10 Predictions for the New Year

From Forbes:

Housing Outlook 2014: 10 Predictions From The Experts

1. More homes will be available
Short supply drove rapid price increases at the beginning of 2013, but watch for that to change next year. Realtor.com notes that the inventory (homes available for purchase) shortage began to soften in February. New construction and rising prices should bring more homes, both new and old, on to the market in 2014, helping inventory return to traditional levels.

2. Mortgage rates will rise
Zillow predicts rates will hit 5% by the end of 2014–well up from the 4′s and 3′s of late, but still well within normal levels. New Fed Reserve chief Janet Yellen is expected to continue Ben Bernanke’s policy of keeping mortgage rates low by buying blocks of mortgage-backed securities, but the Fed’s bond-buying taper could push rates higher.

3. Mortgages will be easier to get
“The silver lining to rising interest rates is that getting a loan will be easier,” says Lantz. “Rising rates means lenders’ refinance business will dwindle, forcing them to compete for buyers by potentially loosening their lending standards.”

4. Home prices will rise 3%
Redfin and Zillow are predicting that home prices will rise between 3% and 5% in 2014. For comparison’s sake, 2013 saw jumps of 5% nationally, with increases of more than 20% in some hot spots. “These gains, while beneficial in many ways, were also unsustainable and well above historic norms for healthy, balanced markets,” says Dr. Stan Humphries, Zillow’s chief economist.

5. Fewer homeowners will be underwater
Rising prices helped 2.5 million homeowners with underwater mortgages regain positive equity status during the second quarter of 2013, according to Realtor.com. By Q3, a CoreLogic report found that about 6.4 million homes were still in negative equity at the end of Q3. Watch for that number to shrink in 2014.

6. Affordability will decline
Despite the slower pace of price increases, home affordability will decline as mortgage rates rise. The real culprit is income levels, which aren’t keeping pace with the increases in housing costs. In 2013, the National Association of Realtors’ Home Affordability Index dropped to a five-year low. Experts predict the trend will continue in 2014.

7. Ownership will decline
In 2014, Zillow predicts, homeownership rates will fall below 65 percent for the first time since 1995. “The housing bubble was fueled by easy lending standards and irrational expectations of home value appreciation, but it put a historically high number of American households – seven out of ten – in a home, if only temporarily,” says Humphries. “That homeownership level proved unsustainable and during the housing recession and recovery the homeownership rate has floated back down to a more normal level, and we expect it to break 65% for the first time since the mid-1990s.”

8. Americans will move
Rising prices, a reversal of underwater mortgages, and easier credit will free Americans up to move. But next time they’ll choose smaller homes in more affordable locations. Redfin is predicting that new lending regulations–which make it harder to borrow more–will send Americans to less expensive hubs like Portland, Denver, Austin, Richmond, Dallas, Houston, San Antonio, Atlanta, and Raleigh.

9. Foreclosures will fade
The once booming foreclosure market has slowed, with September 2013 the 36th straight month of year-over-year decreases in foreclosure activity, nearly 33% down from the end of 2012. The declines should continue with the overall housing recovery.

10. Home buying process less crazed
During the bust, investors bought as many as one out of every five homes in America, according to Redfin. The perfect storm of increased inventory, higher prices, and fewer foreclosures means that investors are stepping out of the buying market, giving way for regular folks. Add to that the loosening credit rules, and the housing buy market begins to look more normal.

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101 Responses to 10 Predictions for the New Year

  1. First, mf’er! Mel Watt will restart the sausage grinder, to predictably disastrous results.

  2. Here’s how Mel is going to restart the preplanned failure/bailout vehicle/financial garbage can, also known as Phony & Fraudy:

    http://www.zerohedge.com/contributed/2013-12-21/mel-watt-fannie-and-freddie-i-want-go-back-2008

    Well they blew up the chicken man in Philly last night,
    Now they blew up his house too.
    Down on the boardwalk they’re gettin’ ready for a fight,
    Gonna see what them racket boys can do.

    Now there’s trouble busin’ in from out of state,
    And the D.A. can’t get no relief.
    Gonna be a rumble out on the promenade,
    And the gamblin’ commissions hangin’ on by the skin of its teeth.

    Everything dies, baby that’s a fact,
    But maybe everything that dies, someday comes back.
    Put your makeup on, fix your hair up pretty,
    And meet me tonight in Atlantic City.

    Well I got a job and tried to put my money away,
    But I got debts that no honest man can pay.
    So I drew what I had from the Central Trust,
    And I bought us two tickets on that Coast City bus.

    Everything dies, baby that’s a fact
    But maybe everything that dies, someday comes back.
    Put your makeup on, fix your hair up pretty,
    And meet me tonight in Atlantic City.

    Now our luck may have died, and our love may be cold,
    But with you forever I’ll stay.
    We’re goin’ out where the sands turnin’ to gold,
    So put on your stockin’s cause the nights gettin’ cold.

    And everything dies, baby that’s a fact,
    But maybe everything that dies, someday comes back.

    Now I been lookin’ for a job. but it’s hard to find,
    Down here it’s just winners and losers, and don’t get caught on the wrong side of that line.
    Well I’m tired of comin’ out on the losin’ end,
    So honey, last night I met this guy, and I’m gonna do a little favor for him.

