Geoff - it wasnt personal - it was a nose joke - thanks for the tip anyway.
US Real Estate Crash
- Thread starter PDM
- Start date
Easy: Sydney.
Dirt cheap at the moment. Prices set to rise. Affordability pretty good based on % of take home pay, and rents on the way up. All upside as far as I can tell!
Affordability is so good that I bought a brand new house on the Northern Beaches in 2002 and just paid it off about 4 months back. 5 years to own a brand new free standing beachside house on 1600m2 outright makes the affordability argument a bit of a joke don't you reckon! Just got it valued by the banks at $830K. Nice bit of equity that I've now got working for me, and all that rent I never have to pay again.
Dirt cheap! You're stuck in a false paradigm my friend...
Cheers,
MW
Easy: Sydney.
Dirt cheap at the moment. Prices set to rise. Affordability pretty good based on % of take home pay, and rents on the way up. All upside as far as I can tell!
Affordability is so good that I bought a brand new house on the Northern Beaches in 2002 and just paid it off about 4 months back. 5 years to own a brand new free standing beachside house on 1600m2 outright makes the affordability argument a bit of a joke don't you reckon! Just got it valued by the banks at $830K. Nice bit of equity that I've now got working for me, and all that rent I never have to pay again.
Dirt cheap! You're stuck in a false paradigm my friend...
Cheers,
MW
Common Michael, thats talk that make the haters hate.
To be fair I dont think the Northern beaches is affordable for many first home owners, but why should a premium area be. Plenty of houses are available under 250K in Sydney & if that is not affordable, what is.
Cheers
newcastle is pretty good too, if only people were prepared to think big - third house (in 10 years) is 3mins drive to the cbd, has sweeping views over the city, beaches and ocean, 10mins walk to the beach ... oh, did i mention it was 5bed, 3bath, dble gge and pool?
yes, it does need cosmetic work only (purple walls and olive curtains etc) - bit will easily double in value once it's done. and to think of all those lookers that never even made an offer ...
And what percentage of the available cash for property do you reckon first home owners represent? Miniscule by proportion I'd reckon. To be honest, they're a demographic that are largely irrelevant when determing housing affordability.
Oh, I forgot, its ALL about first home owner affordability isn't it... But your first post that I replied to said "All of Australia is expensive", it didn't say "Most of Australia is unnafordable to first home buyers" which is a completely different argument. I refute the first statement, but agree completely with the second one which I think you were actually trying to make.
Don't you think its just a little ridiculous for people to run the line that if first home buyers can't afford it then its over-priced! Think about it, that's an absurd observation. They are such a small representation of the buying community that their buying power is irrelevant in setting the price. And the price is set by what the highest bidder can "afford". By definition every house ever sold was affordable!
Somehow, someone got this clever idea of taking the median price and arguing first home owners should be able to afford this. Give me a break.
Cheers,
Michael
PS. I actually agree with everything you posted in that last post above, just continuing the discussion in a "colourful" way...
PPS Lizzie, nice work! If I ever get in a rut I'll have to look you up as a buyers advocate for me.
Last edited:
Easy: Sydney.
Dirt cheap at the moment. Prices set to rise. Affordability pretty good based on % of take home pay, and rents on the way up. All upside as far as I can tell!
Affordability is so good that I bought a brand new house on the Northern Beaches in 2002 and just paid it off about 4 months back. 5 years to own a brand new free standing beachside house on 1600m2 outright makes the affordability argument a bit of a joke don't you reckon! Just got it valued by the banks at $830K. Nice bit of equity that I've now got working for me, and all that rent I never have to pay again.
Dirt cheap! You're stuck in a false paradigm my friend...
Cheers,
MW
I'm glad you think $830k is cheap Michael.
