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?

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  • Originally Posted by wiseman
    When China's RE bubble bursts, all the investors there will sell in distress and buy cheaply in Pune, since Pune is manufacturing hub and all the Chinese have to do is shift their factories to Pune, buy property cheap and start on another bubble. This will start Pune's own RE bubble which will see RE prices rise 50% per annum forever!:D

    All you bears will look foolish when you see RE at 4 times its current price in 2012 when China's RE bubble bursts.:p


    You mean when the whole world's RE bubble bursts,
    all will come to Pune and buy into its RE ....

    That's interesting. So you can expect your next neighbor
    to be a Chinese, an American, or an European ...
  • How will Raj Thakare react ;-)

    May be by renting out properties to them at exorbitant prices.. n then showing is maharastra prem by attacking them ;-)
  • MNS and Raj are trying to find out who is ams444. they are asking if AMS stand for American Maharashtra Sena!!!;)
  • Originally Posted by utopian2009
    MNS and Raj are trying to find out who is ams444. they are asking if AMS stand for American Maharashtra Sena!!!;)

    So you got into the bandwagon of faltu jokes in just 7 hours.
    Welcome to IREF.

    Originally Posted by utopian2009
    leave loving and hating you folks are trying to subvert the question raised again with another faltu joke

    do you feel there are loads of faltu jokes? I feel the forum is full of that and a timepass for many who are kinda addicted to it.
  • i put jokes only in thread which has record of faltu stuff and not everywhere like you folks. you have something to learn from me. I am happy you got aware of faltu jokes.

    good try at policing. it was a deliberate joke to invoke such response

    sorry if you're hurt. not intended to hurt you!

    happy joking in this thread! it's allowed!!

    Originally Posted by aditi sharma
    So you got into the bandwagon of faltu jokes in just 7 hours.
    Welcome to IREF.
  • WATCH TOWER: Need to monitor real estate activities

    A good editorial:-
  • watch tower

    However even a CRISIL well rated builder (Rohan) isnt enjoying great stature (including in IREF). so such ratings dont help property buyers.
  • RE
    I am trying to figure out how 'only hearts' can build home?
  • Originally Posted by utopian2009
    I am trying to figure out how 'only hearts' can build home?

    For that to understand, you require one:D.
  • May be falling in love with builders can build home

    Fall so deep in love that just rush to sales office to every project from Tranquility to Vanshaj Kiona, from Reflection to Blue-Ridge .....Thats how home is built (by hearts around Builder)
  • Originally Posted by puser
    May be falling in love with builders can build home

    Fall so deep in love that just rush to sales office to every project from Tranquility to Vanshaj Kiona, from Reflection to Blue-Ridge .....Thats how home is built (by hearts around Builder)

    Man, falling in love with builders can only give you heart attacks:D.
  • Without tax, petrol costs Rs 23/ litre

    Though not directly related to RE, I thought it is important to inform you, hence the post.
  • Although unrelated but in Chicago 20 min from Sears Towers house is available at 209000$ = 95Lakhs

    Plot may be somewhere 5000 - 6000 sf.
    5 bedroom
    builtup 2000+

    2 garage

    at least one can daydream ... a far far far better house one can buy in US with the same price in Pune ;)
  • great house, this is what they call VFM. Really makes one wonder why we are forced(almost) to pay so much for a house in our cities :-(
  • Originally Posted by gsa177
    great house, this is what they call VFM. Really makes one wonder why we are forced(almost) to pay so much for a house in our cities :-(

    1901 sq. ft. Penthouse (top floor) northeast corner home. 10-foot ceilings and floor-to-ceiling windows plus an open terrace showcasing lake views up the Drive!Features include: Brazilian cherry floors, glass mosaic fireplace, open kitchen with extended cabinetry, stainless steel appliances, stainless steel back splash, wine cooler, bath with Jacuzzi tub and steam shower hook up, full washer/dryer. 2 deeded parking spaces - $40K each. Building amenities include: 24 hr doorman, valet, receiving room, sundeck, party room, exercise room, dog run, bike room, on-site management.

    And this is located at one of the best views from balcony ... over looking "Navy Pair" (Marina and lake)

    The hottest address in Chicago ..... just at 4 crores !!!! 20k psf

    And the DREAM Home is here ...... just 4.5 crores 5930 sq. ft. builtup.
    Swimming pool ... lakeside ....... just look at the pics .......

    hope no one from pawar gang sees it .... they will go and buy tomorrow