Real Estate is the Best Anti-Inflation Play

[cbc58]

Real estate values don't go up in an inflationary environment - they go down. Cost's to maintain go up. When values get near a real bottom then renters will jump ship and rental properties won't look so attractive due to lower occupancy ratings.

 

[oyarde]

I pay three times that tax for just my home.

Yes , the Mrs and I probably , 8 times that on two houses and two pc.'s of land .

 

[dinosaur]

Wouldn't the type of real estate matter? If food costs go up, then won't the price of farm land have to somewhat keep pace with that?

 

[LibForestPaul]

I don't see why taxes are such a big problem

Because when people lose their jobs and their homes, the tax levy (big pool of money the government steals) can only change if the taxing authority (county) reduces staff or benefits (government employees and public unions). When this does not occur, everyone else who is staying put gets a nice increase in their tax rate.

do you really think they're going to step in and take it away arbitrarily?

It matters not what I think, it matters what the state has done. They have.

You make way more money from rent than you pay in taxes anyway.

In detroit? A renter in a detroit has the option of leaving this cesspool. An owner can not move his house out of that dump.

 

[adams101]

Anything tied to massive credit, mortgage and the banking industry is a TERRIBLE investment right now. As the derivatives stuffed full of toxic mortgages unravel you will see the bankers continue to print and hand themselves more and more unsecured 0% loans in a futile attempt to bail themselves out of the collapsing derivatives market. Real estate has NEVER been more over valued than it currently is in this country right now. These massively overvalued derivatives packages are to the financial market what a badly leaking nuclear reactor is to a city.

They have NOT stabilized these industries. They have simply stuck their finger in the dam then done nothing more because it would wipe out all the Big 5 banks. All the QE is to simply payoff the wealthiest investors who have been duped into these derivatives but are now aware. This QE is the only thing keeping JP Morgan, Goldman Sachs etc out of high profile World Court lawsuits and felony prosecutions that would bring the whole thing down in flames.

Even a 5% negative variance in the value of $100 trillion derivatives will wipe out the industry and the industry is believed to be closer to 35% because of all the corruption. Fixing even a small percentage of the derivatives problem is mathematically impossible. It has to collapse and it will take decades or even generations for the banking, mortgage and real estate market to stabilize again.

These a**holes completely screwed the real estate and lending industry for generations. The federal government did and still is just watching it all while giving the crooks an occasional "yes boss". In 2008 we were only made aware of the problem. We did NOT fix it. We are kicking a can the size of Los Angeles down the road right now.

 

[newbitech]

real estate is not a global currency like gold is. Unless you want to sell your property to foreigners when the dollar collapses, I don't see how real estate is a better inflation hedge.

The problem with real estate being an inflation hedge is that real estate isn't something that can be accumulated like gold. In other words, gold is something that can be accumulated in small increments over time. Real estate must be accumulated in larger chunks for instance.

So where 100,000 will buy you a house at the right price and the right time to be a hedge against future inflation, 10,000 will not be leveraged in the same way with out a smaller denomination asset.

So conditionally sure, real estate is a great anti inflation investment, assuming one has managed accumulate regardless of macro economies.

 

[Jordan]

By bubble gone, you mean the height is gone, but not that it's bursted already, right? Because if you don't believe hyperinflation is coming, you MUST believe houses will depreciate, right?

I think houses will appreciate going forward due to attractive valuations and modest inflation.

Home purchases are, for the most part, a purchase with credit. As the cost of credit rises, less people will be able to borrow, it is as simply as that.

Even with rates at historic lows the housing market is sitting on the lows of the last 10 years. Just because something costs less than to replace, doesn't mean it is undervalued. It means there is excess supply.

When we hit hyperinflation, houses may go up or down in price, it matters how bad it is, but they will almost certainly approach their "cash value" price.

Yes, it doesn't mean it is undervalued, but it does mean that no one is going to make more of it until it goes back to the cost of replacement.

And no one should ever buy a house with credit. We have learned that when your name goes on the dotted line, the bank that pretends to loan you money; never puts forth one dime of consideration (which is mandatory in a real estate transaction) .... then they sell your signature over and over and over and over again. In many cases the 100,000. they pretended to loan you, was sold on the stock market several times before you even signed the document.

