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Prices on retnals keeps going up
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“Everything at this point is going in landlords’ favor,” said Gary L. Malin, the president of Citi Habitats, one of the city’s largest rental agencies.

http://www.nytimes.com/2012/02/12/realestate/for-rentals-no-ceiling-in-sight.html?pagewanted=1&_r=1

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Yup, renting is for suckers. Short term vs. long term thinking.

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Brooks, way to make a general conclusion from a isolated cherry picked scenario. Basically, 99% of owners make a shitton of gains. Yes, if you bought in 2007, that might not be the case (yet).

"Basically, 99% of owners make a shitton of gains."

Actually, over a statistically meaningful period of time, owning residential real estate has provided returns of 1-2% over inflation. THis has based on data for the past 100 years or so.

Actually, over a statistically meaningful period of time, owning residential real estate has provided returns of 1-2% over inflation. THis has based on data for the past 100 years or so.

And that's a reasonable go forward expectation....

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"Actually, over a statistically meaningful period of time, owning residential real estate has provided returns of 1-2% over inflation. THis has based on data for the past 100 years or so."

Not really. If you actually look at the data 1890 to present, you only get 0.3% above inflation:

http://www.ritholtz.com/blog/2011/04/case-shiller-100-year-chart-2011-update

You'll only get 1-2% if you do something stupid, like choose a 5-10 year period. Or else if you use the peak of the bubble in 2006 as a reference point, as RS likes to do. But even the WWII bottom of 1942 to the 2006 peak only produced a 1.3% return beyond inflation.

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Ionada - yes, you are correct -- the data i was using was also Shiller's, but pre-crash. I hadn't updated it in some time. Thank you for posting the link to Shiller's work.

Brooks2 - it depends on your time horizon and your appetite for risk. Nothing will outperform a diverse basket of equities over time. But the volatility will be significant at times, so that isn't the place to invest your 15 yr old's college money.

and what does your 100 year data on owning real estate in Manhattan?

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Joey, Hunter - you can dismiss the data, but the reason it is relevant is that...wait for it...real estate is a mean reverting market. Blink twice if you know what this means.

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Note that Shiller's method probably overstates capital gains, since he is unable to fully correct for increases in quality over time. He measures repeat sales, but over time, buildings depreciate and are updated, and the updates are almost certainly more important. Most of Manhattan's older buildings have electricity, for example, and over time, many are likely to acquire washer/dryers, central air conditioning and other mid-20th century advances.

Also, of course, just because real estate tends to track CPI inflation quite closely over time is no reason to think that if you pay bubble prices you will receive average returns. Unless you think that capitalist markets in real estate development are terminally broken, you should expect real price declines from here: in functioning markets, prices tend to track costs (not the mean whatever that means in a data set that is constantly changing and not normally distributed).

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Yes Azil the New York Times is a joke. No news flash there.
Shocking they are in the toilet.

If they had half a brain they would have bought Streeteasy 3 years ago.

urbandigs here...is anyone else's user account keep changing?

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