For what it's worth, my view of the USA is this:
Everyone is moving away from the country areas and those areas where the "industrial age" businesses used to thrive. They are moving to the cities and the sun. No one wants to be out in the boondocks over here anymore, or workin' on the fram or in the factories. All the middle-management jobs are being shipped over-seas to places like India etc. The middle-class is disappearing - fast.
So, all the cheap areas which skew the national average prices down to $200k like Aussierogue was saying is a massive inaccuracy. Places like Pittsburgh, Buffalo, parts of Chicago, Northern California, Oregon and so on, are experiencing a decline in population, rising unemployment, crime, etc. House prices are doing nothing in a lot of these areas, and there are many of them.
Meanwhile, the more affluent areas such as San Fran, L.A, New York, Santa Barbara etc just keep getting more expensive, but the number of houses in these areas is small compared to the overall population. Even though there are fewer of them; their pricetags drag the average up a little.
This country really is the classic example of the fewer "haves", and the many "have-nots", and it's getting worse.
So, to all those people looking to come over here and pick up a nice, cheap property and make a quick cap growth; be very, very careful, and be even more careful who you talk to about investing over here. You have to be looking at their interest in the deal; it'll be theirs before yours most likely.
Hi LAA,
For what its worth, I DO think $830K is cheap now. And that's the whole point! Cheap is a relative measure and varies individual to individual. Arbitrarily picking the poorest demographic (first home buyers) and arguing that they can't afford the median price, therefore property is expensive is a flawed argument. Its not expensive to those that can afford to buy it, and obviously some people can or else the prices wouldn't be where they are would they.
I guarantee you that some people call $2M cheap and others $10M.
Get over it poor people. Prices aren't too high, your expectations are!
Build that bridge and get over it. Dry your eyes princess. Any other provocative lines anyone would care to share? How about: "If you ain't got no money, take your broke a$$ home!"Cheers,
Michael.
Last edited:
I agree with Michael. The price is what it is. If what people want to live in is too expensive relative their pay, either find a way to increase pay, put in a long term plan to invest, or move. No point just sitting there complain about it, as the Daily Telegraph readers seem to do.
If people think the price is too high, and it really is too high, then the price will come down, and they can buy then.
As Yieldmatters suggested, if you don't want to live in a shoebox move to a country town or overseas.
Obviously there ARE people who can afford the prices that properties are trading at.
Alex
If people think the price is too high, and it really is too high, then the price will come down, and they can buy then.
As Yieldmatters suggested, if you don't want to live in a shoebox move to a country town or overseas.
Obviously there ARE people who can afford the prices that properties are trading at.
Alex
at this moment its hard to see US getting out of this tricky situation unscathed.. For housing the positives are "supposedly" low inflation (yeah right) and low unemployment ...
when/if either or both of these get hammered thats going to be a calamity ..
can the US spur up govt projects to support unemployment and save the day.. with the allready high trade imbalance this is unlikely without creating more inflation .. they could always invade another country .. that an easy way out
when/if either or both of these get hammered thats going to be a calamity ..
can the US spur up govt projects to support unemployment and save the day.. with the allready high trade imbalance this is unlikely without creating more inflation .. they could always invade another country .. that an easy way out
This was about the US Real Estate situation so I apologise for going a little off topic. But every time I bring up the point that Australia is getting very expensive somebody says "no it isn't - when I bought back in xx ".Easy: Sydney.
Dirt cheap at the moment. Prices set to rise. Affordability pretty good based on % of take home pay, and rents on the way up. All upside as far as I can tell!
Affordability is so good that I bought a brand new house on the Northern Beaches in 2002 and just paid it off about 4 months back. 5 years to own a brand new free standing beachside house on 1600m2 outright makes the affordability argument a bit of a joke don't you reckon! Just got it valued by the banks at $830K. Nice bit of equity that I've now got working for me, and all that rent I never have to pay again.
Dirt cheap! You're stuck in a false paradigm my friend...
Cheers,
MW
I don't think pointing to a purchase 5 years ago is much of an argument. In fact it sometimes makes the current highs we are looking at all the more unusual.
