When there are blood on the street, buy property

[GarretSidzaka]

rich people are like normal people except they have the power to screw everyone over

 

[The Yankee]

And "normal" people have the power to screw themselves over.

 

[GarretSidzaka]

yup. but when a Upper Lower class family finally gets the chance to buy a house, sub-prime, with extremely crappy terms and variable rates, the blame can fall on the lenders shoulders.

They buy a house at $1200 a month. Then the market goes to poop and the rates go up to $1600+ a month. Then, a person in the family gets laid off, because their lower end jobs have job security based on the market, and then they are forced to foreclose, and are shredded financially.

how is it their fault?

'Bad Bad poor person!! You know you can't ever own a house!!'

 

[The Yankee]

how is it their fault?

They signed the papers. Just because lenders were dumb enough to play with such loans (or somehow thought such things would last), nobody forced the applicants to take the loans.

 

[mrt144]

yup. but when a Upper Lower class family finally gets the chance to buy a house, sub-prime, with extremely crappy terms and variable rates, the blame can fall on the lenders shoulders.

They buy a house at $1200 a month. Then the market goes to poop and the rates go up to $1600+ a month. Then, a person in the family gets laid off, because their lower end jobs have job security based on the market, and then they are forced to foreclose, and are shredded financially.

how is it their fault?

'Bad Bad poor person!! You know you can't ever own a house!!'

so what you're saying is poor people are stupid but stupid people shouldnt be responsible for their actions.

 

[GarretSidzaka]

the very desire to have what has been traditionally denied to the lower class was what made them sign those loans.

And it is the sharks of our society who make sure that they stay poor.

I hope you middle class types enjoy your money while it lasts, coz if there is a depression, the very rich and the very poor won't take the bullet...

 

[mrt144]

the very desire to have what has been traditionally denied to the lower class was what made them sign those loans.

And it is the sharks of our society who make sure that they stay poor.

I hope you middle class types enjoy your money while it lasts, coz if there is a depression, the very rich and the very poor won't take the bullet...

you're so funny!

This is going to be obvious to everyone but you; That which is denied to the lower class is denied for a reason and that which the lower class wants doesnt justify or excuse them from making poor decisions.

 

[GarretSidzaka]

what reason

 

[Mise]

Annnnnnnnnnnyway......

Buy low, sell high works for stocks, which historically average a 10% return.

Housing, historically, barely beats inflation with its return, and with such a large capital outlay, speculating with real estate smacks of stupidity.

You can invest £5,000 of your own money in the stock market, make a 10% return, and come out with £5,500 this time next year.

Or you can get a 95% mortgage @ 6% APR, buy a £100,000 property, get an average 12% return (it's been this high in the UK for the past decade, only now is it starting to cool off), and walk away with £11,300. Even if the return is 8%, you still pocket £7,300.

Plus you get to live in a house for a year...

Doesn't sound stupid to me.

Leverage was one of the many reasons for the G.D., at least hte stock market meltdown. Folks went 100% leveraged into property that was only fueled with a ponzi scheme.

And what if it's fuelled by fundamentals, such as fewer new homes being built than new families being started? A rise in the number of single person households? An influx of Eastern European migrants? A generous non-domicile tax regime encouraging filthy rich foreigners to base themselves in the country, driving up house prices in the swankier suburbs?

 

[mrt144]

what reason

lower class people can't afford to buy houses! JESUS! IF THEY WERENT LOWER CLASS THEY WOULD BE ABLE TO! IT SHOULD BE MOTIVATION ENOUGH TO NOT BE LOWER CLASS AND POOR ANYMORE!

Lower class people dont deserve the ability to buy houses because they havent earned the money to do so.

 

[The Yankee]

the very desire to have what has been traditionally denied to the lower class was what made them sign those loans.

I desire a house too. But if someone is going to make sure nobody rejects my application for a home, even though I clearly couldn't afford a home that will cost $1,500 a month, that means I'm forced to sign the deal? Hell no. I could read the terms, factor in the budget, know that I can't pay $1,500 a month, and walk out. It does not satisfy my desire. But I have to keep my desires in check so that I can stay afloat.

 

[The Yankee]

Annnnnnnnnnnyway......



You can invest £5,000 of your own money in the stock market, make a 10% return, and come out with £5,500 this time next year.

Or you can get a 95% mortgage @ 6% APR, buy a £100,000 property, get an average 12% return (it's been this high in the UK for the past decade, only now is it starting to cool off), and walk away with £11,300. Even if the return is 8%, you still pocket £7,300.

