Ok, sounds good with such a short lead time to build. So on average you can build a home for 75-80% of the market value over there, after all costs?
re:So on average you can build a home for 75-80% of the market value over there, after all costs? Modular construction is less expensive because most of the work is done off site in a plant. Similar to how Ford revolutionized the manufacturing of cars. The manufacturer of these homes is in rural GA. Labor cost there is much less and the construction process more efficient....... The main hurdle is public perception. If people see it roll in on a truck the think it is a mobile home (which is less desirable) But once it is put in place it is considered regular construction and passes all of the required building codes. You can take any plan and build this way. apartment communities, town houses, hotels, 6,000 sq ft homes....you name it.
SethArb Re:hi midas ... how are your returns compared to your prior returns trading the market? less perhaps , but with far less stress? Less stress and not very time consuming. If I turn it up a couple of notches the returns would far outweigh any trading profits. This is especially so because I do not put any money down. One of the benefits with being in the mortgage business. I do plan to trade again very soon. There are simply to many ways to make money and to little time in the day....................
http://www.economist.com/finance/displayStory.cfm?story_id=3722894 Global house prices Still want to buy? Mar 3rd 2005 From The Economist print edition According to our latest house-price indicators, it is now much cheaper to rent than to buy a house in many countries WHEN The Economist launched its global house-price indicators in 2002, residential-property markets were merely warming up. Today they are red hot in many of the 20 countries we cover: in half of them, prices have risen by around 10% or more in the past year (see table). But for the first time since we started to track them, housing markets in several countries have slowed sharply. The most dramatic slowdown has been in Australia where, according to official figures, the 12-month rate of increase in house prices fell to only 2.7% in the fourth quarter of last year, down from nearly 19% at the end of 2003. Another index, calculated by the Commonwealth Bank of Australia, which is based on prices when contracts are signed rather than at settlement, shows that average house prices fell by 7% in the year to December; prices in Sydney plunged by 16%. The Reserve Bank of Australia's quarter-point increase in interest rates this week is likely to give prices another downward nudge. Britain's housing market has also cooled since last summer. The Nationwide index, which we use, was still up by 10% in the year to February, down from 20% growth in July. Other anecdotal evidence suggests that prices have fallen since last summer in many parts of the country. In contrast, America's housing bubble continues to inflate. Although the rate of increase slowed in the fourth quarter, prices were still up by 11.2% over the year. In California and Washington, DC, housing prices rose by more than 20%. Alan Greenspan, the Fed's chairman, recently admitted in congressional testimony that there may be property bubbles in âcertain areasâ and a risk that prices could decline. There is certainly evidence that prices are being driven by speculative demand: a new study by the National Association of Realtors shows than one-quarter of all houses bought in 2004 were for investment, not owner-occupation. House prices are still rising rapidly in continental Europe. French house-price inflation has accelerated to 16%, its fastest on record in real terms and only a whisker behind Spain's 17%. Prices in Italy, Sweden and Belgium are also rising at close to 10%. Excluding Germany, where prices fell again in 2004, average home prices in the euro area have risen by 12.5% over the past year, causing some concern at the European Central Bank. Punishing prices, puny yields The main reason why housing markets have cooled in Australia and Britain is that first-time buyers have been priced out and demand from buy-to-let investors has slumped. While house prices have soared, rents have risen modestly or even fallen in some cities. In America, Britain, Spain New Zealand and Australia, average net rental yields (allowing for management fees, maintenance and empty periods) have fallen to 3.5% or less, well below mortgage rates. Shane Oliver, the chief economist at AMP Capital Investors, estimates that net rental yields on houses in Sydney are only 1%. Landlords are nowhere near covering their true costs, but many still hope to make their profit from capital gains. That sounds ominously similar to the days of the dotcom bubble, when it was argued that the link between share prices and profits no longer mattered. According to calculations by The Economist (with the help of Julian Callow of Barclays Capital), house prices are at record levels in relation to rents (ie, yields are at record lows) in America, Britain, Australia, New Zealand, France, Spain, the Netherlands, Ireland and Belgium. America's ratio of prices to rents is 32% above its average level during 1975-2000. By the same gauge, property is âovervaluedâ by 60% or more in Britain, Australia and Spain, and by 46% in France (see chart). The ratio of prices to rents is a sort of price/earnings ratio for the housing market. Just as the price of a share should equal the discounted present value of future dividends, so the price of a house should reflect the future benefits of ownership, either as rental income for an investor or the rent saved by an owner-occupier. To bring the ratio of prices to rents back to equilibrium, either rents must rise sharply or prices must fall. Yet central banks cannot allow rents to surge as this would feed into inflation. Rents directly or indirectly account for 29% of America's consumer-price index, so rising inflation would force the Fed to raise interest rates more swiftly, which could trigger a fall in house prices. Alternatively, if rents continue to