The cover story in the latest issue of Fortune is a contrarian and counterintuitive article titled "The Return of Real Estate".
"Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing."
Comments?
(ps – "Dinner for 3" will be at Cactus Creek on the 23rd thanks to the 2-fer $50 gift cards at Costco. Feel free to send a bottle of Dom our way! But I have to wonder if going to Costco at 3 PM on a Saturday is worth the $50 bucks in savings. My idea of hell, second only to Toys-R-Us on Christmas Eve. I’ll post a review if I survive the parental visitation.)
Sully
I would agree with this article if it wasn’t for the lead sentence. In areas where real estate is affordable, it’s very affordable. This has no bearing on price of Gold however.
It’s no secret that QE 2 has goosed the stock market, even brainless Ben admits to that. So what happens come June when the goosing stops? Everyone gonna run to US Treasuries? Now that’s something to bet on! 🙂
billddrummer
I too read the article and thought that just because real estate has become affordable doesn’t necessarily mean that sales will inevitably recover.
A buyer still has to qualify for a mortgage unless it’s a cash deal, and it seems to me that fewer buyers now qualify because of a combination of bruised credit and tighter lending standards.
But perhaps that’s just because I have bruised credit.
Maybe no one else is affected.
CommercialLender
Many moons ago when I first started reading/posting, I mentioned I sold my home and moved to a rental in a good ‘hood. 6 years later, I’m happily still there and have not had a rent increase in 4. I have little if any desire to move any time soon. I’m way under market with a landlord who loves us and just does not want to rock the boat. I actually fiddle around with plumbing issues, new landscaping, replacing dryer parts, etc. because I enjoy the experience on another’s dime, so to speak. The home ‘value’ when I moved in is around $100K more than today, using my own assessments of what I see selling both then and now, not to mention another 6% or so in selling costs if I owned and wanted to sell. This ‘hood is a VERY desirable community with sought after schools in the Silicon Valley area.
I recall writing about how many people openly laughed or chided me for doing so at the time. In a few short years, maybe 2, we were down to only 2 friends who owned with the rest of our cohort renting in my same town. Now, it’s in style to rent, acceptable as an alternative, and even seen as a savvy financial plan. Sure, not for everyone, and in a rising market it could place you on the wrong side of the equity markets, but by renting at the time I was espousing and being chided for my primarily issues of illiquidity and my personal risk being out of tolerable range by buying. The only thing I miss is the tax deduction, but due to my specific situation the tax deduction was not as meaningful as most would assume, and likely do assume when buying.
That said, many assume just because prices come down, demand will suddenly go back to normal. I submit demand is not now and won’t be for a while as high as it was (or perceived to be) back in the boom. Thus, even in very good neighborhoods, despite the relative cost savings, a ‘V’ we won’t see.
Sully
CL, renting as a savvy financial plan is not a new fad. Until this last boom, renting was a considered alternate in some financial planning scenarios. Apparently, during this last boom it became a fad to own! Didn’t matter whether or not one could afford it, owning was the only way to go. We all know how that panned out. Also, another – and one I often considered – was to buy and then rent out a house while renting and living in an equivalent house. At the time the two would cancel each other for tax purposes. However, I’m sure by now Congress has screwed that plan up.
Donald Robak
Two for one at Cactus creek was a very good deal. We bought ourselves.
billddrummer
To CL,
Good to see you posting, and you’ve validated what many of us thought but were uncomfortable stating:
Renting is a good thing for many.