    Well I guess everything dies, baby that’s a fact
    But maybe everything that dies, someday comes back
    So fix your hair up nice, and fix yourself up pretty,
    And meet me tonight in Atlantic City.

  3. JJ says:

    I predict that Zillow stock will rise more than real estate in 2014.

    I predict Chris Christy will run for president and will be about as successful as Rex Ryan is in winning a superbowl with Jets

    I predict better than expected weather than super bowl.

    I predict Beyonces butt will get even bigger

  4. Fast Eddie says:

    Short supply drove rapid price increases at the beginning of 2013, but watch for that to change next year.

    Bring it on. Although, I probably shouldn’t hold my breath.

  5. cobbler says:

    Grim – stainless totes (from yesterday)

    Good place to buy used ones is Federal Equipment (fedequip.com). Also, look at the aluminum ones if your brew is compatible with the metal – they are about 50% cheaper.

  6. chicagofinance says:

    I predict that Corey Booker and Bob Menendez will be caught in a Washington hotel room together.

  7. Fast Eddie says:

    Despite the slower pace of price increases, home affordability will decline as mortgage rates rise. The real culprit is income levels, which aren’t keeping pace with the increases in housing costs.

    Salaries haven’t moved in over a decade. They never did keep pace with increases in housing costs which, by the way, continues to rise unabated. Those hanging on for dear life will need to do so for a long time or ultimately cave and limp away from the closing table sacrificing most of their life savings. They’re taking that train into Manhattan day after day just to prevent themselves from slipping below the surface.

  8. JJ says:

    Let’s go to the beach, each
    Let’s go get away
    They say, what they gonna say?
    Have a drink, clink, found the bud light
    Bad b-tches like me, is hard to come by
    The patron on, let’s go get it on
    The zone on, yes, I’m in the zone
    Is it two, three? Leave a good tip
    I’mma blow off my money and don’t give two sh-ts

    Fast Eddie says:
    December 24, 2013 at 9:27 am

    Despite the slower pace of price increases, home affordability will decline as mortgage rates rise. The real culprit is income levels, which aren’t keeping pace with the increases in housing costs.

    Salaries haven’t moved in over a decade. They never did keep pace with increases in housing costs which, by the way, continues to rise unabated. Those hanging on for dear life will need to do so for a long time or ultimately cave and limp away from the closing table sacrificing most of their life savings. They’re taking that train into Manhattan day after day just to prevent themselves from slipping below the surface.

  9. Fast Eddie says:

    In 2014, Zillow predicts, homeownership rates will fall below 65 percent for the first time since 1995.

    No asset has failed to revert to the mean since the beginning of time. I fully expect prices to slide another 10% in the next 2 to 3 years. Increased inventory, higher lending rates, rising property taxes and overall housing costs will send that message home.

  10. Fast Eddie says:

    Oh, and don’t forget when your company starts ejecting you from the healthcare bennies due to Oblamacare and your premiums and deductions explode.

  11. Bystander says:

    I predict that the Fed, three handed “economists”, political sc*m, housing mouths, and real-*hores will use any trick or lie to back into good numbers so sheeple can continue to be led off cliff. Merry Xmas one and all..

  12. AG says:

    I predict more all American guys will get slaughtered by Newark and Camden trash.

  13. Libturd at home says:

    “I predict Beyonces butt will get even bigger.”

    That’s the one prediction JJ made that can’t occur.

    In 2014, I predict:

    I’ll finally get my Fit EV.

    Gator will move to the Freedom Tower.

    Gator Jr., will score 80% of his team’s goals in the C flight.

    Gator Jr. II, will stop being such a bipolar PITA.

    Gary will still not buy a home.

    Grim will make a great whiskey, but his lack of marketing will be his venture’s undoing.

    ChiFi will move in with the Uberinspector after his wife finds out that his supposed attendance at those many so-called economic symposiums, have really been trips to Scores.

    JJ drops his losing investment in the Jets season tickets the year before Geno takes them to the Super Bowl.

    Anon becomes the 10,000th and last person to sign up for Obamacare.

    Clot, stops showing up here after he refuses to carry Grim’s unpopular whiskey in his ghetto juice store.

    Nom opens up a firework stand on Route 78.

    Joyce finally smiles (mainly after the Jets win the Super Bowl).

    Essex, with guitar in hand, joins the protests in Trenton over the forthcoming pension IOUs.

    Camden’s is paved over to make the world’s largest bike trail.

  14. I have a great way to sell grim’s whiskey: put fake Hennessey labels on it.

    Instant ghetto hit.

  15. I would sell grim’s whiskey even if he uses a Dodge truck radiator as a coil.

  16. Comrade Nom Deplume, a.k.a Captain Justice says:

    Merry Christmas to all, peace on earth, goodwill toward men (even anon).

  17. Comrade Nom Deplume, a.k.a Captain Justice says:

    [13] libturd,

    All the M-80s your kids could ever want.

