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anon_0k9zlfz6lz9oy
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Down to 2009 levels. We go over that in the video which its clear no one watched lol
Best post in thread. I'm retired and our house is paid for and we have lots of $$ invested (fairly conservatively) for retirement, but not in real estate.
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anon_0k9zlfz6lz9oy
Guest
Why not in real estate? Since 1870 at 75% LTV (25% down payment) real estate has produced 6X the stock market. https://www.frbsf.org/economic-research/wp-content/uploads/sites/4/wp2017-25.pdf
Brookfield Bets on Single-Family Rentals With $300 Million Fund
The company acquired a controlling stake in single-family landlord Conrex, which operates in Midwestern and Southeastern U.S.
www.wealthmanagement.com
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anon_0k9zlfz6lz9oy
Guest
Right. And conrex buys and develops rental communities by the hundreds.Brookfield Bets on Single-Family Rentals With $300 Million Fund
The company acquired a controlling stake in single-family landlord Conrex, which operates in Midwestern and Southeastern U.S.
i get that theres this conspiracy theory that blackrock and wall street is gonna be everyones landlords and theyre buying jane and john doe’s house but its simply not true
I‘m guessing most if not all of the participants in this thread are knowledgeable enough to know you can’t compare levered and unlevered returns. Rather, you should compare asset level, unlevered rates of return. Equating the two (levered and unlevered) is a disingenuous sales tactic.
And I’m also sure participants in this thread realize the liquidity difference between owning equities and real estate.
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anon_0k9zlfz6lz9oy
Guest
1) if the most common by a mile investment purchase leverage is 75% LTV, why wouldnt we use that? Even at just 50% leverage (low leverage) real estate does about 3X the stock market from 1870-2015
2) if you wanna go unlevered then compounded from 1870-2015 returns for real estate are 6.61%, equites just 4.64%.
i get that stock market people and financial advisors hate this chart and these facts but theyre the truth. Its no secret why real estate creates more millionaires than any asset class on earth
Because he probably doesn't want to be a landlord. We owned two townhouses and it got to be a huge pain in the ass. We sold one and now have our niece living in the other. When she leaves, we'll sell that one two. We have full time jobs and taking on the landlord aspect as another sucked balls and we had good tenets, sh*t just breaks.
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anon_0k9zlfz6lz9oy
Guest
Certainly doesn't look like 6X to me, but I'm sure you'll try to convince me otherwise, although that's going to be tough, given that the excerpt below and the accompanying graphic seem to make it pretty clear that historical rates of rreturn on housing and equities have been fairly similar, with equities doing a bit better since WWII.
Major findings.
We summarize our four main findings as follows. 1. On risky returns, rrisky Until this paper, we have had no way to know rates of return on all risky assets in the long run. Research could only focus on the available data on equity markets (Campbell, 2003; Mehra and Prescott, 1985). We uncover several new stylized facts. In terms of total returns, residential real estate and equities have shown very similar and high real total gains, on average about 7% per year. Housing outperformed equity before WW2. Since WW2, equities have outperformed housing on average, but only at the cost of much higher volatility and higher synchronicity with the business cycle. The observation that housing returns are similar to equity returns, yet considerably less volatile, is puzzling. Diversification with real estate is admittedly harder than with equities. Aggregate numbers do obscure this fact although accounting for variability in house prices at the local level still appears to leave a great deal of this housing puzzle unresolved.
1. Leverage introduces risk beyond the asset level return. How you purchase an investment is not the same as what the asset generates.
2. Now please paste in the table which shows the returns of equities versus housing in the US for the entire period, from post 1950 onwards, and 1980 onwards. That’s is the market most relevant to this group. You know, the one that shows equities outperforming housing over the full period by 2.33 percentage points per annum, or by 3.13 Pp per annum post 1950 and 3.43 pp per annum post 1980. That one.
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anon_0k9zlfz6lz9oy
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anon_0k9zlfz6lz9oy
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You do realize that for the most part you cant get a loan to purchase real estate unless your DSCR is 1.25 or above when youre at 75% ltv right? Are you a financial advisor by any chance? I find financial advisor are the ones most upset when exposed to this info
I am not a FA, and the ability to obtain leverage to purchase an asset does not mean you should compare levered returns to unlevered returns. And please post the relevant chart mentioned in my post above, Thanks.
