Trusting R.E again but losing faith in stocks

Real estate that you live in is not an "investment" - it is a capitalized expense. Nonetheless, in much of the country (not Manhattan)it makes absolute sense to buy real estate now, because it's the cheapest it's been in a lifetime.

I'm seriously considering taking my business to Broward County, saving $50,000+ in costs that are just added to the bottom line as net profit. A 2,000 square foot house can be got from between $275,000 - $325,000; at 5% interest and with property taxes of about $5,000 a year, capped in growth at 3% per annum, it makes 100% sense.

No one trusts the stock market anymore for good reason: dot.com, housing, 2008. The massive use of leverage - which we're seeing again, thank you, Uncle Ben! - causes stocks to swing wildly in very short time frames. Once the leverage is withdrawn, or prices sink to a certain level, margin is called, which feeds the beast and causes rapid and wild crashes. In the olden days a 2% price change might have happened in 3 months, not every day. The market did not rise 30% in 6 months.

The problem isn't stocks themselves; it's the way the markets are managed. 30x leverage at a real interest rate of -5% will cause a massive bubble, ripe for the burst.

Ill admit, I just bought a little horse property house in CT..locked in 10yr arm at 4.1275%.

is that a small property for regular sized horses or a reasonable piece of land for tiny ponies?

4.5 acres, current owner had 2 horses, 7 chickens, and 4 goats..more of a farmhouse than any of the farmhouses we looked at..house is small..1800sft cape house

>I'm seriously considering taking my business to Broward County, saving $50,000+ in costs that are just added to the bottom line as net profit.

There's a real tax benefit to the move.

>Nonetheless, in much of the country (not Manhattan)it makes absolute sense to buy real estate now, because it's the cheapest it's been in a lifetime.

Manhattan in the past couple years has gotten cheaper, not terribly much, and if anything the global forces that propel prime Manhattan real estate have only gotten stronger, with Manhattan being premium property and greater wealth being concentrated at the top.

>No one trusts the stock market anymore for good reason: dot.com, housing, 2008. The massive use of leverage - which we're seeing again, thank you, Uncle Ben! - causes stocks to swing wildly in very short time frames. Once the leverage is withdrawn, or prices sink to a certain level, margin is called, which feeds the beast and causes rapid and wild crashes. In the olden days a 2% price change might have happened in 3 months, not every day. The market did not rise 30% in 6 months.

>The problem isn't stocks themselves; it's the way the markets are managed. 30x leverage at a real interest rate of -5% will cause a massive bubble, ripe for the burst.

What does this all man? Dot coms may or may not be fresh in people's minds today, but we have very different online business models. No longer are we talking about pets.com. We are talking about Facebook which is the second internet, or Apple for which everyone sees cool devices in someone's hands. Amazon is big business. The overbuilt infrastructure of the late 1990s is actually running out of capacity to some extent today, with so much content being distributed across the country and globally. Smartphones, Netflix, etc. have caught up to people.

And housing seems more like a housing problem than an equities problem.

As for the way the market is managed, absolutely people are concerned about these new ETFs, concerned about high frequency trading and flash crashes, and in companies themselves absolutely concerned about executive compensation.

But I have no idea what this means: "Once the leverage is withdrawn, or prices sink to a certain level, margin is called" or where this is applicable "30x leverage "

There are a few reasons why the lost faith in stocks is to some extent justified.
1) There are just too many instances where Directors and managers of public corporations do not appear to be
acting in the best interest of share holders
2) The game increasingly feels rigged, whether it be via Fed policy or Day Traders playing games with "The Tape"
3) The accounting profession is not providing good reporting and principles, look at banks and mark to market
standards, regulatory/tax arbitrage schemes and Enron type scams not caught by auditors

Homes are easy to understand. You own the real estate and knowing the cash flow does not require a rocket scientist or brain surgeon.

Saw it on FB, UD: Very handsome billy goats you got along with it, too. I hope we don't see you on Animal Hoarding anytime soon, along with last night's woman with 67 dogs.

I'll stick to the swimming pool, thanks.

It's a fine time to buy property in some parts, and Ft. Lauderdale is one of them. Since I'll have to retire someplace anyway, seems best to go now & enjoy.

Stocks are fine, as long as you know what you're doing and don't react emotionally, and don't mind seeing wild price swings. A lot of people can't take that, and what's happened since 2000 is clear evidence that something is grossly wrong with how the markets are run, but Goldman Sachs is far more powerful than Barack Obama.

thats right! love those pygamy goats!

"I'm seriously considering taking my business to Broward County, saving $50,000+ in costs that are just added to the bottom line as net profit. A 2,000 square foot house can be got from between $275,000 - $325,000; at 5% interest and with property taxes of about $5,000 a year, capped in growth at 3% per annum, it makes 100% sense."

@STEVE; The property taxes themselves are not capped. The potential increase in property VALUE ASSESSMENT is capped at 3% (only for a primary, principal residence). If the millage rate increases, be it 2% or 20%, your taxes will go up accordingly.

