Real Estate is the Best Anti-Inflation Play

[wgadget]

True. Which is why I like investing in it.

I don't make the rules, I just play by them. Ben Bernanke and company are making homes excellent investments, so I'm just following their lead. Don't hate the player; hate the game.

Back in 2004, GWBush and Alan Greenspan were making homes excellent investments. We all know how that worked out.

[wgadget]

Meantime, Dodd-Frank legislation is giving the Too Big to Fails fits...The US and the UK are teaming up to slay the dragon. Derivatives, anyone?

http://blogs.marketwatch.com/thetell...to-fail-banks/

[Jordan]

Back in 2004, GWBush and Alan Greenspan were making homes excellent investments. We all know how that worked out.

Incredibly well for people who bought, rented, and held? Yep.

This is a great time to buy real estate. Look at the spreads between carrying costs and rents.

[wgadget]

Incredibly well for people who bought, rented, and held? Yep.

This is a great time to buy real estate. Look at the spreads between carrying costs and rents.

We have not yet reached bottom. There is a hidden glut.

[Jordan]

We have not yet reached bottom. There is a hidden glut.

Okay, we'll see how that plays out.

How much further do you think national housing prices will fall and by when? Please quantify your predictions so that we can come back and see how well you do.

[wgadget]

A real estate broker told me that 2 out of 5 homes in my neighborhood are either already foreclosed on or in the process. I heard there are 5 million homes nationwide in this status. So...I guess the market might be cleared in oh...10 or 15 years? I'm gonna guess prices will go down another 20% or so in the near-term (2 to 5 years). Not sure how well the banks' ability to hold onto empty homes for five years is gonna bode with "the neighborhood." As in, "There goes the neighborhood." Dilapidated homes in "the neighborhood" do not make for rising prices, imho.

Also, as the municipalities get more and more desperate for "revenues," property taxes will rise. It's not rocket science.

[The Free Hornet]

You contradict yourself here. It's very easy to make more real estate, and we've been doing it since the first mud hut was built.

+1 great point.

Perhaps zoning laws and building inspectors are a way to force artificial scaricity on an unscarce product. Power center cities like DC are another way to create artificial scarcity. The same might be true with tech cities and IP laws. The tech stays there because IP law demands it stay with specific companies. Likewise with public education and medical industry regulation. Centralize the resources and close down anything not under Uncle Sam's thumb (e.g., make running a rural ER prohibitively expensive by forcing them to treat regardless of ability to pay not to mention licensing and medicine/FDA/IP costs).

That said, there does seem to be a limited amount of hip but only a few cities benefit from this effect.

[The Free Hornet]

Even from a single poster I can't get consistency.

OK - so not a single consistent poster here???

Gold goes up over time because of inflation, I recognize that. Real estate goes up over time because of inflation and it cash flows during the period. No one is willing to admit that.

The first post (#1), made that admission: "Which means that real estate is a good anti-inflation play that actually generates cash flow - unlike gold - and like gold, you cannot make more real estate out of thin air".

Disregarding the 'cash flow' aspect. What is nice about real estate is that you can leverage real estate to get more real estate. Someone starting off with one tennant may work their way up to dozens or thousands. An ounce of gold will always be an ounce of gold and it is not as easy leverage your way into more gold (you could sell it and buy velocity shares that double the price trends and use those profits to buy more gold).

My beefs with real estate are that it is a job to manage and I already have a job. More so, I am both willingly and unwillingly exposed to too much local real estate market. As such, any real estate plays for me would have to be externally managed (farmland, e.g.) or something that doesn't need management (like a vacant lot) and preferable sufficiently far away.

Okay, we'll see how that plays out.

How much further do you think national housing prices will fall and by when? Please quantify your predictions so that we can come back and see how well you do.

You're forgetting the 3 most important things about real estate: location, location, location. Who gives a damn about "national housing prices"? Which city will be the next Detroit or Las Vegas? Where is the next DC or San Diego? That's what I want to know.

[newbitech]

Disregarding the 'cash flow' aspect. What is nice about real estate is that you can leverage real estate to get more real estate.

yes, i am nitpicking...

anyway, the leveraging comes in the form of credit lines. One cannot successfully lever up whilst disregarding cash flow, since the cash flow is required to maintain the credit line. So Rents - Credit Maintenance - Real Estate Maintenance = Cash flow. That is the simple formula.

[gerryb1]

How much further do you think national housing prices will fall and by when? Please quantify your predictions so that we can come back and see how well you do.

I think the values are declining by $40B a month, soon to be $85B a month.

So glad they don't need to clear the market! It's much better to instead have empty houses, jobs will be created in the future in the form of salvage and demolition crews. Woohoo!