  18. Comrade Nom Deplume, a.k.a Captain Justice says:

    Merry Xmas all. A friend posted this on FB and although it has an uber left bent, it is interesting and oft discussed here.

    http://www.resilience.org/stories/2006-12-04/closing-collapse-gap-ussr-was-better-prepared-collapse-us#

  19. Phoenix says:

    I predict that grim’s distillation will sell much better once he markets it as Dr. Grim’s Epilepsy Remedy (see attached picture), or something similar with a snake oil salesman type marketing due to Obamacare.
    http://www.strangecosmos.com/content/item/126666.html

  20. Ragnar says:

    Merry Christmas,
    Now enjoy “The Most Offensive Christmas Song Ever”, sung by Mr. Hankey, and inspired by Bill Clinton.
    http://www.youtube.com/watch?v=ZMXFkWK9tK8

  21. unbelievable says:

    I predict
    1. Grim the shill will still be shilling
    2. Grim will argue that houses were as unaffordable as 13 years ago and
    if you can’t afford it is because you failed to raise your income
    as everyone else did (including him)
    3. this blog will increase its irrelevancy

    http://www.zerohedge.com/news/2013-12-24/spot-paradox

  22. Bystander says:

    Rag,

    Pretty bad but I prefer John Valby aka Dr. Dirty. You can sing a long to his Christmas filth.

    http://www.youtube.com/watch?v=K9eP4ZLGyro

  23. Phoenix says:

    Golly Gee, and I thought this forum was for the refined, upscale, classy, sophisticated, grey poupon eating types, you know, with all the talk about Graydon and Ridgewood.
    John Valby and Mr Hankey…….

  24. Anon E. Moose says:

    ub [23];

    And a Merry Christmas to you too.

    Of course this blog is [now] less relevant. Grim was right about the bubble when people like you were camping outside to be 5th with an offer on open houses they haven’t even seen yet. The world has come to us, so we are no longer iconoclast. C’est la vie.

  25. grim says:

    Oh please, you are being much too complimentary if you think we’ve ever been relevant, or maybe just giving yourself too much credit.

    This blog is a real estate obsessed circle jerk, whether you are in favor of real estate, or not.

    The fact is that 99% of the population does not exhibit the same kind of obsessiveness we do when buying or selling. We are absolutely statistically irrelevant in the calculus.

  26. Fast Eddie says:

    Regarding the affordability link: http://www.zerohedge.com/news/2013-12-24/spot-paradox

    You don’t have to convince me that prices are at of whack, I’ve been screaming it from the hilltops but the lemmings seem to falter regardless.

    One of a million examples: Take a look at 48 ALPINE TERRACE in Hillsdale. This place needs work, the pictures do no justice. Nice house, nice property, right? The taxes are just under $20,000. Are you kidding me? I don’t care how many in the house are commuting to Manhattan, those taxes are a f.ucking crime. The house has been sale forever (I was in it a year ago) and will continue to drop to meet the tax theft obligation. It’s m0ronic and suicidal to buy this place at that price.

  27. Fast Eddie says:

    There was this real estate chicky who was sending me a link, updated every day for all listings in a specific area. About three months ago, the notices stopped so I figured I was just tossed from the list. This morning I get a link with the up-to-date listings.

    It’s the same houses I saw months ago. Let me repeat it: It’s the same houses I saw months ago. What does it mean? It means that the pocket listings and investors are working at the back door and the rest of us schlubs are fed dog sh1t on a platter and asked to pay the same price as the select inventory. F.uck you.

    All this sales activity gets recorded and one keeps asking oneself: “Why didn’t I see that listing? Where was this house listed?” It’s a scam and a ruse. This industry makes used car dealers look like Saints!

  28. grim says:

    28 – Can you please explain that graph to me? Because I believe it is graphing the price of new homes only. If it only includes new homes, I’m not sure what that graph is trying to say? New homes are getting more expensive relative to salaries? Of course they are, have you seen a house built in 2013 versus 1991? They aren’t even comparable.

    In 1991 – the average size of a new home (per census) was less than 2100 square feet, it is currently hovering just shy of 2500. That 20% increase isn’t in open space, it’s including more bedrooms, more bathrooms, additional living areas, all of which translate to much more expensive.

    Do you know what the price of copper, lumber, and asphalt were in 1991? Have you seen how much more complex heating, cooling, and electrical systems have become in 20 years? Electric? Fixtures? Kitchens? Appliances? Do you understand the impact that 20 years of increasingly complicated building code has had on the cost of construction? Take a look at a house built in the 1950s – you are probably lucky if you have 2 outlets in a bedroom. Look at a house built today – wouldn’t be surprised for you to find 6.

    If you were “designing a kitchen” in 1991 – Your choices would go like this – Which appliance set do you want? GE or Maytag – White or Almond? It doesn’t matter if you wanted to spend $6,000 on a 6 burner stove with a griddle, they didn’t exist, you got a 4 burner stove with oven under it. If you wanted to splurge, you could get the self cleaning version. What cabinets? You can have Oak or Formica, no choice in stain or door styles. Which formica would you like for your countertop? Floor? Which linoleum would you like?

    Appliances alone today cost as much as an entire kitchen (including labor) did in 1991, corrected for inflation. Top end appliances probably cost 3-4x.