Plus you get to live in a house for a year...

Doesn't sound stupid to me.

Works great if you're on the upside of it. But you failed to take into account "historical" returns in favor of stating what you can get during a hot market.

Jericho is just comparing a historical average to a historical average. Yes, people can and do beat it either with skill, luck, great location, or great timing. But if you're going to sit on something long-term, he is saying that putting it into the stock market is a better bet, everything else being equal.

 

[GarretSidzaka]

lower class people can't afford to buy houses! JESUS! IF THEY WERENT LOWER CLASS THEY WOULD BE ABLE TO! IT SHOULD BE MOTIVATION ENOUGH TO NOT BE LOWER CLASS AND POOR ANYMORE!

Lower class people dont deserve the ability to buy houses because they havent earned the money to do so.

spoken like a true capitalist

@the Yankee
i essentially agree with you. and appreciate your level attitude. but remember that there is fine text and variable rates, that at anytime could make your initial calculations wrong in two months.

 

[The Yankee]

So everyone should do the research, read the fine text, and know where the ARM is going to be after that two or three year intro rate. Some did it but still believed their income would somehow grow to cover it later on. That's the gamble they took and a lot were burned by it. Such as it happens, unfortunately.

Please note that it does take at least two to tango here.

 

[GarretSidzaka]

yes, but where i get so mad about it is that the government continues cutting support for the lower class (this is because of corporate lobbying ect.) and the middle class is getting eroded by the waning economy (because of detrimental government activities because we have a Oil CEO as president an a Weapons Contractor for vice president).

These two reasons repeat themselves over and over again throughout much of the current crisis that we are in.

But why scruple over the reasons? If we can get right wingers and left wingers and even radicals (me) to agree there is a problem, then we can all use our unique abilities to work together to solve them. If only for our childeren.

 

[Mise]

Works great if you're on the upside of it. But you failed to take into account "historical" returns in favor of stating what you can get during a hot market.

The market in this country has been "hot" for the past decade. It's now showing signs of cooling. But even if house price inflation is comparable to RPI (excl. mortgage inflation, obviously) at 4%, and assuming interest rates are around 6% you still only end up "paying" ~2% interest a year, in real terms. Which is far cheaper than renting.

And Jericho is comparing an investment with an investment + necessity of life. In other words, by investing the £5,000 in the stock market, you lose the opportunity to buy a house, meaning you have to continue renting. Meaning that, overall, you end up throwing away money on rent.

The point of home ownership is that you get to keep the equity at the end of it; when you rent, you keep nothing.

I'm not saying that it's right for everyone, but saying that 100% mortgages and leverage in general (!) is "stupidity" is grossly oversimplifying and offering only one side of the story.

Jericho is just comparing a historical average to a historical average. Yes, people can and do beat it either with skill, luck, great location, or great timing. But if you're going to sit on something long-term, he is saying that putting it into the stock market is a better bet, everything else being equal.

Except it's not equal, is it? ^^



In the thread on investment, Jericho was quite adamant that leverage was a Bad Thing -- a sentiment that he's repeating now.

Saying that leverage is a Bad Thing is glib. I was offering an alternative.

 

[The Yankee]

Leverage was horrible when it came to buying stocks on margin. Which is why, I believe, we (in the US anyway) have a 50% lower limit on such things, so that people can't borrow 20 times their cash amount and get wiped out completely once the market took a bad turn with no way for the broker to recover the loaned money.

It is the game you play if you buy a house with zero down, with higher interests to compensate. I don't think this would be eliminated because of the recent mess...but greater scrutiny of what the banks are approving may be enforced at some point.

As for house versus rent, if you do buy with zero down, you throw away money on extra interest. It may be worth it to you anyway, but you do have to know what you're walking into if you do go on that path.

We shall see what happens....

 

[GarretSidzaka]

yes, we shall, for good or ill, we shall...

 

[Whomp]

I'm with Mise. Leverage can be extremely powerful whether it's real estate or the futures market. As we've seen in the US it's the speculators that took it on the chin with the vast majority of real estate foreclosures.

For those of you who think this has never happened before I suggest you read up on the S&L crisis of the late 80's/early 90's. Google Resolution Trust.

 

[The Yankee]

If you're going to be a speculator, fine, just make sure you know how powerful leverage can be both ways.

Though if you're going to dabble just a bit, I'd take the more conservative approach to it.