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anon_0k9zlfz6lz9oy
Guest
Why cant you? Also, seems a little disingenuous to only want to use unlevered returns when well over 90% of buyers use leverage to buy real estate.
what do you do for a living? Why do you think the stock market is better than real estate? Why has real estate created more wealth than the stock market?
Blackstone Bets $6 Billion on Buying and Renting Homes
The investment firm’s deal for a company that buys and rents single-family homes is the latest sign Wall Street believes the U.S. housing market is going to stay hot.
www.wsj.com
Weird that you use 1870 as the basis point to start the comparison
that data is global data- from 16 countries. Why not present US data? Also it is unclear if those real estate returns capture true cost of carry (interest expense and property tax expense and maintenance/improvements) and transaction expenses. Most equities cost zero dollars to transact. The same can’t be said for real estate.
What you CAN say is that if you do not like volatility and you have a long investment window then real estate is preferable over equities.
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anon_0k9zlfz6lz9oy
Guest
Lol correct. You realize you just linked an article to blackstone buying 17,000 homes at once right? Haha
Blackstone Bets $6 Billion on Buying and Renting Homes
The investment firm’s deal for a company that buys and rents single-family homes is the latest sign Wall Street believes the U.S. housing market is going to stay hot.
1. Leverage introduces risk unrelated to the performance of the underlying asset, comparing levered and unlevered is apples and oranges. It’s why discounted cash flow analyses require calculating an unlevered beta for a comp set.
1.(a) Separately, in your hypothetical example, I suspect you are misrepresenting the levered rerun potential of real estate. Over the period you quote, it’s highly unlikely an investor would maintain 75% leverage ratio. Could they obtain such leverage over the entire investment period, and consistently maintain that leverage? Could they do so in all of the world markets underpinning the sample?
2. My occupation is irrelevant to this discussion.
3. I’ve expressed no preference for equities over real estate. I’ve simply noted that the way you portray the comparison is inappropriate.
4. Still waiting for the relevant chart showing returns in the US.
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His point is that it is an apples to oranges comparison. 90% of RE purchasers use leverage. True. I would guess that about 20% of retail investors use margin accounts, at 2-1 buying power. So as long as the market appreciation exceeds the interest rate on a mortgage or margin account then the rate of return will always be better using leverage.
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anon_0k9zlfz6lz9oy
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Disagree in it being inappropriate when you consider that is how almost everyone buys real estate. Im waiting for you to post them.
youre likely looking at page 25 which doesnt display geometric mean accounting for volatility
It's understandable that someone is quick to interpret data that "protects" his business or occupation prognosis but unless you've lived through real downturns/ recessions you can't appreciate the fears and worries about yours or your loved ones job or ability to support their families. As I said about being a bit paranoid, use it to help protect yourself.
It is not a matter of disagreement, comparing the two is inappropriate and wrong. Anyway, it’s not worth continuing this discussion. The point is made, and posters can read the points made.
On the chart, I was affording you the chance to correct your attempt at providing misleading information. .
No, it is an article about Blackstone buying a PE firm that bought 17,00O homes over the course of a decade.
of course, they need that to launch the business. You know both Brookfield and Blackstone raised funds to invest in SFH rentals after these purchases.
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anon_0k9zlfz6lz9oy
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We’ll agree to disagree. I dont believe theres anything misleading about using what is most common as the example. I was actually a little generous saying only 75% LTV as the stats show 80% is most common
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anon_0k9zlfz6lz9oy
Guest
Correct. Not to buy individual homes but rather entire communities that were already being held as rentals
Realtor says "now is a good time to buy!"
Story at 11.
Now, a word from our sponsors.
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Story at 11.
Now, a word from our sponsors.
Now's a good time to buy! Let Gaga Realty make your Sicilian dream come true! | Now's a good time to buy! Let Gaga Realty make your Sicilian dream come true! | By Vic DiBitetto | Facebook
Now's a good time to buy! Let Gaga Realty make your Sicilian dream come true!