    Average salary to new home price is irrelevant without controlling for improvements in the quality of the house, as well as the size.

    Sorry, but that’s a big load of steaming horse shit. What that graph tells me is that home buyers want bigger, more well appointed houses, and that they are willing to pay for it.

  29. grim says:

    29 – No – you just got autoexpired and she didn’t turn it back on. Sounds like she’s got some free time on her hands and just making a pass through her prospects list.

  30. Fast Eddie says:

    Forget about new houses. Although, I could only imagine the quality of materials these builders are using and the hammer and nail m0nkeys they hire to put it all together. Cut rate drywall, anyone? Particle board sheathing? Copper is being used less and less in favor of PEX and a 800 sq. ft. driveway of asphalt isn’t gonna cause bankruptcy.

    Regardless, in this area, the majority of transactions are existing houses, that’s where my “enthusiasm” is rooted. And the bottom line is salaries have stalled for over a decade, two incomes can barely keep people afloat and the ruse continues.

    We need another 10% drop in prices AT LEAST across the board to even consider anything that appears to be normal. Anything else is just f.ucking noise.

  31. Michael says:

    28- graph is based off new housing which means jack in our area.

  32. grim says:

    32 – Shocked – seems that every time you post a property, the accompanying statements always include commentary on the quality of fixtures and finishes. The formica countertops, the formica cabinets, the pink shell toilet, etc. And now what you are saying is that’s all really irrelevant? No difference between the JennAire double ovens and an Bisque Hotpoint?

    In 1970 only 66% of new homes built had central air. Today, it is near 90%.

    So what you are telling me is you don’t care if a house has central air, not a problem for you?

    In the 1970s, only 17% of all new homes built had 4 or more bedrooms. ONLY 17% … How does that compare to today?

  33. Fast Eddie says:

    Appliances alone today cost as much as an entire kitchen (including labor) did in 1991, corrected for inflation. Top end appliances probably cost 3-4x.

    You’re assuming that the quality of the floor the fancy appliances are sitting upon are on par with the appliance. And little does anyone know but half the materials used to build the house “fell off a truck” and the new owner gets to pay for them again. Labor costs? $10 an hour back in the 90s and $10 hour today. Complex building codes? Joe the builder knows Vinnie the inspector; it’s all good! :)

    But as Michael stated, it’s irrelevant in our area.

  34. Fast Eddie says:

    34 – Top end appliances aren’t always a must in new construction or renovation. Like anything else, there’s a trade off. New technology is allowing for a more efficient and cost effective infrastructure, is it not? Does the C/A unit of 25 years ago compare to one today in long term usage cost? What about flex duct or in room A/C instead of old fashioned window units clunking away?

    And if I buy an existing POS that looks like a snap shot of the 70s, do I need to put a JennAire in or can I compromise here?

    It’s amazing what some Fantastic, a coat of paint and new interior doors can do for a place as well. That’s where a lot of my frustration and potential buyers frustrations stem. You want top dollar for this place and you did NOTHING in 30 years? They can f.uck off.

  35. Michael says:

    28- Do you understand why 20,000 in taxes looks expensive to you? Inflation!!!! You keep think it’s the 90’s and taxes should be 7,000 on a valuable property. I keep banging this on the head but it does not seem to be sinking in for some people on this board. As for everything becoming more expensive, it’s inflation. The govt printed up a lot of money to basically erase their debts and the debts of the financial sector. This causes inflation in goods first. What will be following the rise in the price of goods is the rise in the cost of service (aka wage inflation). This wage inflation will be coming in the next few years. It’s already starting with calls to raise minimum wage to the 10 dollar level. That’s a huge % increase. Esp, if you look back in 1999 and I was in the 5 range. That’s almost 100% increase. You have to understand that inflation is the invincible theft committed by govt or people in control of the monetary system. 90% of the people walking around this planet don’t have the slightest idea of what inflation really is and what it does. If you understand it, you will learn how to take advantage of it. One way to take advantage of it, take out as large of a loan as possible right now and buy a hard asset like real estate in a good location. Your loan will mostly be paid for by robbing the people who do not hold their money in hard assets. Their paper money will get robbed through inflation by increasing the amounts of the paper money it takes to buy that hard asset, hence devaluing your large loan and increasing your hard asset cost. That’s why it’s really a dumb move to be complaining about real estate prices in one of the most valuable areas for real estate in the world. Go get a loan and stop worrying about the price. We don’t live in Kansas, where the land holds no value whatsoever. Your loan will be beat up by inflation, leaving a big smile on your face. Remember, the people making 100,000 will be making 200,000 in ten years due to inflation. Those taxes have already been hit by inflation, they won’t rise again till the next cycle. Why? Taxes need to wait for wage inflation to kick in, so taxes won’t be rising quickly till at least 2021. Understand inflation and take advantage, or be left in the dark to be taken advantage of.

  36. Michael says:

    38- Those taxes, meaning property taxes. Also, sorry for all the grammatical errors, was not proofreading at all.

  37. Michael says:

    32- Keep waiting for a 10% price drop. You just don’t get it, housing is never going to be this low again…ever. Why….inflation. It’s like a guy in the 80’s waiting for those 60,000 dollar houses he remembers from his days in the 60’s. Not happening ever!!! Unless, they restart the monetary system.

