US real estate
- Thread starter tyrant
- Start date
Something being a 'good buy' does not mean prices should go back up. Prices are determined by supply and demand, not by value alone. Currently, US real estate is oversupplied, due to the huge overbuilding that occurred during the boom. So, prices are likely to continue falling until that supply gets worked off and comes back into balance with demand.
Positive cashflow is nice, but there are many superior alternatives to real estate. For example, corporate bonds yield 4-7% and have no expenses and require no work to manage. Stocks currently are on an earnings yield of around 7% and are also a passive investment. Real estate costs are typically about 40% of the gross yield, meaning that at 6-8% their net yield is around 3.5-5%.
Which would you prefer, passive investments in a diversified index basket, yielding 4-7%, or a highly concentrated, risky investment, requiring a lot of work to manage, that yields 3.5-5%?
Housing in the US will be dead for another 3-5 years.
I will not begin looking at it as an investment for quite some time.
There are better returns elsewhere for sure.
I will not begin looking at it as an investment for quite some time.
There are better returns elsewhere for sure.
just like any bubble, we aren't done going down until we make a new long term low. i won't think about buying a house as an investment until we test 62% home ownership. i might buy a house to live in, fully expecting to lose another 50% on it (if my wife forces me to buy a house)- but definitely i wouldn't expect to make any money on an investment property until the millions of homes owned by banks and soon to be owned by banks are washed out in a high volume sell-off.
US Median income is $24K, based on your formula the median house price should be $68K. Outside of major markets (NY, Chicago) that seems to be about the going rate for a 1 or 2 br condo.