If your definition of "discounting" already included such a broad use of opportunity cost, then you got your money's worth. Apparently, I was robbed. Concerning the real estate situation in California, even the Central Valley agricultural area is going up fast.
...Austrian theory identifies monetary expansion as the problem. "The market process set in motion by credit expansion does not depend in any essential way on there being a change in the general level of prices" (Garrison 2001, p. 71)." Is the U.S. increasing it's monetary supply by as much as Japan did?
Why do people believe that the housing market is going up forever & hear only things they want to hear? Thanks for the compliment by the way... I specialize in smart-ass responses to not so smart questions.
Current real estate valuation is perception - i.e. speculation. This is where I see the problem. Current prices are based on speculation and perception, not value or fundamentals. Fundamentals should be 90% of RE investing IMO. Right now for many so-called RE investors, fundamentals probably constitute 5% of the decision to take a highly leveraged Interest only ARM - otherwise they WOULD NOT BE TAKING THAT TYPE OF LOAN. This is a speculative purchase that uses perception, not value, as the basis for a decision. This is impulsive and will lead to loss IMO. For those that argue "limited supply" as a support for continuing price increase, I say that supply nor demand is the issue. Supply/Demand is perception. Well informed investors who buy real estate DO NOT CARE about supply/demand because it is NOT QUANTIFIABLE. It is irrelevant. Trust me on this. What is happening right now is the use of leverage. This leverage has created a speculative perception based market. Speculative markets exhibit similar tendencies to the zero-sum idea - there is a loser for every winner. Who will be the loser and when is a good question. I am not a negative person nor do I have a "there will be a crash" philosophy. I am simply stating what I have learned in over 9 years of RE experience. I got lucky with timing and that's it. All the purchases I made were based on value and cost, not perception. The gains were substantial because I got in at the right time. I do not see any reward in the coming years without an overwhelming risk. Let me say it another way: speculative purchases at this point in the game are a poor investment decision and you may get lucky but eventually this type of behaviour will be punished. Mike
I met an investor a few weeks ago whom bought 20 properties in the last 18 months. He loves real estate. When I was reviewing his positons and his cash flow, he was negative cash flow about $300 per month, but I couldn't help but wonder what wwould happend if he had two or three simultanious vacancies for 3 months. How would he manage this given he wasn't a rich man. He had $1 mm in equity, but no cash. Tough positon to be in. You can't eat equity!
Ive been buying lots in central florida....i have accumulated 8 lots so far and they are up about 30-40% according to what ive seen sold lately...they are paid for...i was thinking long very long term...should i sell???
Mike, I'm not a RE speculator but I do own a condo in Fl that in the past 3 years went from 135 to 400k in value based on sales of similar units. It seems to me there is a bubble there but each time I review the RE sales in the area (Palm Beach County, property is on the ICW), the prices go up. My question is you state the price is not based on supply/demand but rather on perception, isn't that pretty much the same thing? I'm assuming by "perception", you mean perception of supply demand. Also, you say buy based on "value" not "perception". How do you go about determining value? TIA, DS