    We had a correction in housing prices already. Prices were going down or stayed at the same price for 4 to 5 years. That’s a long time for no gains for a hard asset that is an inflation hedge. Get in now or complain about prices being at the minimum 50% higher in 10 years.

  38. Michael says:

    “A game as old as Jewish banking. Swap pieces of paper for hard assets, then make the pieces of paper worthless, while keeping the hard assets. Inflation is one of the oldest and most successful forms of theft, which is why it is the policy of central banks in the developed world. In the Islamic world, usury is forbidden, which makes it difficult for the the central bank to steal by stealth. Islamic governments are most honest about their theft from citizens.”

  39. Michael says:

    In 1968 a gallon of gas cost 34 cents. Avg movie ticket was 1.31. A lough of bread cost .22 cents. Inflation is a b-tch.

  40. Michael says:

    36-Eddie, in those desirable locations you are looking at, if the houses were updated to 2013 standards, the houses you are looking at would not be in your price range.

  41. Street Justice says:

    No, it’s inequitable distribution of state school funding. I’m willing to bet the rate of tax increases in suburban NJ towns outpaces inflation.

    37.Michael says:
    December 26, 2013 at 9:45 am
    28- Do you understand why 20,000 in taxes looks expensive to you? Inflation!!!!

  42. Fast Eddie says:

    Michael,

    Your mantra is all satire and drama.

  43. Fast Eddie says:

    No, it’s inequitable distribution of state school funding. I’m willing to bet the rate of tax increases in suburban NJ towns outpaces inflation.

    By a country mile. Yet, for all these skyrocketing costs, it’s done on flat salaries. We had one salary, then two salaries in the household. We’re at the tipping point. What’s next? Graydon’s mommy changing her name to Mitzi and walking Ridgewood Avenue.

  44. Fast Eddie says:

    Michael [42],

    You know my financial status?

  45. grim says:

    45 – Spreading the income and wealth would be beneficial for NJ from a Federal taxation perspective.

    We get back what, $0.60 for every $1.00 we send to Washington? Shame that it took a disaster to get a few dollars back from Washington, and even then it wasn’t without a fight. Perhaps if Rand and the rest of his state would stop shaking the tin cup and start pulling their own weight, we’d have a little more in our pockets.

  46. Fast Eddie says:

    Spreading the wealth would be beneficial for NJ from a Federal taxation perspective.

    Eliminate government as much as possible. That would be a start.

  47. Bystander says:

    Michael gets all of his economics knowledge from the book “Dick and Jane buy a house”

  48. Michael says:

    43- property taxes are not tied to inflation on a yearly basis. Property taxes have barely risen since 2011 as compared to the rise in property taxes from 1999 to 2011. Obviously, property taxes are attached to the price of real estate. It’s no coincidence the huge property tax increases came at a time when the housing market was in a bubble. The point of my comment blaming inflation is still on pt based on the idea that house prices are tied to inflation. Meaning long term rises in property taxes are tied to house prices, which are tied to inflation long term. Bubbles come and go. You can’t complain that taxes are through the roof when property values just went through the roof. Obviously the prices come back down, causing property taxes to not rise as quickly or even to be lowered in an appeal. That’s where we are right now. Blame what you want for higher property taxes, but the main reason for the large increase from 99- to 2010 was property values. If the houses didn’t go up in value, the taxes would not have either. Yes, how the money spent is another topic, but if there were no huge increases in property values, they could not increase the property taxes.

  49. Bystander says:

    Michael, do you really believe that inflation caused homes prices to rise as much as 200% in 10 years (’96-2006). The gross and unprecedented expansion of debt will have major consequences and benign inflation is not it. You have millions of Americans hanging by a thread. Price inflation does immediately equate to wage inflation because you need huge economic growth to creat competition for labor. Now, tell us all where this huge US GDP growth is coming fron in next 10 years.

  50. Fast Eddie says:

    Bystander,

    He’s a cheerleader because he’s probably a member of the walking dead party. It’s painfully obvious that any transaction that occurs in our area without the advantage of an inside connection is nothing more than a bailout on a one-to-one basis.

  51. Bystander says:

    50 Mike,

    You are the biggest fool on this site. Taxes have barely risen in 3 years? I bet they are up 10% for most folks and do not include the games played with sewer fees being charged separately now and reduction in services. My town has trash once a week now and no recycling.

  52. Michael says:

    49- instead of poking fun at me, why don’t you try to understand inflation and how it affects you. You guys complain being robbed by taxes, when you actually get something from your taxes. You guys never complain about being robbed by inflation. Inflation gives you nothing, unless, as I stated earlier, you get loans and buy a hard asset with those loans. Only then, do you get something out of inflation with the assistance in destroying your debt value.

    It’s like some of my economically challenged friends. They think by winning the lottery, they are set for life. I try to explain to them that a pick 6 lottery winner winning 200,000 in 1970 thought he was set too. It’s even funnier with the win for life gimmick. Eventually a 1,000 dollars a week will be worth jack.

