Shiller vs Buffett

They're talking about two different things: Shiller is talking about owner-occupied housing, and Buffett is talking about buying a property and renting it out.

Completely different businesses, and business models.

Not so simple. Who is the buyer, what is their financial profile? If they save money renting will they be disciplined enough to invest in equities, stay the course through the various cycles? If not they end up with a box of rent receipts and no savings. Schiller's comparison to purchasing a car/house seems strange. The 1963 Buick my grandfather owned was not worth much in 2005 (even with inflation). However the house he sold (purchased 1963- Bergen County, NJ) produced a sizable check. That along with his other investments over the years, not too shabby and he loved his home, enjoyed it deeply.

But I agree, owning is not always appropriate.

Buffet is long real estate and talking his book.

Shiller calculated that the long term return on owner-occupied real estate is... zero. So, basically, you can't count on appreciation. Only potential income, which has long been a tenant of actual real estate investors (not the geniuses who thought they were when they bought in the bubble).

Properties used to trade at 8 times rent roll.
Try that formula in manhattan today...or the other 4 boroughs.

KeithB
Might of faired better if he bought the Corvette though.

I am guessing Shiller is good at predicting and a good professor, but might not be as good as an investor like Buffett? Maybe he's thinking mostly in terms of price appreciation only and ignoring tax benefits and fact that renters could be paying your mortgage etc...?

Anyways, thanks for your opinions guys.

Really isn't an apples to apples comparison. Micro vs. Macro.

Shiller calls overall markets much better than Buffett. Buffett has been a little off at times (he called the bottom too early essentially last time).

But Buffett buys companies and RUNS THEM. At least streamlines them. He is not an investor in the buying public equities sense. He is private equity, and large stakes in public companies.

So my take... buffett doesn't quite understand "the world" as well - and he admits he is blind to technology - but he looks for undervalued assets and fixes them.

Shiller understands overall markets better.

And Buffett doesn't seem to know much about real estate. Shiller *created the index*. He also called the decline when no one else is. I vote Shiller on this one.

> Buffet is long real estate and talking his book.

this guy is so exposed to the housing sector! and not only didn't see the bubble, he didn't even see what AIG had gotten into even though he was a big shareholder.

shiller instead understands the housing sector... so who would you listen to? the guy who missed the biggest housing bubble in history and keeps on being exposed to the sector or Shiller who understands housing well and keeps on getting it right about every big bubble?

funny this would even be up for discussion.

I don't think the views differ much.

For Buffett: "Specifically, he likes the idea of actually buying distressed houses with cheap leverage, and renting them out."

Operative word there being "distressed". Places like Phoenix, something I had considered in 2011 because you could yield 10% on cash after all expenses, significantly more with cheap leverage. Not worth my time given amount of effort vs. value of my time, but worth somebody's time. Now up 20% since Buffett made this proclamation a year ago.

>this guy is so exposed to the housing sector! and not only didn't see the bubble, he didn't even see what AIG had gotten into even though he was a big shareholder.

Moody's?
U.S. Gypsum?

"Not worth my time given amount of effort vs. value of my time, but worth somebody's time."

How valuable can your time be? You're posting on average over 3x a day on here since you joined. Reasonable to assume that you are reading far more posts than you respond to - that is a lot of time on Streeteasy.

Time is worth lots. This is entertainment. At times it is quite valuable to see the poor judgment of "intelligent" people w.r.t. investment, that has been quite helpful to me. But mostly entertainment.

I also watch 1-2 hours of TV a day. Very expensive stuff.

Exercise too. But I think that's OK, adds to life at least 1:1, probably a net benefit dollar-wise.

Crap, this is my third post in a row. Ran through my daily budget in 3 minutes. I'm gonna pull out the calculator to see how much it cost me.

How much did your post cost you?

Don't let actual facts get in the way of your opinions, though.

"CHART OF THE DAY: Why Buying An Old Home Is A Bad Investment"

Read more: http://www.businessinsider.com/homes-30-bigger-consume-2-more-energy-2013-2#ixzz2Knp2QQuq

"It takes maintenance, it depreciates, it goes out of style. All of those are problems. And there's technical progress in housing. So, new ones are better."

ive been harping on this ad nauseum

while owners amortize transaction costs, they accumulate deterioration costs at a much greater rate