11 replies to this topic

[Alizee]

In my state, houses are going for 1.2-10k, which is affordable to me at the moment, and I am considering buying my second house. And I was thinking.... "Is there ever going to be a time when these homes are going to be affordable like this again??? With the population increasing, people are going to need a home" I just bought my first one a few months ago.

work hard, and buy homes for rental/selling

Do you think this a wise thing to do??? I want to be financial able to afford to live forever, so I am trying to go into the best market.

I also want to buy a little gold each year, but I don't expect to see a return until I cash it out.

[niner]

Hmm. Do you know how to work on houses without having to hire expensive contractors? If so, considering how cheap mortgages are at the moment, it doesn't sound like a bad idea. Personally, a house that sells for less than 1% of the median US home price sounds like it has too many problems to consider, so I'd look upscale. Are these in Detroit? If you buy something close to where you live, and you understand the neighborhood, you could probably make some money. Some people do really well in real estate, though they are usually working in high-value markets. The thing that matters most in the value of housing isn't the population, which in this country is pretty stable, and in many developed countries is falling, but rather the ability of people to pay for them. You have to consider the employment and wage situation, along with the cost of the housing.

I'd stay away from gold/silver. It's hard to make money in that market, not that hard to lose money. Like all investments, it really gets down to 'buy low sell high'. If you'd like a decent long term investment, I would put a little money every month in a low-cost broad based stock index fund, like the Vanguard Total Stock Market Index. If you put in a fixed amount every month, which can be arranged to be deducted directly from your checking account, then you will automatically buy more shares when the market is low and fewer shares when the market is high. This avoids the danger of putting in a large lump sum in a high market. The Roth IRA is really a great deal as a container for long term investments.

You might want to look at some books about investing, or check out some of the investment forums on the web. Longecity isn't really a hotbed of investment knowledge...

[Mind]

I am considering buying a second house, although in my area houses are not as cheap as in Detroit. Be mindful that the rental market is getting bloated. Many people expect rents to go lower from here, so you might not be able to charge as much as you anticipate. However, for a few thousand dollars it is hard to go wrong. If you have a reasonable income, even if the house/landlord thing did not work out, you are not out much money. You can lose a lot more in a hurry by putting too much money in volatile assets like stocks, even indexed funds. I am not buying stocks right now because I have a rational distaste for buying when the market is at a record high. "Diversify" used to mean own a diversity of different stocks. That did not work out too well in 2008. Diversify in today's world means some stocks, some property, some bonds, some cash, some precious metals, a side business/hobby, etc...

Edited by Mind, 13 May 2013 - 05:39 PM.

[niner]

You can lose a lot more in a hurry by putting too much money in volatile assets like stocks, even indexed funds. I am not buying stocks right now because I have a rational distaste for buying when the market is at a record high. "Diversify" used to mean own a diversity of different stocks. That did not work out too well in 2008. Diversify in today's world means some stocks, some property, some bonds, some cash, some precious metals, a side business/hobby, etc...

Actually, even in 2008 that was the meaning of diversification. Some asset is always a better value than some other asset, and they go back and forth, though sometimes of decadal timescales. If you look at stocks over the past century, the broad US market has seen a series of secular uptrends with 10-15 year flat periods in between. We have come off of a ten year flat period, and I see a fairly long uptrend ahead. The Dow and S&P are at record numerical highs, but they aren't particularly overvalued. I wouldn't touch long duration bonds with a ten foot pole in this interest rate climate, but shorter bonds are at least a place to park money. Don't expect to make much with them. Some parts of the market that haven't really taken off are Europe and the Emerging Economies. Those are both asset classes to consider in your diversification efforts, along with real estate. Real Estate Investment Trusts (REITs) are a great way to get RE exposure in a diverse and liquid package. If you have any high interest rate loans, like a credit card balance, paying them off is usually the best investment you can make.

[Lister]

1.5-10k!!??!?? I wish…

Living in Vancouver I was looking at a minimum of $350k for a 1 bedroom 500sq foot apartment. Even then I was looking at not a great place. Now that I’m in Kelowna (British Columbia’s Interior) I’m looking at a more reasonable $400k for a new, but small home. While the top end (even here) is still absurd (10 million for a vineyard) the majority of the market is between 300k to 1m for homes which is somewhat doable.

And don’t think that Canada’s dollar is in some way significantly less than the US’s dollar; wasn’t but a few months ago that we were at parity ($1 USD for $1 CND). Wages here aren’t great either… as a manager of million dollar accounts you’re looking at $52k a year on average.

Anyways I could complain some more but I will say that I still feel and have always felt that there is a wave coming. Climate change + overall global instability + peak everything (oil, water, minerals, energy) + severe over population, etc has to lead to something eventually in my opinion. LAND I feel is the most secure investment. Land values will go up and down and you may lose money on the short run however money is based on what? Land is a real, tangible, usable asset. Even if the value drops you can still use the land which is something you can’t do for the most part with other types of investments.

That’s my 2 cents (yeah I’m poor )

[niner]

Anyways I could complain some more but I will say that I still feel and have always felt that there is a wave coming. Climate change + overall global instability + peak everything (oil, water, minerals, energy) + severe over population, etc has to lead to something eventually in my opinion. LAND I feel is the most secure investment. Land values will go up and down and you may lose money on the short run however money is based on what? Land is a real, tangible, usable asset. Even if the value drops you can still use the land which is something you can’t do for the most part with other types of investments.

