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There's plenty of housing for flipping, which is its only legitimate use.
If there were a beefed up National Urban planning initiative to build at least 10 new Metro areas at least as big as the Dade Broward area of South Florida, somewhere in the US.
It would create so much work, we would be begging for Mexican and immigrant labor, houses would be at $120K median price for 1700sqft homes, so much housing stock would create so many jobs unemploymehnt would be almost non existent. Liberal Elites could come down off their goddamn high horse and realize they'll never be rich unless they produce something rather than ensuring everyone's kids and their children never live in a single family home of their own.
Change My Mind!
My prediction : slowly declining house prices in the sf area for several years at least.
Better idea. Phase out government back home loans. Without the 30 year mortgage,
Not sure what you mean here. The government backed 30 year mortgage did the most to transfer wealth from the middle class to the rich banker class.
ALL of that "unrealistic" inflation in home value is caused by government backed loans. Take away the government guarantee and the banks would require larger down payments, serious appraisals, and shorter terms. Without the easy money sloshing around, home prices would be held in check.
Government loans actually help the middle class by allowing them to buy a house and build equity rather than paying rent for their entire life.
No, government backed loans give people the ability to borrow much more than the fair price of the house
Government backed loans artificially increase demand and drive up price
Wrong--there's nothing artificial there.
"Demand" in economics means Qualified Demand, not unqualified "Want." Everyone wanting a Mansion and Olympic sized pool plus a landing strip for his/her personal jet airplane is not "Demand."
The government backing allows too much easy money which is what drives up prices. Without government backing, the irresponsible borrowers would not be able to bid up prices. The only people in the market would be people who saved up the down payment and then the houses would be affordable enough to buy with a 10 -15 year loan.
Easy money always drives up prices
that's 2.8% annual return on investment on your original $1M. Think you can do better elsewhere? probably. you can reduce your original investment by financing, and you might see a higher return, but that's just leveraging, and the D value (debt servicing overhead) will also go up and eat into your bottom line.
That's if you're renting it out. If you want to live there, the math is different, but this is your landlord's math conundrum.
cmdrdataleak saysthat's 2.8% annual return on investment on your original $1M. Think you can do better elsewhere? probably. you can reduce your original investment by financing, and you might see a higher return, but that's just leveraging, and the D value (debt servicing overhead) will also go up and eat into your bottom line.
That's if you're renting it out. If you want to live there, the math is different, but this is your landlord's math conundrum.
Don't forget to add in the mega appreciation rates that are typical of California.
However, they'd have to pay North of 50% taxes between state and fed on the gains from selling the property.
Strategist sayscmdrdataleak says
Don't forget to add in the mega appreciation rates that are typical of California.
Yes, the value of the property is likely to appreciate in actual market terms, even though you're getting tax advantage to claim depreciation of the premises.
In fact, my calculations in the comment above do not take into account at all what gain an investor would realize per year if they later sold that property. It could be a tidy sum. However, they'd have to pay North of 50% taxes between state and fed on the gains from selling the property. So even if the property appreciated 20%in value, they'd only net 10%. Over that amount of time, you could probably get better returns on, say, investing the same amount in total stock market index + total bond market index blend.
It's very much like stocks. The price of a stock should be approximately the earnings per share divided by the current interest rate. Say that a stock earns $1/share and the current interest rate is 5%. The stock would be fairly priced at $20/share ($1 / 0.05). At $20, it would be a tossup whether you should buy the stock or just get interest.
Similarly, the price of a house should be approximately the annual rent (minus upkeep, etc) divided by the current interest rate. If the house brings in $10,000/year in profit, and the current interest rate is 5%, then the house is worth $200,000. At that price, it's the about the same to rent or to buy.
Everything else is a bet on the future, and the future is hard to predict.
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https://www.marketwatch.com/story/housing-market-now-reminds-me-of-2006-robert-shiller-says-2018-10-30