rise at their current annual pace of 2.5%, house prices would need to remain flat for over ten years to bring America's ratio of house prices to rents back to its long-term norm. There is a clear risk prices might fall. Lower real interest rates might justify a higher p/e ratio. For example, real interest rates in Ireland and Spain were reduced significantly when these countries joined Europe's single currencyâthough not by enough to explain the whole rise in house prices. In Britain, where tax relief on interest payments has been scrapped, real after-tax rates are close to their average over the past 30 years, and so do not justify a higher price/rent ratio. In America, too, real post-tax interest rates are not historically low, in part because mortgage-interest tax relief is worth less at lower rates of inflation. For instance, if interest rates are 10%, tax relief is 30% and inflation is 7%, the real after-tax interest rate is 0%. If interest rates are 6% and inflation is 3% (ie, the same gap as before), and tax rates stays the same, the real interest rate is 1.2%. The unusual divergence between house prices and rents does not just affect investors; it also undermines the conventional wisdom that it is always better to buy a house, because ârent is money down the drainâ. Today in many countries it is much cheaper to rent than to buy. Rent asunder Take a two-bedroom flat in London, which you could buy for £450,000 ($865,000). To rent the same flat would currently cost £1,700 a month. In addition to a 6% mortgage rate, a buyer would face annual maintenance and insurance costs of, say, 1.25%. In the first year, the rent of £20,400 compares with total mortgage interest and maintenance payments of £33,000, a saving of £12,600. Interest payments would be less if a large deposit were paid, but in that case the income lost from not investing that money elsewhere has to be taken into account. Assume that rents rise by 3% a year, in line with wages, while house prices from now on rise in line with inflation of 2%. At the end of seven years (the average time before the typical homeowner moves), you would be almost £35,000 better off renting, taking account of the capital appreciation and buying and selling costs. In other words, even without a fall in real house pricesâwhich many believe to be likelyâbuying a house in Britain today seems a poor investment. The figures look even more striking in the San Francisco Bay Area, where it is possible to rent an $800,000 house for $2,000 a month. Making the same assumptions about rents and house prices, but also deducting tax relief on a fixed-rate mortgage and adding property taxes, a buyer would pay $120,000 more over seven years than if he had rented. House prices in San Francisco would need to rise by at least 4% a year (2% in real terms) for it to prove cheaper to buy a house. Since 1950 American house prices in real terms have risen by an annual average of just over 1%. To expect them to rise faster from their current dizzy heights smacks of irrational exuberance, to say the least.
That sure is a purdy article. You wouldn't happen to have the bubble article they wrote up in 2003 would ya? Now lets try reality: In the last example, would the average person be willing to "lose" $120,000 over a 7 year span by buying a house rather than renting? Sure they would. Ask any female this question and they would say yes. Apartments are shit. A few months ago on HGTV there was a show where a couple was looking at 3 different houses to buy. To make a long story short, the wife wanted the higher priced unfinished house because of the jacuzzi tub that was installed. Check out CBSMarketwatch and they had something about prospects for college grads look good this year. I bet if you ask them about the scenario of renting vs buying and most would say buy. No one wants to live in an apartment. Last month CBSMarketwatch had an article citing I believe a 13% rise in baby boomers buying second homes. Why not rent instead of buy? Cause apartments are shit. Will there be a dropoff in housing prices. Of course. Crash? No. Why? Cause apartments are shit.
Buffett attacks American spending junkies Spending junkies. Who the heck wants to rent? In another article he makes a comment for the "U.S. to establish a new tariff plan to lower the trade gap." A tarriff or maybe a foreign consumption tax would be a lot better than simply raising rates to lure in capital to fund the CA deficit.
The problem that will someday come to haunt the housing market is the overextension of the buyers these days. Because of the perceived housing craze and appreciation by the buyer and the willingness of lenders to loosen their requirements, home buyers today are overextending themselves relative to their income. This is in terms of both price and time. A bigger portion of peoples incomes is going toward their mortgage. And a bigger number of mortgages are shorter in term. That's the biggest change, and in the long term it's not for the better. Hopefully, this will self correct in an orderly way (via refinance, rise in income, etc), but markets don't usually correct in an orderly fashion.
Someone that moves real frequently, may not pay to get a home; and some just prefer to rent, it's easier than mortgage. Dont really buy into Economist saying rent is cheaper ; average home is $240,ooo in USA approximatly, and its lower in my county. Even a 5 or 7 year arm would be a good deal for the averge person, who moves average of every 7 years; compare that to 0.000% renters gain in 5-7 years.[actually rent loss of 5-7 years payments.] Theoreticaly some one who is a careless shopper could buy at the top-if he had to sell early perhaps????? Guess it takea an ''Economist'', who perhaps gets paid per word to goof up that math.
And luxury houses have even lower yields than apartments. The thing that interested me about that article was Germany. Their real estate seems to have been stagnant for years. Any Germans on this thread look at real estate at all, or anyone familiar with the market there? If their reform process gets underway, it might be worth a look.