When there are blood on the street, buy property

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.

:lol: I take that as a compliment.

I am middle class by most means and yet I didnt rush out and do something stupid with property. I didn't believe the hype and if poor people do, it's most likely the reason they are poor to begin with.
 
leverage is a double edge sword, but I think one of the biggest problems with leverage is that at some point people use it as an excuse to speculate and lose sight of the implications of it.
 
leverage is a double edge sword, but I think one of the biggest problems with leverage is that at some point people use it as an excuse to speculate and lose sight of the implications of it.
Agreed. As with any bubble in history, really. I suppose people need a little finance 101 to understand it.

Thing that continues to be missing in this is how most of the problems were with speculators. Today, Countrywide offered to redo loans for owner occupied (~80k homeowners).
 
Agreed. As with any bubble in history, really. I suppose people need a little finance 101 to understand it.

Thing that continues to be missing in this is how most of the problems were with speculators. Today, Countrywide offered to redo loans for owner occupied (~80k homeowners).

I just finished a book "Manias Panics and Crashes" where it details many of the those exact things. The common theme among all of them are an increase in the ease to get credit to participate in speculation.

it's kinda funny to see that translate so well into today's world.

I think that while many problems were created by speculators, it has a scope of damage that goes beyond just them. But the point is even people who were not speculators made terrible decisions and those are the sob stories we hear.
 
I just finished a book "Manias Panics and Crashes" where it details many of the those exact things. The common theme among all of them are an increase in the ease to get credit to participate in speculation.

it's kinda funny to see that translate so well into today's world.

I think that while many problems were created by speculators, it has a scope of damage that goes beyond just them. But the point is even people who were not speculators made terrible decisions and those are the sob stories we hear.
Extraordinary Popular Delusions & the Madness of Crowds, by Charles Mackay
This should be required reading for all high school students.

I think Richard Bernstein said it best when he compared it to pop corn. You get a few kernels to pop before you get the big one. This tendency happens about every 5 years.
 
:lol: I take that as a compliment.

I am middle class by most means and yet I didnt rush out and do something stupid with property. I didn't believe the hype and if poor people do, it's most likely the reason they are poor to begin with.

you would.

and stop dissing the poor lest you join us soon
 

Why am I not surprised you brushed such issues aside? Oh, wait, the government does that all the time, yes?

Ramius75 said:
for me it's Mandarin

Ironically, you aren't being a very good citizen, then. The 1st language in Singapore is English :D
 
you would.

and stop dissing the poor lest you join us soon

Unless you are on the computer at the library you aren't poor. You probably don't know what it truly means to be poor either.
 
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.

Yeah, I mean really, the question you have to ask yourself is: "What's the best way to spend my income?"

Obviously, deducting things like food, transport, bills, luxury goods, etc, you're left with "what should I do with the money I'm spending on rent?" So a smart individual would take their rent and find a mortgage which charges the same amount in monthly repayments. That way, you end up spending the same, and you get to keep the equity in the house at the end of it.

Historically, mortgage repayments and rent on the same property are roughly equal. An investor would use rent to pay the mortgage, build up equity in the property, and profit from the difference in price of the house at sale and at purchase. The average Joe would wonder why on Earth he's paying rent when he could equally be paying a mortgage and own the bricks 'n' mortar. This is why home ownership is so popular in Anglophonic nations.

In the UK, however, we're starting to see rent fall below mortgage repayments. This is due to the huge rise in popularity of buying to let as an investment (as above), and a steady rise in interest rates over the past few years.

So you're absolutely right, it all comes down to what the best decision is for the individual. But rules of thumb such as "0% down = bad" are just as destructive as "homeownership > renting".
 
the thing that throws all that for a loop is when mortgage payments even for 0% down are still way higher than rent. For instance studio condos, yes STUDIO CONDOS are being sold for 285k-300k in the same neighborhood that I live in. I pay 575 for my studio apartment. there is no chance in the world I could find a mortgage payment that low, nor would there be an advantage in owning until further down the road based on the rate of increase of housing prices vs. my rent.
 
the thing that throws all that for a loop is when mortgage payments even for 0% down are still way higher than rent. For instance studio condos, yes STUDIO CONDOS are being sold for 285k-300k in the same neighborhood that I live in. I pay 575 for my studio apartment. there is no chance in the world I could find a mortgage payment that low, nor would there be an advantage in owning until further down the road based on the rate of increase of housing prices vs. my rent.
*jealous* there's no way I could ever find a studio flat anywhere in the South East for, what, £350 pcm? No way...
 
*jealous* there's no way I could ever find a studio flat anywhere in the South East for, what, £350 pcm? No way...

but the thing that makes it so absurd is the total disconnect between my apartment price (which I admit is in a 90 year old building) and the condo price for something with only a few more square feet and newly painted walls. I could afford a higher rent, but for what? an extra room? a dishwasher? wait, a dishwasher would be pretty awesome.
 
but the thing that makes it so absurd is the total disconnect between my apartment price (which I admit is in a 90 year old building) and the condo price for something with only a few more square feet and newly painted walls. I could afford a higher rent, but for what? an extra room? a dishwasher? wait, a dishwasher would be pretty awesome.
Yeah, that's exactly why I'm renting, cos I'd never be able to afford a flat as nice as mine (it's even got a dishwasher!!) without renting with friends. And I'd rather live with a flatmate than live on my own. Plus it means I'm free to move around, which is quite likely at my age...
 
Historically, exponential growth is unsustainable. I expect the Dow Jones will never reach 20,000.

:twitch: Could you please elaborate?
 
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.


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?

Its not fueled by fundamentals. Its fueled by new financial tools that didn't price risk correctly.
 
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.


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?

Also, the return in the stock market over the same time as the house market has been greater.
 
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.


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.

You are also throwing money away on interest payments. It takes a long time for your monthly payment to pay more towards the principal that you owe than interest.

Leverage is a bad thing when you're willing to accept it without fully understanding it. Those who use leverage professionally don't have such a easy-come 'tude.

!00% mortgages are stupid. If the market tanks, what are you going to do? You have no money of your own invested in the house. Youre just going to walk. They attempted to account for this risk by having higher interest rates on such loans. Obviously that didn't work.
 
Agreed. As with any bubble in history, really. I suppose people need a little finance 101 to understand it.

Thing that continues to be missing in this is how most of the problems were with speculators. Today, Countrywide offered to redo loans for owner occupied (~80k homeowners).

And for that, I dislike Countrywide. For folks who weren't stupid, whats their reward? Nothing.

And whomp, you assume that speculators didnt lie on their loan applications saying that the homes would be owner occupied. There is more than 1 casey serin
 
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