    I try to explain to these friends that it is much easier to get rich than stay rich. It’s a constant battle with inflation. Far more challenging to stay rich. You have to somehow find investments that keep up with inflation and at the same time don’t lose total value in a bust. Big time challenge!!! Why do you think there are so few wealthy families that are “old money”. It’s no coincidence. It’s also no coincidence that so many lottery winners, musicians, actors, and athletes that make it big end up with nothing. They have no idea what inflation is and how to go to war with inflation. Inflation kicks their ass almost every time.

  53. Fast Eddie says:

    They have no idea what inflation is and how to go to war with inflation.

    Equities, over time, dollar cost average and automatic re-invest. Case closed.

  54. grim says:

    I’d caution about using the early to mid 90s as the starting point for any analysis on home price appreciation in NJ, especially one that uses the rise from that point to argue for overvaluation. I’d argue that home prices were significantly undervalued at that point in time, and to some extent, some of the 200% rise you point to is recovery from the 80s bubble bursting.

    Frankly, early to mid 90s was the best time in the last 30 years (or more) to buy a house in NJ.

  55. Street Justice says:

    The problem with your posts is that they are not a thoughtful analysis of facts or data. If reading this blog has taught me one thing, its that you should always question generally accepted “assumptions”.

    So, dig up some facts, post the link here, and tell us your interpretation of them. Otherwise, it just sounds like you are blurting out a bunch of bullsh1t.

    54.Michael says:
    December 26, 2013 at 11:29 am
    49- instead of poking fun at me, why don’t you try to understand inflation and how it affects you

  56. Michael says:

    51- I’m the idiot? Housing is an inflation hedge LONG TERM. As I stated in my post (50), bubbles also affect pricing, which is why I state LONG TERM. You can’t just look at the pricing of 10 years, esp in a bubble, and draw conclusions on what drives pricing increases.

    Obviously, there are other tangibles, like demand of location. Hence, why I say buying property in this area is great. You get the value increase of people fighting to buy for that location, which is why this area is top dollar for real estate. Do you hear that fast Eddie? I’m not advocating that you buy any real estate that is not within an hour drive of a coast and major metropolitan city. Those are the money zones for real estate. Get those two requirements and you are good to go in any part of our country.

  57. joyce says:

    58
    Mike,

    Show me an example (include a link to a google spreadsheet if you can) that shows the total return adjusted for inflation of a RE purchase once you account for everything (PITI, maintenance, updates, depreciation, transaction costs, etc)?

    What do you use to measure inflation?

  58. Michael says:

    55- Not that easy buddy. Easy in theory but difficult to apply. Financial advisors always leave out the part of busts that turn those equities into worthless piles of crap. Yes, long term avg great, but that’s if you survive the busts.

    “They have no idea what inflation is and how to go to war with inflation.

    Equities, over time, dollar cost average and automatic re-invest. Case closed.”

  59. xolepa says:

    (59) No graph needed. Example, I purchased a multi unit property in 90’s with essentially 100% borrowed money. Average positive cash flow is now over $2k monthly. There is no monetary return on your own residence. Some may argue that cash-out refinances count. On the other hand, I can’t begin to put a value on how my own home has worked for myself and my family in twenty+ years. My guess: priceless.

  60. Michael says:

    55- In 2008, you are telling me people would advocate stocks that were turning 65 at the time? They got wiped out when they needed it most. Plus, throw in the fact that the only reason these people didn’t lose it all was due to a govt bailout. Anyone that owns a significant amount of their wealth in equities and complains about welfare or property taxes is a hypocrite. They got saved by the govt and their printing press.

  61. grim says:

    59 – Yes, but don’t forget you need to offset against imputed (or actual) rent.

  62. joyce says:

    61
    xolepa,
    1) So what’s the average yearly return? Sounds like you bought at a good time; were you always cash flow positive?
    2) I was mainly referring to primary residences since the majority don’t own any investment/second homes.

  63. grim says:

    Plenty of immigrant mini-mogul landlords across North Jersey who are racking in small fortunes in rent on a monthly basis, all with free & clear ownership.

    Joke in the local polish community is your first house needs to be a 3 family, then when you upgrade, you don’t sell the first house, you just buy a 2 family. After a few years, you can afford to live in a 1 family – but only because you’ve got 5 rents coming in, and even then a one family was looked at as extravagant (so most just built the huge mcmansion 2 families you see across north jersey).

    Oh yeah, and your mortgage lender was the old babci next door.

  64. Michael says:

    59- total return adjusted for inflation? Why would I want to do that? It’s a hedge for inflation. Inflation is why I put my money in housing.

    Also, if it’s a rental property all those costs don’t keep you from making a nice profit. Landlords in this area kill it. You money from rent collected and also selling high after buying low(which has nothing to do with inflation and everything to do with supply and demand/location).

  65. Fast Eddie says:

    Michael 60 & 62,

    It’s not that easy? Are those numbers in my statement a mirage? I started years ago, not in 2008 or 2013. You’re going to put the linear measurement of a house over equities, long term? Those same equities that compound over time? You’re crazy.

  66. joyce says:

    So, you’re telling me the return is zero?

    66.Michael says:
    December 26, 2013 at 12:10 pm
    59- total return adjusted for inflation? Why would I want to do that? It’s a hedge for inflation. Inflation is why I put my money in housing.