Pretend you write a blank check to someone... sign it.. You have hundreds of people photocopying it, and rather than cashing it... they are selling it.

You can't do that with a blank check ... photocopies don't play... but promissory notes/mortgages do according to the courts. Everyone look at the promissory note you signed when you purchased your home... and see how intentional it is that your signature on the last page does not correspond with the first pages. Page 1 might be a half of page... page 2 might be a full page... All they want is your signature, to something... and they will take whatever they can attach it to ... anytime past, present and future.

Citation needed on this whole post. I can't even keep up with what you're trying to say.

Isn't this the exact same thing the so called experts were saying right before the housing bubble burst?

Real Estate does have a long way to drop still because it was not allowed to bottom out in 2008.

I'd rather put my money into commodities like gold and silver and rent housing then to deal with owning a house through credit.

The real estate burst was deflationary, and real estate prices went down. The opposite, inflationary pressures, should bring rising prices. The logic follows, no?

If you're going to buy real estate for keeps, then you want the prices to be low. If the prices are low, then you have a better opportunity to rent. If the prices go up, then you can flip it. It really depends on what you are willing to do and the skills you have. Just buying a house and waiting for the market to go up to resell is a failing strategy. You should plan to make your money back within 2 years at the most, whether that means collecting the price of the house in rent or reselling it for double your total investment. Double is a lot to ask for higher priced homes, but for people who are just starting out, a 15k house with 5k investment can turn into a 40k house at resell value if you can find it for that cheap. They could be foreclosures or even just a private sale from someone who just wants to get rid of it. That's how we got our latest house. There was no advertising involved, and you can get a pretty good deal if you talk face to face with people without relying on the marketing facade.

Make your money back in two years at most? By renting? You should sell your secrets on a late night infomercial.

What you're describing is mostly work and not a whole lot of investment. I'd rather make 12% per year on any amount of money I can stuff into something than 50% per year on $20,000.

It sure has been one of the best. Out stripping most commodities I would figure.

Still I don't think the markets have finished collapsing. I think things will continue on a downward spiral until we regain control of the counterfeiting of our currency. That or we are allowed some currency competition.

I think there are many areas we are going to have to re-evaluate. I've heard of a couple in recent days. I've heard people say as long as the price of gold is this high the mining will continue. Same for oil. Big boom. ? The increases all seems strictly due to inflation. And proportional. I don't really see how twice as many of something worth half as much can really get you off of your butt to do something.

I've also noticed in many areas it seems impossible to get good quality. I bought some sewing needles today and never did find any that looked like something I would sew with. Two places later I found some that looked suitable to pull splinters. I also glommed onto some great old music books that they don't print any more. They have new editions but these had ring binding that lays flat on your music stand.

I suppose there are lots of quality items out there that have increased in value and could be a real hidden investment.

What?

While real estate is the topic. What do y'all think of *land trusts*?

I keep reading about people (mostly rich folks) putting their real estate assets in trusts - with themselves as the beneficiary. Theory here being that instead of the property being in a person's name, it's in a trust's name, hiding who actually owns the property.

I'm also seeing articles on scammers using the same tactics as actual land trusts to dupe people into signing their property over to a trust.

Seriously way too complicated of an issue to just start explaining here, but one of the benefits is anonymity.

Real estate values don't go up in an inflationary environment - they go down. Cost's to maintain go up. When values get near a real bottom then renters will jump ship and rental properties won't look so attractive due to lower occupancy ratings.

Well, we've had an inflationary environment for well over a century and home prices have gone up. What's the deal there?

Wouldn't the type of real estate matter? If food costs go up, then won't the price of farm land have to somewhat keep pace with that?

Terrible wager at the present time. Farmland is stupid expensive, and it's more of a bet on biofuel policies than it is a bet on inflation.

Anything tied to massive credit, mortgage and the banking industry is a TERRIBLE investment right now. As the derivatives stuffed full of toxic mortgages unravel you will see the bankers continue to print and hand themselves more and more unsecured 0% loans in a futile attempt to bail themselves out of the collapsing derivatives market. Real estate has NEVER been more over valued than it currently is in this country right now. These massively overvalued derivatives packages are to the financial market what a badly leaking nuclear reactor is to a city.