Hmm. The "It's all going to hell" argument. There's been a lot of that going around. It fueled the big runup in silver that has since very much cooled down. Land is a lot like precious metals. It's usable for some things, but to be real useful it requires a lot of work. It costs you money to carry it, if only opportunity costs in the case of metals, and unless you can rent it out, it doesn't pay you anything. Both are prone to large price swings.

I have pretty much the opposite view- new developments in advanced materials, biotech, AI, energy technologies, etc are going to fuel a huge new wave of economic growth. I want to be positioned to benefit from it.

[Mind]

Some other casual research I have read indicates secular bear markets generally last for a generation (18 to 20 years), which would still give us another 3 to 5 years before the next secular bull market. Things move faster nowadays. Maybe memories are shorter and people won't mind investing at record highs again, even after getting crushed in 2000 and 2008. With currency devaluation in play right now, that might continue to boost the nominal price of stocks as well. I still think stocks are a little risky right now.

Edited by Mind, 24 May 2013 - 07:56 PM.

[niner]

I wouldn't recommend that anyone just go and dump a ton of money in any single investment, but to develop an asset allocation plan, which could be as simple as 60% stocks, 40% bonds/fixed income/cash, or (ideally, imho) could include a number of other asset classes that might be at least a little bit uncorrelated with each other. (Ideally a lot uncorrelated, but that's hard to find these days) I'd consider REITs and foreign and emerging market debt and equity, in addition to US debt and equity. US stocks are numerically high today (although the Nasdaq is still pretty far from its all-time high), but valuations are pretty good. In 99/early 2000 and in 07/08 stocks were more expensive relative to earnings. I think it's better to start investing automatically via payroll deduction or automatic checking account debit, and put in a little every month than it is to wait for what looks like a good time. March '09 was a spectacular time to invest, but everyone thought it sucked. Aside from investing automatically, the other thing that's a key is to rebalance (sell positions that have grown beyond your target percentage, buy those that are under target) your portfolio periodically, like on Dec31/Jan1. (push any profits into the new year for tax reasons) This forces you to sell high and buy low. You can also direct regular investments to whatever is under target, although that's hard to automate.

[Mind]

Hey Lister? Have you played Crack Shack or Mansion? Vancouver home prices have definitely been in a bubble recently. Not sure if they have come down recently.

[niner]

Wow, Crack Shack or Mansion was great! My son and I just played it. Well, wadaya expect for the west coast? Speaking of bubblicious, check out this nice chart of S&P 500 trailing valuations. At 19 (today), it's cheap by recent standards, but a little high by standards of the past century+. This metric is a bit flawed though, in that it doesn't give you precise timing. It seems to lag the market. For example, the worst time in history to buy US large caps, according to this, is may 2009, which was an exceptionally great time to buy.

[Lister]

Hey Lister? Have you played Crack Shack or Mansion? Vancouver home prices have definitely been in a bubble recently. Not sure if they have come down recently.

13/16 Right. Admittedly I didn't give it much thought. The one that looked like a crack shack and was, I probably should have gotten right.

Vancouver home prices are YOUR fault you blasted Americans. All these Chinese and Indian families only wanted to be Americans but NO, you had to deny them their green cards. So they said “Screw you America, we’re bringing our millions to Canada” and then they saw Canada, realized the only nice places are Vancouver and the east coast (stereotypical view); the east coast was too far away so they all are moving to Vancouver.

We had a brand new condo development go up in New Westminster with over 100 condos. I drove past the sales office on the day they first opened and the lineup was around the block (lowest price was 360k for a tiny 1 bedroom). Turns out the first 10 or so in line bought the entire development. ALL of them were Chinese from mainland china or Hong Kong.

We had a dozen or so teenagers all get arrested because they were racing their brand new Ferrari’s, Lamborghinis, Maserati’s, Bentley’s, and Audi’s through Richmond (20 minutes from downtown Vancouver). My university was full of 18 year old Chinese kids driving 200k cars. It’s like Dubai is too hot and dry so they’re all flooding into Vancouver.

So really Vancouver’s real estate is artificially inflated by immigrants. I doubt that’s going to change any time soon. We had a slight correction (my mother’s home went from 800k to 725k) but prices are still well over the top and they’re going back up again.

I still think property is a better investment than stock. It’s more flexible, tangible, and predictable. I wouldn’t be surprised though if niner and I went our two separate investment paths and ended up with the same result. Ultimately we’re all at the mercy of the global market.

[niner]

Wow. The image of teenagers driving Bentleys is pretty disturbing. Maybe we should ship you some of our expert American carjackers... I'm not opposed to property investment, but it's a commodity, and is subject to the whims of supply and demand just like other commodities. At least real estate can generate a revenue stream, unlike other commodities like metals. I own real estate in the form of the home I live in as well as a REIT index fund. I just think everyone's portfolio should be diversified, and I think equities should be part of most people's portfolios. Stocks give you a way to benefit from the march of progress. If the Chinese economy were to go down the tubes, Vancouver real estate might plummet. On the other hand, you might be able to pick up a nice Maserati for a song.