  67. Michael says:

    67- You act like it’s easy to survive stock market crashes. You forgot about the part where Uncle Sam saved your ass in 2008. Thank the govt you hate so much for bailing you out. That bust should have taken out the financial sector and started it over again. Say it with me, thank you Uncle Sam.

    If it was as easy as you say, no wealthy individual would ever go broke. Just have to put your money in an s&p 500 index fund, contribute to it, and close your eyes…right?

  68. Michael says:

    68- I’m saying why do I care about the cost adjusted for inflation when it’s a vehicle to hedge inflation. What is so hard to understand?

  69. joyce says:

    I know you’re not paying cash for your investment properties, based on your previous inane advice. I’ll eat my words if I’m wrong, but outside of Newark, etc… you’re buying a house with little to nothing down and renting it out cash flow positive from day one?

    66.Michael says:
    December 26, 2013 at 12:10 pm
    Also, if it’s a rental property all those costs don’t keep you from making a nice profit. Landlords in this area kill it. You money from rent collected and also selling high after buying low(which has nothing to do with inflation and everything to do with supply and demand/location).

  70. joyce says:

    When I invest money, I can about the return. Everyone but you and stupid people do, that’s why it’s hard to understand.

    70.Michael says:
    December 26, 2013 at 12:20 pm
    68- I’m saying why do I care about the cost adjusted for inflation when it’s a vehicle to hedge inflation. What is so hard to understand?

  71. Fast Eddie says:

    Just have to put your money in an s&p 500 index fund, contribute to it, and close your eyes…right?

    Absolutely! Now you’re getting it!

  72. joyce says:

    can = care

  73. Bystander says:

    Grim,

    We all know that mid-90s had a game changer with rise of internet, business/personal software and hardware, cell phone and cable..list goes on. This rapid job growth led to huge demand for workers and salary growth. Yes, homes were under valued bc we now look back now…but since tech bubble burst and now housing bubble burst, govt. has made sure no true price discovery occurred. Every trick and bailout was used so I would not use historical stats to prove anythong today is BAU.

  74. Michael says:

    71- Obviously can’t get a loan for zero down on an income property. Need sometimes 30% down. The banks know it’s a cash machine. Not going to make it easy for you because that will create another bubble with everyone rushing to get in on it.

    After clearing closing costs, every single rent check you receive is profit. You might not see it until you sell the house (if you own mortgage) but it’s there. Someone is paying the mortgage, taxes, and maintenance costs and if you are a landlord, it’s not you.

  75. Fast Eddie says:

    What if I sell my house at the warped prices realized, rent and invest the equity in stocks? I could earn more than twice the 3% annual appreciation per year, minus the overhead. Whadda ya think, Michael?

  76. Michael says:

    72- I’m saying, why do I care about the cost adjusted for inflation? You are the idiot. All I care about is that the house cost the same or more when it comes time to sell it. Otherwise, it’s not an inflation hedge. You don’t have to sell in times of low pricing after a bubble (why now is a great time to buy and why there is no inventory). Successful landlords hold long term. Do you think the polish landlords grim is talking about care about the adjusted cost for inflation?

  77. Fast Eddie says:

    Successful landlords investors hold long term.

  78. Bystander says:

    #65,

    I know plenty of these types especially Indians in Edison. You have to be connected to immigrant community to be legit. You need plenty of off the plane ruses to pay your crazy rents. They realize soon that knowing family from India means nothing in good ole USA. Also try being white and doing same, you will get hosed time and time again in that area.

  79. Michael says:

    77- Once again you leave out busts. If busts never happened, I would agree with you. History shows that they happen. Not often but it does happen. The stock market is a volatile animal. It’s a huge gamble. Real estate in a good location is a hard asset. Might not keep up with the returns of the s&p over time but it sure as hell won’t leave you with nothing. Wall Street was built for insiders while sacrificing the majority. I’ll take income properties in a good location any day over stocks.

    Problem for the 50 million dollar club with real estate, how many properties can you keep track of and take care of in terms of maintenance. They have no choice but to go into the equities market to protect their wealth. If someone just won 6 million, they would be much better off as a landlord than playing with the market. Once you accrue massive wealth, no choice but to head to the market.

  80. Michael says:

    81- btw, when I talk about real estate investing, I’m talking about income properties. In case this was not clear.

  81. grim says:

    Hey where to stay around Key West (or in the keys in general)? Might head down in Feb.

  82. Michael says:

    77- For example, some guys throw out stats like the following. The DJIA increased 100% in the last 6 years. Well not really. If you were in the market pre-2008 crash, you are just finally starting to get your money back and some. It really was not an increase unless you started investing right after the crash. Like I said, it’s all about surviving the crashes, which many do not.

  83. Fast Eddie says:

    84 – Compounding interest, dividend reinvestment and splits. It’s not linear, it’s exponential. Whether you start today or 20 years ago, forget about the tops, bottoms and noise.

  84. grim says:

    Go long bourbon, I can hook you up.

