I'm sure glad that real estate prices only go up

Discussion in 'Economics' started by Brandonf, Feb 8, 2009.

  1. Brandonf

    Brandonf ET Sponsor

    see attatched chart. one word....WOW, or two HOLY CHIT!

    This is going to turn so ugly, and a lot of people are going to get hurt even worse then they already have been. The best thing for the government to do is probably going to be to let things take their natural course, which is what we eventually end up having to do coz we are broke..but it would be nice if we did it now as an active choice.

    I do feel bad for people. When we moved to Florida (Sarasota) in 2005 the person who gave us our loan literally told us we were making a horrible choice. She said that "the smartest people" are buying all the house they can afford, and then putting as little down as possible, because even if all prices do is keep going up at a palty 5% per year if we just put 5% down on hour house and "stretched as far as you feel comfortable, and then stretch a little more" we would be doubling our deposite every single year. And of course real estate in South Florida NEVER has gone down, and since we could afford to live on the water if we wanted we had even more of a sure thing!
    We kept our heads about us and put 30% down and got a regular 15 year conventional mortgage. Obvisously still paid a lot for it, but it is a house that can be lived in "forever" and it's very nice. I'm glad that we had the financial IQ to tell her to shove it, I feel very bad for those who did not.

    Here is the link to the entire NY Times article: http://www.nytimes.com/2009/02/08/us/08lehigh.html?_r=2&pagewanted=1&em
  2. yeah i love that saying, heard it all my life. a year after buying my home we have depreciation... sweet.
  3. Sorta like "Son, buy and hold is the only way to make $$ in the stock mkt!"
  4. It's going up here.
  5. AAA30


    Where is here?
  6. nkhoi

    nkhoi Moderator

  7. Brandonf

    Brandonf ET Sponsor

    Pretty much. They love to show you a chart of the DOW and how if you had just held on for capital gains you'd be in style by now, even if you bought at the worst points in history. What they dont tell you is that if you factor in inflation and taxes on your gains investing in the stock market is a terrible proposition for the average investor.

    If you look at the DOW adjusted for inflation we peaked out in the 60' around 3100 and then fell to 850 in 1981. The investment was not whole again until 1992 after inflation. Right now, if inflation and tax on gains is accounted for that investment is under water yet again.

    The stock market never has been a place that the average person should keep their money, but the mutual fund industry spends nearly half a trillion dollars per year world wide on advertising to sell the "buy and hold" matra to the masses, and it's worked very well.