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Stop extrapolating current trends to infinity. Who said prices will continue to rise at the current rate forever? I think they can go up quite a bit higher during the next cycle. I am not in the business of extrapolating to infinity, so I suggest you try the same...
Only people who are buying homes have anything to do with demand in the home buying market. What have your grandparents to do with it? Are they potential homebuyers?
Uh... no. Only if there was a buyer who had enough income to afford to buy their home for $1 million.They’re not planning on moving. But if they did, they would have over $1M to go shopping with from the sale of their home. Nothing to do with income or credit supply for them.
Max,as we both know during the good times"greed overtakes fear"and this is understanable in so many different ways, soap box speakers tell anyone can be a billionaire,just pay them 10k and jump in line with all the other punters with stars and $$$$ signs in their eyes,there is no such thing as money for nothing everything comes with a price tag,would you trust any F-P that tells you they can beat Mr Market no one ever has and don't be so sure about the silent money factor that is out there i know several older investors that are just sitting and waiting,they have their own simple plans that work in past times as they will work again,just a matter of time no one has ever gone broke by making a profit,you can have all the doom and gloom in the world but each day some makes money-it just might not be you ..willair..Uh... no. Only if there was a buyer who had enough income to afford to buy their home for $1 million.
I doubt that a FHB will be able to come up with the cash.
Maybe the couple who just sold their old PPOR for $650k.
would you trust any F-P that tells you they can beat Mr Market no one ever has
Okay, and who did they sell their old home to? And who did those people sell their old home to? And they? At the end of the 'chain' sits a FHB or an investor, and the amount of money they can bring is wholly a function of income.
The amount of money that FHBs can bring to the market is absolutely important to the whole system. The entire value of the entire housing stock rests solely upon the amount of new money coming into the system, from FHBs, Investors and Mover-Uppers. If this amount is diminished, the value imputed to every other home diminishes also.
At the end of the 'chain' sits a FHB or an investor, and the amount of money they can bring is wholly a function of income.
Are you disputing my post (which was properly explained within itself, but not within your quote)? If so, spit it out. If not, stop sniping unless you have something constructive to add to the discussion.
Good for you ,so lets go back ten years too this time in 1998 just when property was starting to run skywards,the dot com bust up did not worry you or you were just too smart and could see the stop signs, not many did Max but you seem to be a foward thinker,so you saw all this subprime mess on the cards?,the worldwide money markets can't defy gravityI have. Consistently for the last decade.
no - your argument is flawed. do you like apples?
someone on a median income with a TON of equity can have a median mortgage in a very expensive suburb - they might have a $1mil home and brought $700k to the table because they bought 20 years ago in an average area when they were still on an average income and market forces have driven the prices up in those areas as people brought existing equity into the area from other homes.
EVERYONE brings some form of equity to the table. if they don't, it's a 105% loan and if everyone does this, it causes specualtive bubbles.
so the price paid for that $1mil home ISN'T relevant to income - and this scenario isn't theoretical.
it's called "cashing in your chips", "downsizing" and all those other lovely terms used for when BBs buy a smaller, better appointed house in a better area on a govt wage bringing a ton of equity to the table.
how do you like them apples?
Well I think it would be impossible. How could it ever happen?
Average house values of 1.5 million with wages of 50k? Houses would have a rental yield of 1%.
It could never happen, but go ahead and show me how it could.
Good for you ,so lets go back ten years too this time in 1998 just when property was starting to run skywards,the dot com bust up did not worry you or you were just too smart and could see the stop signs, not many did Max but you seem to be a foward thinker,so you saw all this subprime mess on the cards?,the worldwide money markets can't defy gravity
forever and depending on what area you invest in,im half way through
a book called the "Black Swan"and it will change the way i invest from now on,i'm just trying to pick which area the next B-S will come out of nowhere from,as for Munger-Buffett you want to read the books again
because they also lose money at times,and time gives it back to them.
and for a simple stand alone investor like myself,it's my way or the highway,will you buy when the all ords hits 3499?,i will.imho..
willair..
Hi TC
I agree it will pull up at "some point". However, i can paint a "possible" scenario (I never said it was probable by the way):
Median house price $1.5m
Two working people per household on $50k
Combined Income of $100k = $90k post tax after dealing with all the middle class welfare to come.
They need $20k to live on per annum, leaving them much better off than today's pensioners.
The rest is spent on rent = $60k /annum circa $1150/week.
This leaves yields for investors around 4%, which is pretty much where they are now in a lot of areas. We can all argue about the "sustainability" of the situation but it is "possible", admittedly extremely improbable.
Note what happens though. There is now no chance for Mr and Mrs Median to ever buy a house because they are severely "rental stressed" and haven't got a hope of saving a deposit. 20% of the population (the investors who can stump up the necessary to get the finance) end up with 80% of the houses.
Again highly improbable to get that far but noting the factors in my previous post I can definitely see a trend in that direction...
Max, your bucket analogy is OK but why to you contend that money only flows in from income and no other sources?
What's the other source?
savings, credit, new migrants, government grants, funds recently divested from the ASX, etc.