They have NOT stabilized these industries. They have simply stuck their finger in the dam then done nothing more because it would wipe out all the Big 5 banks. All the QE is to simply payoff the wealthiest investors who have been duped into these derivatives but are now aware. This QE is the only thing keeping JP Morgan, Goldman Sachs etc out of high profile World Court lawsuits and felony prosecutions that would bring the whole thing down in flames.

Even a 5% negative variance in the value of $100 trillion derivatives will wipe out the industry and the industry is believed to be closer to 35% because of all the corruption. Fixing even a small percentage of the derivatives problem is mathematically impossible. It has to collapse and it will take decades or even generations for the banking, mortgage and real estate market to stabilize again.

These a**holes completely screwed the real estate and lending industry for generations. The federal government did and still is just watching it all while giving the crooks an occasional "yes boss". In 2008 we were only made aware of the problem. We did NOT fix it. We are kicking a can the size of Los Angeles down the road right now.

[citation needed]

NAR's composite quarterly Housing Affordability Index* rose to a record high of 205.9 in first quarter, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power. This is the first time the quarterly index broke the 200 mark; recordkeeping began in 1970.

You can also look to the Housing Opportunity Index for more data.

 

[adams101]

Jordan, How do you see the quadrillion dollar derivatives market stuffed with tens of trillions in toxic mortgages effecting the future of real estate investments? How do you see the $8 trillion on Fannie/Freddies books that federal government has on a spreadsheet out in space someplace because it would destroy any government or corporate spreadsheet it was put on? How can you have so many tens of trillions in over inflated over evaluated real estate out there and consider now and the foreseeable future as "stable"?

How in the heck to you foresee "modest" inflation? The entire mortgage, loan and currency industries are propped up by ignorance and cover ups. There are literally hundreds of pages on the derivatives market out there. I can't believe you want "factual data". That is like asking for factual data sidewalks are made of cement. Type in derivatives crash and the news media of your choice. These were simply off the first page of Google. They are all totally non partisan.

http://moneymorning.com/2011/10/12/derivatives-the-600-trillion-time-bomb-thats-set-to-explode/

http://www.zerohedge.com/news/five-...ivative-exposure-morgan-stanley-sitting-fx-de

http://www.wanttoknow.info/banking_finance/derivatives_market_bubble_financial

http://theeconomiccollapseblog.com/...ld-destroy-the-entire-global-financial-system

http://www.wealthwire.com/news/equities/3947

If you need a couple hundred more pages saying the same thing..... let me know.

 

[dinosaur]

Terrible wager at the present time. Farmland is stupid expensive, and it's more of a bet on biofuel policies than it is a bet on inflation.

$1,000 an acre in some parts of the US. You can get an acre of land for less than an ounce of gold. Are you saying that biofuel policies could deflate food costs, if changed? Not being argumentative, I just don't really study this stuff so am interested in the thoughts of people who do.

 

[Jordan]

Jordan, How do you see the quadrillion dollar derivatives market stuffed with tens of trillions in toxic mortgages effecting the future of real estate investments? How do you see the $8 trillion on Fannie/Freddies books that federal government has on a spreadsheet out in space someplace because it would destroy any government or corporate spreadsheet it was put on? How can you have so many tens of trillions in over inflated over evaluated real estate out there and consider now and the foreseeable future as "stable"?

How in the heck to you foresee "modest" inflation? The entire mortgage, loan and currency industries are propped up by ignorance and cover ups. There are literally hundreds of pages on the derivatives market out there. I can't believe you want "factual data". That is like asking for factual data sidewalks are made of cement. Type in derivatives crash and the news media of your choice. These were simply off the first page of Google. They are all totally non partisan.

http://moneymorning.com/2011/10/12/derivatives-the-600-trillion-time-bomb-thats-set-to-explode/

http://www.zerohedge.com/news/five-...ivative-exposure-morgan-stanley-sitting-fx-de

http://www.wanttoknow.info/banking_finance/derivatives_market_bubble_financial

http://theeconomiccollapseblog.com/...ld-destroy-the-entire-global-financial-system

http://www.wealthwire.com/news/equities/3947

If you need a couple hundred more pages saying the same thing..... let me know.