Oh I don't know. I can afford to buy a decent PPOR (or expensive IP, though that isn't my strategy) TODAY. Obviously other people can too because my target PPORs aren't staying on the market for long.
So if talking about property being cheap a few years ago isn't helpful because the market has since moved on, if you'd sold a few years ago......... (Cheap shot, I know, but I remember agonising in 2003 over whether I should sell my IPs in Brisbane, having made good gains over the last 3 years, and decided I was in it for the long haul. I understand YM's motive in selling, but I chose the long term over the short term, and I wasn't gutsy enough to call the top fo the market. Maybe the meek really will inherit the earth).
We simply never know at any one point whether prices are high or low. It is what it is. Buy when you can afford to, factoring interest rate rises into your calcs, and if you can't, lower your 'wants' and move further out until you CAN afford it. Since I plan on buying multiple properties over years anyway, who really cares if one or two of mine are more expensive compared to market than others? In the long term it will go up. We think 1990 prices are low, no? Back then they would have thought it was ridiculous.
Being on a starter wage and expecting to buy a median priced home isn't exactly useful. You buy a true starter home, then work your way up. Because you know why? The home is going to appreciate faster than your wages.
As for the US market...... if there's a recession, so what? If I'd been buying from a few years ago, even if some of my portfolio was purchased at the peak, I'm still ok. If I bought at the peak expecting to flip it, I took the risk, I pay the price. True investors (or at least conservative PPOR buyers) should have factored in rate rises, market falls, etc. If you don't, you pay the price. No doubt in a few years (5? 10? Who knows? I don't care because I have a long term horizon) we'll see the media reporting on a new wave of investors who 'cleaned up' during the late noughties mortgage crisis, just as we read about the current moguls cleaning up during the early 90s crash (there's a reason why they call Sam Zell the Gravedancer).
Alex
So if talking about property being cheap a few years ago isn't helpful because the market has since moved on, if you'd sold a few years ago......... (Cheap shot, I know, but I remember agonising in 2003 over whether I should sell my IPs in Brisbane, having made good gains over the last 3 years, and decided I was in it for the long haul. I understand YM's motive in selling, but I chose the long term over the short term, and I wasn't gutsy enough to call the top fo the market. Maybe the meek really will inherit the earth).
We simply never know at any one point whether prices are high or low. It is what it is. Buy when you can afford to, factoring interest rate rises into your calcs, and if you can't, lower your 'wants' and move further out until you CAN afford it. Since I plan on buying multiple properties over years anyway, who really cares if one or two of mine are more expensive compared to market than others? In the long term it will go up. We think 1990 prices are low, no? Back then they would have thought it was ridiculous.
Being on a starter wage and expecting to buy a median priced home isn't exactly useful. You buy a true starter home, then work your way up. Because you know why? The home is going to appreciate faster than your wages.
As for the US market...... if there's a recession, so what? If I'd been buying from a few years ago, even if some of my portfolio was purchased at the peak, I'm still ok. If I bought at the peak expecting to flip it, I took the risk, I pay the price. True investors (or at least conservative PPOR buyers) should have factored in rate rises, market falls, etc. If you don't, you pay the price. No doubt in a few years (5? 10? Who knows? I don't care because I have a long term horizon) we'll see the media reporting on a new wave of investors who 'cleaned up' during the late noughties mortgage crisis, just as we read about the current moguls cleaning up during the early 90s crash (there's a reason why they call Sam Zell the Gravedancer).
Alex
When I bought 2 x 1 bedroom flats in 1997 and 1999 for $73,000 and $78,500, people also told me that property was not a good investment in a low inflation environment...
Glenn
I can afford one too but it doesn't mean they aren't overpriced. I am a sample of 1.