"4.5 acres, current owner had 2 horses, 7 chickens, and 4 goats..more of a farmhouse than any of the farmhouses we looked at..house is small..1800sft cape house"

@NOAH: Threaten to grow some corn and see how much the government will pay you not to plant it! It's a profit deal!

The real question is how many animals does it take to make sure you get the agricultural property tax break? Do they have that in CT?

@NOAH: P.S., Have you ever seen the movie "Funny Farm" with Chevy Chase? Highly recommended for your new situation.

(Movie (sorta) quote) Local directing NYC movers to new country house; "Well, to get there, you have to turn left where the old stump used to be, then go in the direction of the quarry, turn left where Emma Watson lived before she married Bill . . . "

You get the idea. . .

There is generally no clearer sign of something being a lousy investment than the American public flocking into it... and whenever Americans flee stocks, it generally means it is a great time to buy.

I may have to reconsider taking my stock profits....

hehe..i like the corn idea..no, havent seen funny farm. will do though. I will say we found one awesome house that was right next to a maximum security prison in walkill, ny..literally, next door. And of course that was not in the description

http://www.realtor.com/realestateandhomes-detail/1182-Route-208_Wallkill_NY_12589_M37393-31205?ex=NY516775073

@ NOAH: OMG! Gorgeous house, can't believe the location!
Couldn't resist rewriting the description:
"Set on a knoll overlooking pastoral (PRISON) views stretching (FROM 20 TO LIFE) to Mohonk mountain range, this gracious home offers an abundance of space for both (ESCAPEES) family & (HOME INVASIONS) entertaining".

It's amazing what lousy locations people will put up with. I once had an office with a train track literally 6 feet from the rear windows. We all got to know the schedule pretty well (just low use freight) so we knew when not to schedule the conference calls.

I guess I should address the OP; I think the pendulum is swinging back on RE. Many U.S. properties are now priced well below replacement/rebuilding cost, and many are below where they were in 2001. That's too far the other way, and the general public, being as slow and stupid as they are, are FINALLY beginning to notice and $pend.

If anyone were to straighten out the RE price graph, to the old standard of 3-5% per year appreciation, it would show many areas priced BELOW where the should be, in historic terms.

This has bee a Fed driven, low volume liquidity rally. Market would fall big on any real selling volume.

Wrong, Needs:

As provided in Section 193.155(1), F.S., beginning in 1995, or the year after the property receives homestead exemption, an annual increase in assessment shall not exceed the lower of the following: a. Three percent of the assessed value of the property for the prior year...

http://dor.myflorida.com/dor/property/resources/limitations.html

it can never go over 3%, but the amounts can be carried forward to the next years.

And in any case, Needs, you're talking about $500 a month in property tax at the $400k level - a pittance. Higher than NYC single-family home property tax, but much lower than apartments.

The move wouldn't be so much for the tax as that's offset by increased federal taxes & having to own a car. It would be mostly offset b/c property is back to an affordable price: the places I'm looking out were selling for around $700k in 2007; now, $300k. And get a short sale, and bingo! A deal.

@STEVE; I agree with you, it is a great time to buy in Florida. I think I keep saying that in other threads.

Did you try this out yet? You'll save on more than just taxes.

http://cgi.money.cnn.com/tools/costofliving/costofliving.html

Plus there's no real winter south of Interstate 4. I feel bad for people who buy in north Florida thinking it's warm in the winter, when it's really NOT.

Here's a hint for you; buy a house built after the miami-dade building code went into affect in the late 1990's. Or better yet, buy a place with impact glass on the windows. Makes for a lot of peace of mind.

According to that calculator, more than 50% cheaper.

Not bad.

I used to live in South Beach - hated it. But Ft. Lauderdale is a different animal.

I never liked South Beach. It's incredibly congested, and if you're not gay, a drunk or a hooker, there's really not much to do.

Ft Lauderdale can be nice. Canal lot, near the Galleria? What do you think?

Oh, like as if there's anything to do in South Beach if you're a gay drunk hooker.

The housing crash seems to have had little impact on consumer confidence, as 81% of adults believe buying a home is the best long-term investment a person can make.

According to a report by Pew Research released this week, this figure is only down 3% from 1991. Pew cites a CBS News/New York Times survey completed in 1991.

Of those 81% of the adult sample, 37% "strongly agree" that a home is the ultimate long-term investment, while 44% only moderately agree. Both figures indicate less adamant view than the 1991 survey.

Almost half (44%) of individuals whose homes lost value said they expect to recoup their equity losses in three to five years. Another third are less optimistic and believe it will take between six and 10 years.

http://www.housingwire.com/2011/04/22/homeownership-still-considered-best-long-term-investment-pew

Gimme a break Riversider! Can't you see propaganda when it's smashed like a Cream cake on your face?
Do you actually believe every article and survey you read to be true, my naive little flower?

Florida. Blech. Lived near Daytona for a year. Couldn't pay me enough to live there.