for a second time in six weeks on Wednesday, citing expectations for an acceleration in US economic growth and the metal's recent lacklustre price performance.


    The bank lowered its 2013 average gold price forecast to $1,545 an ounce from $1,610 and its 2014 price view to $1,350 an ounce from $1,490.

    It also advised that investors close a long COMEX gold position, recommended in late 2010, and replace it with a short COMEX position.

    "Despite resurgence in euro-area risk aversion and disappointing U.S. economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning," Goldman said in the note.

    “While higher inflation may be the catalyst for the next gold cycle, this is likely several years away.”

    "With our economists expecting few ramifications from Cyprus and that the recent U.S. slowdown will not derail the faster recovery they forecast in (the second half of 2013), we believe a sharp rebound in gold prices is unlikely."


    Goldman Cuts Gold Price Forecast Through 2014 as Cycle Turns - Bloomberg
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  • Already explained

    Originally Posted by compuwalah
    Good. So how a Ponzi scheme be played in RE ?


    Please refer the original post. Its hidden in there.

    cheers
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  • I hate that...

    I hate that 'i told you so' and the many new babas we have on the forum incl yours truly.

    But then, did'nt I tell you guys

    This thread should be offered to finance ministers of the world and most likely the depression would end sooner than later.

    The most important solution is stopping all financial investment products like mf, futures etc. that lead to market and therefore economy manipulation at the hands of speculators and big groups. Bare sharemarket under a watchdog though is okay.

    Yes millions (worldwide) would be jobless but i am sure the economy would improve and they would be employed in REALLY PRODUCTIVE fields. Most of the current finance field is purely speculative and therefore unproductive. They do nothing but create money out of thin air thus devaluing money, increasing inflation and creating bubbles.

    My 2.....err...where are my cents? I seem to have none left.;)
    Ladies and gents brace yourself for a ride in hell....in coming months.





    Originally Posted by Baruch
    Dear Gold Buyers

    Sad news (GS rarely gets it wrong on oild & gold)



    Goldman Sachs has cut its gold price forecasts for a second time in six weeks on Wednesday, citing expectations for an acceleration in US economic growth and the metal's recent lacklustre price performance.


    The bank lowered its 2013 average gold price forecast to $1,545 an ounce from $1,610 and its 2014 price view to $1,350 an ounce from $1,490.

    It also advised that investors close a long COMEX gold position, recommended in late 2010, and replace it with a short COMEX position.

    "Despite resurgence in euro-area risk aversion and disappointing U.S. economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning," Goldman said in the note.

    “While higher inflation may be the catalyst for the next gold cycle, this is likely several years away.”

    "With our economists expecting few ramifications from Cyprus and that the recent U.S. slowdown will not derail the faster recovery they forecast in (the second half of 2013), we believe a sharp rebound in gold prices is unlikely."


    Goldman Cuts Gold Price Forecast Through 2014 as Cycle Turns - Bloomberg
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  • SEBI has gone beyond SC order, says Sahara Boss Roy

    SEBI has gone beyond SC order, says Sahara Boss Roy - Moneycontrol.com

    The market regulator had today called Roy and three other group directors to discuss sale of group's properties and recovery of unpaid dues. SEBI and Sahara Group has been in a tussle after the Supreme Court order directed the market regulator to attach properties of Sahara Group in connection with the refund case involving an estimated Rs 24,000 crore payment to over 30 million small investors.

    In February, SEBI had ordered a freeze on the assets and bank accounts of the two Sahara group companies namely Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC).


    Roy said that in the meeting held today, SEBI demanded details of his personal properties. Surprisingly, Roy who is known for living a lavish life claimed to have no immovable properties and said that he had cash of around Rs 2 crore in bank accounts and gems and jewellery worth Rs 1 crore only.

    "Company provides us all facilities...personally I am not a very rich man, the company is very rich," he said. :bab (59):
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  • Hang me if any wrongdoing found in Sahara, says Subrata Roy

    Hang me if any wrongdoing found in Sahara, says Subrata Roy
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