  85. Hughesrep says:

    83

    Wife and I liked this place when we went two years ago. Walk to downtown and have the use of the beach at the hotel next door.

    http://www.santamariasuites.com

  86. Richard says:

    Jumbo ARM rates are up hard the last few weeks. Wells Fargo jumbo 5y was 2.25% early Dec, today its 3.125%. I think these were most popular mortgage in Manhattan, it’s going to make a big difference I think.

  87. Njescapee says:

    grim, tons of choices in Key West. Rent a condo @ the Truman Annex. Ocean Key Resort is really nice. The Reach Resort next to the Santa Maria is very nice as we’ll. Btw we now have our new Key West rum distillery.

  88. ccb223 says:

    Grim – lots of little houses (some w/private pools, etc.) you can rent in Key West…if you want a more economic option stay at the Southernmost Inn…affordable, nice and great location.

    The key is to stay walking distance from Duval street. You should also check out the Hemingway House/museum while you are there…very neat. Got to do at least 1 thing non-debaucherous.

  89. The Original NJ ExPat, cusp of doom says:

    I can’t believe John Valby is still at it. This was one of his classic limericks that I first heard circa 1979:

    http://www.anvari.org/shortjoke/Limericks_-_Dirty/67_there-once-was-a-lady-named-dot-who-lived-off-of-pigshit-and-snot.html

  90. chicagofinance says:

    While you deserve every dastardly thing I can conjure, I will bite my tongue and say that your approach throws caution to the wind. Where your strategy falls short is the fundamental ignorance of risk. If this issue is not blatantly obvious to you, then you should spend more time reading here and less time lecturing everyone about your infallible command of economic theory.

    Michael says:

    December 26, 2013 at 12:31 pm

    71- Obviously can’t get a loan for zero down on an income property. Need sometimes 30% down. The banks know it’s a cash machine. Not going to make it easy for you because that will create another bubble with everyone rushing to get in on it.

    After clearing closing costs, every single rent check you receive is profit. You might not see it until you sell the house (if you own mortgage) but it’s there. Someone is paying the mortgage, taxes, and maintenance costs and if you are a landlord, it’s not you.

  91. Comrade Nom Deplume, a.k.a Captain Justice says:

    Oh, NOW Holder’s DoJ decides that the knockout game can be a hate crime.

    http://www.cnn.com/2013/12/26/justice/texas-knockout-charge/index.html?hpt=hp_t2

    Michael, cobbler, anon, you are all invited to defend this latest DOJ double standard.

  92. cobbler says:

    Nom – I don’t understand why you think that I am a bleeding heart liberal or something? On a 4-sector scale, I stand as a socially moderate populist… I can’t stand libertarian ideology, but this doesn’t make me a liberal… As for the knockout game – I don’t think it is a hate crime unless proven otherwise for a particular case – but I’d like to see the charges of attempted murder every time the perps are caught.

  93. Njescapee says:

    Grim, check out Lloyd’s tropical bike tour if you make it down to Key West. It was a pretty cool way to see the island.

  94. Njescapee says:

    Grim, check out Lloyd’s tropical bike tour if you make it down to Key West. It was a pretty cool way to see the island.

  95. LoveNJ says:

    It was pure entertainment now, Fast Eddie, Michael, Joyce… started calling names.
    Calm down.

    I found this site since 2006, after moving to NJ from FL. Three people I like to read more, JJ, Grim and Chicagofinance.
    I understand JJ 50% of time, enjoying his stories. The other 50% of time, he was too techincal. So does Chicagofinance 90% of the time. But It seems to me they know their stuff. I may well just follow what they say and verify.
    I like Grim’s comments, not as funny as JJ or fiery as Fast Eddie (every house is a over priced POS, which should be 50% off). Grim is plain and objective. I bought my house at the same time as Grim, just I too sense the market was about to turn the corner. There is still risk ahead, but there is nother risk free.

    Happy Holiday.

  96. Happy Renter says:

    [96] “As for the knockout game – I don’t think it is a hate crime unless proven otherwise for a particular case – but I’d like to see the charges of attempted murder every time the perps are caught.”

    Translation: As for the knockout game — I don’t think it is a hate crime unless it’s a white person attacking a black person.

    We’re all equal, but some are more equal than others, right?

  97. cobbler says:

    happy renter:

    The answer is no. If the prosecution wants to charge someone for a hate crime, whatever the color, they need to produce credible evidence that hate was a principal driver of the attack – which for the knockout game probably is not easy (and not even true) in most cases. To me, purely criminal charge of attempted murder (which is much stronger than the aggravated assault usually charged) looks like much more robust deterrent.

  98. joyce says:

    cobbler/comrade/happy

    I think time would be better spent debating why we have ‘hate crimes’ at all.

    cobbler,

    I like most of libertarian ideology. What can you not stand about it? (I only ask this next question because you brought up libertarianism while directly respond to Comrade… Do you consider him a libertarian?)

  99. AG says:

    Re: Knockout game.

    I will be at Walmart tomorrow at 9am shopping with my eat better today card. Yes, I am a fat bastard, with a busted knee, and my love handles sag over the jeans I wore when I was 25. That being said, I am a patriot. So for the love of God knock me out and crush my skull with my motorized Walmart skooter.

    I did my duty to God and country. I ate myself to death.

    Happy New Year,

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