What people forget is that in a low inflation environment interest rates are also likely to be low. I think the 'inflation increases housing prices' thing was more the case when unionism was stronger, wages tracked inflation more and we were less affected by world trade.
Alex
You said that a few years ago. What makes you think you're right this time? The last time Brisbane prices weakened you tried to lowball and went so low you couldn't do a deal. You still have no experience with successful lowballing and little experience with buying in general, so what makes you think you'll succeed in lowballing the next time even assuming we have a recession and prices fall? (You'll remember I do think we're headed for a recession, in the US AND in Australia).
There are generally two elements to my buying strategy:
1) I don't know whether prices are high or low, though rental yield and the heat of the market gives an indication, and
2) I'm not confident I will have the guts to suddenly flip a switch and buy during a downturn. I have seen what market negativity is and know that it's very hard to ignore the market 'noise'. Therefore, I'll just keep buying my target areas at roughly the market price and dollar cost average into them.
It's a lazy, low-judgement-required sort of strategy, and capitalises on my own strengths which is time (we're roughly the same age, you know), a decent salary, a high savings rate, and equity from existing properties.
Alex
Because in a recession people will be under more pressure to sell. I've read some of the LVRs - the number of people using debt to cover debt - and I think if there is a little unemployment then buying from these people at a good price will be very easy. We will see how I go - it might not be as easy as I think. But one thing is for sure - if prices stay where they are then I simply wouldn't buy at all - there are much better investment opportunities.
But back to the thread! I think there are a lot of parallels between the USA and Australia - the big difference however is all of Australia is infected with property mania - only parts of the USA were infected. The funding of ever increasing property prices not through income but through debt is the biggest parallel for me.
I am starting to wonder whether this forum is a good place for people that have not yet bought a property...they end up trying to find the best deal in the world and end up with analysis paralysis.
Kind of like all the single girls in their late 30's still looking for the perfect man to marry and offer their deteriorating ovaries to!
Glenn
Kind of like all the single girls in their late 30's still looking for the perfect man to marry and offer their deteriorating ovaries to!
Glenn
Alex/Michael
I have been following this discussion. The points you make are valid - to a point. Yes there is merit to saying that first home buyers are not a good measure (although isn't the stat quoted the relative buying power of first home buyers now v. some years back, so it's not an absoute figure but a relative one showing a trend). I have also read that median prices aren't a good indicator.
Basically it seems there is no good indicator, and thus there is no such thing as "overpriced" - and by that logic there is not such thing as a bubble. Ofcourse that is only true if it's a pure market system and all buyers and sellers have perfect knowledge and act rationally. And yes in theory it may be true in the long run (ie even if you buy at a short/medium term peak, in the long run it doesnt matter).
So is that true - do you not believe in such a thing as "overpriced property"?
I have been following this discussion. The points you make are valid - to a point. Yes there is merit to saying that first home buyers are not a good measure (although isn't the stat quoted the relative buying power of first home buyers now v. some years back, so it's not an absoute figure but a relative one showing a trend). I have also read that median prices aren't a good indicator.
Basically it seems there is no good indicator, and thus there is no such thing as "overpriced" - and by that logic there is not such thing as a bubble. Ofcourse that is only true if it's a pure market system and all buyers and sellers have perfect knowledge and act rationally. And yes in theory it may be true in the long run (ie even if you buy at a short/medium term peak, in the long run it doesnt matter).
So is that true - do you not believe in such a thing as "overpriced property"?
While I agree with some of your points in regards to the price of property being relative to what someone is earning (or can afford), can you not see the irony in the fact that you think $830k is cheap? All I have to do here is change a couple of words from your first quote above:
And what percentage of the available cash for property do you reckon $830k house buyers represent? Miniscule by proportion I'd reckon. To be honest, they're a demographic that are largely irrelevant when determing housing affordability.
Arbitrarily picking the richest demographic and arguing that they can afford the $830k, therefore property is cheap is a flawed argument.
Using your own argument/points against you...
