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Banks, real estate going up in price forever?

by Matthew North
14 replies
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I was thinking about this the other day. The house I live in now is worth over a million dollars, when the owner bought it the house was worth half that. Most houses in the city where I live are at least a million dollars to buy, but this wasn't the case even ten years ago, so property prices do indeed seem to go up over time here and everywhere else that people want to live.

The city is growing, with more jobs being added each year, so it makes sense that people want to move to my city. As time goes on, more people move, and more jobs open, so the demand for homes goes up. That's fine, I can accept that.

But do property prices keep going up forever? When does it end? At some point in the future would a 4 bedroom house be worth 5 million, 10 million, or 20 million dollars in my area? In theory you could sell property at whatever price you wanted provided there is a greater fool ready to pay for it. And maybe houses were in fact undervalued back when it was built, considering it's an Alpha city in the relatively early stages of development, yet common sense tells me there must be some form of ceiling on house prices in the future.

I guess I'm just pondering/questioning the notion of "safe as houses," which has always seemed suspicious to me.
  • Profile picture of the author Kay King
    Where does it end? Somewhere in the future with a natural disaster or an economic downturn...or the area may lose it's financial base or location simply lose favor with the buying public. It's all conjecture and there are no promises.

    Allen Greenspan once stated 'real estate cannot go down' - yeah, right. The housing bubble burst in the US in 2007-8...and, yes, it CAN and DOES go down.

    Don't forget when you are talking decades or so - often as prices go up - the currency value may be going down at the same time. So many variables.

    Best advice I' ve ever heard about buying property may be from a broker in Atlanta who said 'buy land where the rental storage units are building'. They have some of the best 'scouts' in real estate.
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  • Profile picture of the author Matthew Stanley
    Don't forget when you are talking decades or so - often as prices go up - the currency value may be going down at the same time. So many variables.
    Completely. Gets even more complicated when considering whether to denominate value in terms of a dollar that may in fact be set to depreciate (as the Gold bugs and Bitcoin bugs out there forecast)

    I'm very keen to monitor this trend as well ... perhaps there will be reversion to the mean, but on the other hand, with remote work gaining steam, and reports like this one from Zillow showing a real exodus from places like San Francisco, will be interesting to see whether Alpha Cities get re-defined/redistributed; whether smaller places with more tax leniency grow in popularity; etc...

    Zillow read should you be interested: http://zillow.com/research/2020-urb-...-report-27712/
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    • Profile picture of the author Odahh
      Originally Posted by Matthew Stanley View Post

      Completely. Gets even more complicated when considering whether to denominate value in terms of a dollar that may in fact be set to depreciate (as the Gold bugs and Bitcoin bugs out there forecast)

      I'm very keen to monitor this trend as well ... perhaps there will be reversion to the mean, but on the other hand, with remote work gaining steam, and reports like this one from Zillow showing a real exodus from places like San Francisco, will be interesting to see whether Alpha Cities get re-defined/redistributed; whether smaller places with more tax leniency grow in popularity; etc...

      Zillow read should you be interested: http://zillow.com/research/2020-urb-...-report-27712/
      i am so glad you started posting on this forum...and this post was the first time i heard or saw the alpha citee before it was flyover and non flyover country....
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  • Profile picture of the author AdmanMrWoo
    NOTE: Every expansion of easy credit and easy money...
    is always followed by an equal contraction of money and credit.



    This is perhaps the most important subject to ponder for warriors.



    Every business is effected by easy money and easy credit.



    Credit is already contracting. One warrior forum member told me, he had $20,000 line of credit on his cards. He understood from me that credit cannot expand forever. So in March he saw things were going to change. So, he started using his cards to stock up on computer back up systems for his business. When he reached $4,000 on his card, his bank called him and said THAT was his new limit.



    NOTE: Some banks, like Wells Fargo is no longer making home loans.

    Wake up. Credit is contracting.



    Prepare your business for such things.
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  • Profile picture of the author whateverpedia
    Originally Posted by Matthew North View Post

    so property prices do indeed seem to go up over time here and everywhere else that people want to live.
    Only if you measure it in a straight line from a point several/many years ago to today.

    If you use the same type of straight line measurement to the stockmarket (any of them) you'll find that stocks and shares too give the appearance of always going up.

    In fact you'll find that the "straight line" goes up considerably more for stocks and shares than it does for real estate.

    The real reason for the volatility on the stockmarket is that shares in any well known company are actively traded, in many case hundreds of times every day. Each time a company's shares are traded, a new valuation is attached to those shares. Real estate usually gets re-valued on an annual (or longer) basis..