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At this point calling against a bubble is a bold call - writing looks to be on the wall after the massacre in both equity and crypto markets.
If you are right, God bless and leverage up - your name can be on the stadium.
If I'm right, your name will be on some bankruptcy papers.
"Scared money don't make money" baby!!! That's the beauty of this. I know where I'm stacking my bets.
If you are right, God bless and leverage up - your name can be on the stadium.
If I'm right, your name will be on some bankruptcy papers.
"Scared money don't make money" baby!!! That's the beauty of this. I know where I'm stacking my bets.
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anon_0k9zlfz6lz9oy
Guest
I barely make money selling homes anymore fyi. In fact, rates being high and driving more people towards rentals is actually more beneficial for me as a landlordRealtor says "now is a good time to buy!"
Story at 11.
Now, a word from our sponsors.
Now's a good time to buy! Let Gaga Realty make your Sicilian dream come true! | Now's a good time to buy! Let Gaga Realty make your Sicilian dream come true! | By Vic DiBitetto | Facebook
Now's a good time to buy! Let Gaga Realty make your Sicilian dream come true!
Dont know if answered but bought my first home in "town" of Poughkeepsie in 1986 for $107k - Raised ranch 1/2 acre land. Sold in 1990 for $134k Moved for job a few times so rented and then came back to TOP in 1993 and bought a smaller house 1/3 acre for 112k. 2000- after divorce sold to the ex to keep the kids in same house for just 125k but market value at that point was $210k
Not sure what it shows but that was the market in an area like upstate NY.
And I should have hit the B up for full market value- just saying :)
Hoboken, Bergen County and Manhattan condo/coops spiralled up from '82 until Oct. 19, 1987. One day cost 5-10%. Slow decline for 2 years then the market tanked. Recovery took most of the rest of the decade. Houses followed the same pattern but a little more restrained.
That was the early 1990's crash. Parent's home- house was not for sale in 1988, and some person randomly knocked on the door and offered my parents $800K for a house on the river. They declined. Four years later in 1992, they decided they had to sell--for less than $360K. Timing is everything.
First place we owned was a townhouse in Middlesex County we bought in 1992 for $98K. Sold it for $90-92K in 1995.
Some historical perspective.
From a 2018 Forbes article:
"In conclusion, a correction of home prices is likely at some point and the next recession could be a trigger like the 1990 recession was to some degree."
What The 1990s Tell Us About The Next Housing Bust
The consensus is that the next time home prices fall, it won’t be like 2007-2012. No one, however, seems to be talking about what the next real estate correction or bust might actually look like. Let's see what we can learn by looking at what happened when real home prices fell in the early 1990s.
www.forbes.com
I think the 1988 and early/mid 90's events were a little different. I recall in 1988 the mid-market houses took a hit in NJ, but the entry level stayed pretty good. My older brother bought his first house in South Plainfield for $64K in 1983 and sold for $130 in 1988. His house in North Edison was valued over $300K but he got for $225K.
In the early 90's, places like California got hit pretty good. My in-laws had purchased their retirement home in Carlsbad in the late 80's. By the mid-90's they realized it was a mistake and sold at a loss. I told them not to sell and it was a shame since my SIL/BIL would have purchased it a few year later when they moved to San Diego.
Then of course we had post 2008. A neighbor of mine walked away from his house about 5 years ago since he was underwater. If only he would have kept through COVID he would have made off well.
In the early 90's, places like California got hit pretty good. My in-laws had purchased their retirement home in Carlsbad in the late 80's. By the mid-90's they realized it was a mistake and sold at a loss. I told them not to sell and it was a shame since my SIL/BIL would have purchased it a few year later when they moved to San Diego.
Then of course we had post 2008. A neighbor of mine walked away from his house about 5 years ago since he was underwater. If only he would have kept through COVID he would have made off well.
Kyk - I work within the acquisitions group for a large publicity traded real estate investment company , one of the companies buying the most single family residential homes nationwide - i will tell you that I disagree with you strongly on your take on the market here. But then again, I’m based out of Arizona and we don’t really invest a whole lot in NJ.
A month ago I would admitted that I know some very smart people who think I’m wrong , but even they are starting to see weakness in the RE market now as well.
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