11–20 of 131 posts
That relationship - when purchase prices go up rents go down and vice versa has always seemed odd to me. When you think about it, it makes sense but you'd think most people wouldn't have the flexibility to move between renting and owning.
Earlier quoted context omitted.
Is it better to buy a home for investment than it is to buy stocks?
The primary feature of the real estate market is that the prices change so slowly that margin calls take years to happen. People are trading houses on 400%-2000% (4x-20x) leverage. Whereas with the stock market and other asset classes, you can't generally get that much leverage, and when you do the risk of getting margin called is perpetual and instant. So although housing prices don't necessarily increase faster tha…
For this discussion, I'm going to waive away the maintenance costs on a SFH, as they are immaterial for the size of the homes in SF regardless of what the value is determined to be by an arms length transaction.
Earlier quoted context omitted.
Is it better to buy a home for investment than it is to buy stocks?
Depends on geography. For example, in Canada, housing is up 30% YoY. Trudeau's Federal government recently said that even a 10% correction in housing would be unacceptable. In practice, Canadian housing isn't housing - it's a 30% (or better) government bond that you get to live in or rent out. That's a 30% return guaranteed by a sovereign state that will gladly destroy everything else in the country to prop up housin…
Very little hope here from the eyes of a local. Maybe you can study software to get out and go to an American city. America remains relatively industrious. Canada is just becoming a high tax version of Monaco (doesn’t even make sense but still).
The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…
It's less of a problem because you can opt out of buying a home by renting. This is what happened back in the 00s and I know a lot of people that rented to opt out of the purchase market. Speaking personally, I rented a 3 bedroom home in Los Gatos for $2k/month, which was "valued" at around $1 million. The difference this time is its on top of huge increases in home prices and rents. So I think you wouldn't see that…
Earlier quoted context omitted.
The primary feature of the real estate market is that the prices change so slowly that margin calls take years to happen. People are trading houses on 400%-2000% (4x-20x) leverage. Whereas with the stock market and other asset classes, you can't generally get that much leverage, and when you do the risk of getting margin called is perpetual and instant. So although housing prices don't necessarily increase faster tha…
The margin call only occurs if you can't service the debt. As long as the note is paid, you can drag the debt out to note maturity (assuming fixed rate vs ARM, interest only, etc). If you have enough income from investments, and can service the note until maturity, whether you rent the property or not is immaterial. You can leave it vacant forever. Same if you pay it off and hold. For this discussion, I'm going to wa…
The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…
Is it better to buy a home for investment than it is to buy stocks?
The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…
Are you assuming that it's somehow sensible to buy property and leave it empty? Owner vs rental doesn't change the number of homes available.
Earlier quoted context omitted.
The margin call only occurs if you can't service the debt. As long as the note is paid, you can drag the debt out to note maturity (assuming fixed rate vs ARM, interest only, etc). If you have enough income from investments, and can service the note until maturity, whether you rent the property or not is immaterial. You can leave it vacant forever. Same if you pay it off and hold. For this discussion, I'm going to wa…
Yes, and this is true in both markets, real estate or stocks. In the stock market you have up to 5 days to service the debt, and may also get liquidated instantly if the broker feels threatened. In the real estate market you have months upon months and maybe years, before your property is taken away from you.
Conversely, someone like Interactive Brokers is going to liquidate your holdings with extreme prejudice if the securities collateral declines below what their risk management feels comfortable with (other brokers are going to call you and perform a margin call).
You also can get way more leverage with real estate loans versus margin loans or pledged asset lines.
The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…
> The systemic problem is that investors are buying up residential property inventory Are you assuming that it's somehow sensible to buy property and leave it empty? Owner vs rental doesn't change the number of homes available.
Why? You basically cannot kick evict a renter or raise their rent.
Earlier quoted context omitted.
Yes, and this is true in both markets, real estate or stocks. In the stock market you have up to 5 days to service the debt, and may also get liquidated instantly if the broker feels threatened. In the real estate market you have months upon months and maybe years, before your property is taken away from you.
I agree that the mechanisms are somewhat similar, but also that they are wildly different (unlike a securities margin loan or pledged asset line, your lender can't foreclose if the value of the property declines and you can't meet a margin call; as long as you keep paying the note, the value of the property could plummet to zero and the lender must continue to accept payments and allow you to retain ownership of the…
I'm mainly responding to provide helpful context to others. Not for a typical pedantic thread where we are already agreeing with each other but just squabbling over semantics.
I would say this is the primary savings grace for real estate investors and homeowners. They get to build equity in so many scenarios that it works out for them and lets them maintain access to low cost capital, against the equity they build up.