    If a piece of real estate was as actively traded as shares, the prices swings would be pretty astronomical. People buy real estate as an investment with at least a 10 year time frame in mind. If you applied the same mentality to shares, you'll generally do better than you will with real estate.
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    • Profile picture of the author Matthew Stanley
      Interesting way to think about it. Then again, if folks preferred the liquidity of stocks (compared to physical real estate) but also favor Real Estate as a category, REITs could be something to consider, too ..
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      • Profile picture of the author whateverpedia
        Originally Posted by Matthew Stanley View Post

        Interesting way to think about it. Then again, if folks preferred the liquidity of stocks (compared to physical real estate) but also favor Real Estate as a category, REITs could be something to consider, too ..
        Indeed. However REITs function more as stocks than they do as a true property investment. For small investors, ie those with limited access to capital, REITs are the best way of investing in property. Not only don't you need much money to get started, you also gain access to a diversified portfolio of properties, and property types (Commercial, residential, industrial, retail, etc.).

        Not only do you get that diversification across property types, you can also get access to a range of locations. In Australia there a number of REITs that are not only Australia wide, but also global in nature. That gives you access to real estate in places you may never have even heard of, or at least will never step foot in yourself.
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    • Profile picture of the author Matthew North
      Originally Posted by whateverpedia View Post

      Only if you measure it in a straight line from a point several/many years ago to today.

      If you use the same type of straight line measurement to the stockmarket (any of them) you'll find that stocks and shares too give the appearance of always going up.

      In fact you'll find that the "straight line" goes up considerably more for stocks and shares than it does for real estate.
      I'm a fan of investing in indexes for this reason rather than single assets.

      The only single assets I own aside from cash and index funds is bitcoin - yet bitcoin (for now) correlates with the movement of the crypto market anyway with only a few notable exceptions. Note that the reason why altcoins go down with btc is because btc is the primary trading pair for most coins, especially those with lower caps.

      Then again if I was like some of my friends who are the DIY type then maybe a house would become a more attractive option.
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      • Profile picture of the author Matthew Stanley
        Interesting. I monitor BTC myself and always curious where others who've invested in it stand on other assets/broader portfolio. Your strategy seems a good way to capture what could be huge upside of Bitcoin while also maintaining exposure to the broader stock market.
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  • Profile picture of the author Matthew Stanley
    Not only don't you need much money to get started, you also gain access to a diversified portfolio of properties, and property types (Commercial, residential, industrial, retail, etc.).
    Totally. Add to that that many of them pay solid dividends, and imo REITs can serve as a good way to dip one's toes into the real estate category while generating some recurring income at the same time
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  • Profile picture of the author Pablowich
    It's very interesting to look at this whole picture. I watched a lot of interviews where leading businessmen from all over the world believe that real estate is becoming unprofitable for their use. Like, at any time you can move to another quarter, city, or country. But they buy it and rent it out. It turns out a vicious circle, It is not profitable, but we will buy it)
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  • Profile picture of the author hardraysnight
    i would be most worried about the rent keeping pace with increasing real estate prices
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  • Profile picture of the author tagiscom
    Originally Posted by Matthew North View Post

    I was thinking about this the other day. The house I live in now is worth over a million dollars, when the owner bought it the house was worth half that. Most houses in the city where I live are at least a million dollars to buy, but this wasn't the case even ten years ago, so property prices do indeed seem to go up over time here and everywhere else that people want to live.

    I guess I'm just pondering/questioning the notion of "safe as houses," which has always seemed suspicious to me.
    As others have said you invest into property and forget about it for 10 years then hope it has gone up.

    Or it all boils down to ratio's, or put 10k into property, (a deposit is probably all that will do) and hope that it pays back in 10 years time. Or put 10k into the stockmarket, and make a million within 5 years then go buy a mansion and invest the 100k that is left to live off?

    Property can go up, but it doesn't appear to have the compounding affect. Or the stockmarket you make 2k and invest that then make a profit on the 10k, then the 2k as well, which makes you 14k all up which you reinvest then it makes a bigger profit on the 14k.

    Originally Posted by Matthew Stanley View Post

    Interesting. I monitor BTC myself and always curious where others who've invested in it stand on other assets/broader portfolio. Your strategy seems a good way to capture what could be huge upside of Bitcoin while also maintaining exposure to the broader stock market.
    Pretty easy for me, l get into one stock only, and watch it like a hawk!

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  • Profile picture of the author roomzasia
    In a developing country, the property price will never go down, it may be stagnant for years but will still go up at the end. For developed countries, it could be opposite like Japan, Germany etc.
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