You're discussing the notional value of derivatives, which is totally unimportant and frankly, not really related to your thesis. Anyway, talking about the notional value of derivatives as a relevant statistic is like saying the car insurance business is doomed for failure because everyone is going to get in a wreck tomorrow and spend 30 days in the hospital. Alas, that's not going to happen.

Anyway, what do all these derivatives have to do with real estate being overvalued? Is real estate also overvalued because everyone owns a homeowners insurance policy on their home, which represents trillions in potential liabilities?

$1,000 an acre in some parts of the US. You can get an acre of land for less than an ounce of gold. Are you saying that biofuel policies could deflate food costs, if changed? Not being argumentative, I just don't really study this stuff so am interested in the thoughts of people who do.

Are you sure that $1,000 isn't old or for grazing land in the middle of literally nowhere or something? Decent corn fields are selling for $7k+ an acre in most parts of the country.

Anyway, if biofuels go away, food prices will drop dramatically. Biofuels eat up 40% of all US corn supplies each year, which exerts incredible pressure on all agricultural output. Less land being used to produce food equals rising food prices. And it goes all the way up and down the chain, since harvested crops are often turned into animal feeds which then drives up the cost of raising farm animals. So biofuel is the main driver. After that I would say increased meat demand in Asia. It takes a lot more calories of grain to make a steak or chicken breast than you get back in return.

It's a dangerous bet that's not quite as tethered to inflation as a topical view might show.

 

[dinosaur]

Are you sure that $1,000 isn't old or for grazing land or something? Decent corn fields are selling for $7k+ an acre in most parts of the country.

Anyway, if biofuels go away, food prices will drop dramatically. Biofuels eat up 40% of all US corn supplies each year, which exerts incredible pressure on all agricultural output. Less land being used to produce food equals rising food prices. And it goes all the way up and down the chain, since harvested crops are often turned into animal feeds which then drives up the cost of raising farm animals. So biofuel is the main driver. After that I would say increased meat demand in Asia. It takes a lot more calories of grain to make a steak or chicken breast than you get back in return.

That makes sense, thank you. Farms go for that in some of the less populated parts of Michigan. Corn is grown in old hay fields, but the deer eat a good portion of the crop.

 

[cbc58]

Jordan,

How many properties do you own?

 

[adams101]

You're discussing the notional value of derivatives, which is totally unimportant and frankly, not really related to your thesis. Anyway, talking about the notional value of derivatives as a relevant statistic is like saying the car insurance business is doomed for failure because everyone is going to get in a wreck tomorrow and spend 30 days in the hospital. Alas, that's not going to happen.

Anyway, what do all these derivatives have to do with real estate being overvalued? Is real estate also overvalued because everyone owns a homeowners insurance policy on their home, which represents trillions in potential liabilities?

I am not sure how you don't see the failure of a Quadrillion dollars in investment capital specifically with mortgage backed securities not tying into US real estate? As I said we saw just a glimpse of this in 2008 but poured tens of trillions into the industry propping up the massive losses.... of just a glimpse. This is all one GIANT spreadsheet here the bankers have separated into two spreadsheets by forming the unregulated derivatives market. Even a 5 or 10 percent variance in these values is a global economic crash of epic proportions.

Derivatives are simply an unregulated place to hide 100 times as many toxic mortgages as those few brought to light in 2008. These mortgages are tied to tens of millions of American individuals, retirement accounts, IRA/401K's, corporations, unions, schools, city governments etc etc etc. They are all tied into derivative investments. The solvency of those people are dependent on the solvency of those derivatives.

The price of real estate is directly tied to the amount of wealth in the country. The wealth of this country is tied up in a Quadrillion dollars of derivatives. Those belong to real people both wealthy but most of all the middle class. Their pensions, 401K/IRA's, the stockmarket, employment etc are massively tied to them. Much of the corporate wealth in the US is tied to them.

How you see this as unrelated I have no clue.

 

[newbitech]

Jordan,

How many properties do you own?

vs how many ounces of gold vs how much liquidity does he have to continue accumulating one or the other.

 

[cubical]

Yes, it doesn't mean it is undervalued, but it does mean that no one is going to make more of it until it goes back to the cost of replacement.

Just because people are not going to make more of it, doesn't mean it will go up in price.

 

[Jordan]

Jordan,

How many properties do you own?

Minority stake in several residential properties via a flipping/holding company. I would be happy to pour money in my own direct real estate investments if I wasn't likely to move. Additionally, I'd love to own residential properties via REITs, but there aren't any good pure-plays on residential property.

So, for now, I stick to passive participation in the real estate market. Returns are phenomenal with no work on my part.

I am not sure how you don't see the failure of a Quadrillion dollars in investment capital specifically with mortgage backed securities not tying into US real estate? As I said we saw just a glimpse of this in 2008 but poured tens of trillions into the industry propping up the massive losses.... of just a glimpse. This is all one GIANT spreadsheet here the bankers have separated into two spreadsheets by forming the unregulated derivatives market. Even a 5 or 10 percent variance in these values is a global economic crash of epic proportions.

Derivatives are simply an unregulated place to hide 100 times as many toxic mortgages as those few brought to light in 2008. These mortgages are tied to tens of millions of American individuals, retirement accounts, IRA/401K's, corporations, unions, schools, city governments etc etc etc. They are all tied into derivative investments. The solvency of those people are dependent on the solvency of those derivatives.

The price of real estate is directly tied to the amount of wealth in the country. The wealth of this country is tied up in a Quadrillion dollars of derivatives. Those belong to real people both wealthy but most of all the middle class. Their pensions, 401K/IRA's, the stockmarket, employment etc are massively tied to them. Much of the corporate wealth in the US is tied to them.

How you see this as unrelated I have no clue.

I see them as unrelated because you have no concept of what notional value means.

vs how many ounces of gold vs how much liquidity does he have to continue accumulating one or the other.

I own zero ounces of gold. Gold is impossible to value, and I find metals to be a very boring asset class because they don't do anything. Much easier to assign a value to the cash flows of a business or piece of real estate than to guess what someone will pay for gold 5, 10, or even 20 years from now. No problems with accumulating, as I can acquire minority positions.

Care to share your financials? This is stupid.

Just because people are not going to make more of it, doesn't mean it will go up in price.

Right, but I'd much rather own a commodity at a price less than its cost to replace than at a price above it. Demand is coming back, and I have time.

 

[newbitech]

I own zero ounces of gold. Gold is impossible to value, and I find metals to be a very boring asset class because they don't do anything. Much easier to assign a value to the cash flows of a business or piece of real estate than to guess what someone will pay for gold 5, 10, or even 20 years from now. No problems with accumulating, as I can acquire minority positions.

Care to share your financials? This is stupid.

So you aren't really accumulating you are pushing paper. Ok, done with this stupid argument.

 

[Jordan]

So you aren't really accumulating you are pushing paper. Ok, done with this stupid argument.

Whatever the hell that means. There's more to the investment universe than what you can find in a jewelry store.

 

[newbitech]

Whatever the hell that means. There's more to the investment universe than what you can find in a jewelry store.

of course there is. However, you said that real estate is the best anti-inflation play and then carry on to tell us how you own paper real estate. that's not convincing.

I don't care to know you financials, but you don't actually own any real estate, or gold. So it's kind of hard to have that conversation with someone who is still making paper valuations. Know what I mean? What you own is still tied to the value of fiat. If you want to hedge against inflation, you have to decouple from assets that track the value of the currency you are hedging against.

At this point, you be better off buying wheel barrows and pitch forks so people can move their money once inflation reasserts. Right now, what real estate is doing is adjusting from damn near 30 years of inflation with a really big explosion in notional valuation in the last 10 years. We've hard blown off that notional value, and some are calling for a bottom. This is just crazy. Unless wages catch up to the cost of financing the medium home price over the next 5-10 years, you are going to be buying into a deflating market. That's not a bad deal if you have enough liquidity to accumulate and NOT be saddled by the paper you hold.

 

[cbc58]

Jordan,

I think you may be trying to make yourself feel better by promoting real estate as a good investment even though you don't own any but may have invested in a flipper. Some flippers make alot of money and many lose their shirts and go after unsuspecting investors for "sure-fire" deals. We have one guy here who does just that but uses another alias to off-load loosing money properties for less than he paid for them. Seen this before back in the 80's when rates were low and then BAM - rates shot up to the high teens and people lost their shirts. Of course mileage may vary from location to location...