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Blackholeshine

Why I Am Never Going To Own A Home Again

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Housing returned 0.4% per year from from 1890 to 2004?

Mods, can we have a database of websites that are proven to be innumerate, and flags them up by sticking a dunces cap icon next to it whenever an url pops up?

so 114^1.004 = 1.576........meaning houses are only 57% more than they were in 1890?

I rather suspect we are talking about real returns, as opposed to nominal.

Running with thier presumably rounded numbers you only need and avaerage anual inflation rate of 2.6% and an anual HPI of 0.4% over and above this to return 57% on a house above inflation over the 104 year period.

I think thier numbers are about spot on. Houses=P!ss poor investment return

I used the inflation calc here http://www.westegg.com/inflation/infl.cgi

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'Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is low. You can’t argue the reverse, since new adults are always competing with you.'

Huh. Not seen it put quite that way before.

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Running with thier presumably rounded numbers you only need and avaerage anual inflation rate of 2.6% and an anual HPI of 0.4% over and above this to return 57% on a house above inflation over the 104 year period.

I think thier numbers are about spot on. Houses=P!ss poor investment return

I used the inflation calc here http://www.westegg.com/inflation/infl.cgi

It doesn't matter what number you pick for annual inflation is, you could pick 25% inflation and 25.4% HPI... it's a moot point given a) the guy doens't state this himself, so we're only guessing , b.) he doesn't compare it against anything else and c) who do you know that invests in property for 110 years?

For most people the investment in buying a house isn't the price increase, but the fact they don't have to pay to live in their home after 20/25 years

That differential only gets bigger too, in 2031 who thinks they could rent the place they're in for the same price as today?

Why don't people get this?

People here must agree with the above on some level or they wouldn't care what house prices were.

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'Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is low. You can’t argue the reverse, since new adults are always competing with you.'

Huh. Not seen it put quite that way before.

The average American moves 11.7 times in a lifetime.

you do have a point, renters move more. But America has a pioneering spirit.

http://www.census.gov/population/www/pop-profile/geomob.html

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There is no security of tenancy in the UK, any tenancy contract will allow the landlord to take posession

or the mortgage company if they decide to sell, At most you get 2 months notice.

Even worse all Landlords serve notice as early as possible, they can then leave the decision right up until

the last day as to if they will extend the contract or take posession. Myself and many others all get served

notice and then a new contract is offered right at the end but the landlord could always take posession, they

served notice.

Renting is the worst way to live, even animals have greater stability.

Edited by northwestsmith2

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There is no security of tenancy in the UK, any tenancy contract will allow the landlord to take posession

or the mortgage company if they decide to sell, At most you get 2 months notice.

Even worse all Landlords serve notice as early as possible, they can then leave the decision right up until

the last day as to if they will extend the contract or take posession. Myself and many others all get served

notice and then a new contract is offered right at the end but the landlord could always take posession, they

served notice.

Renting is the worst way to live, even animals have greater stability.

I treat it as the business transaction it is. Each year I agree the following year's rental agreement at least three months before the end of the present agreement, so that I always have at least three months in hand. Currently, my rental agreement has fifteen months to run.

Renting is a great way to live in the current economic climate ;).

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It doesn't matter what number you pick for annual inflation is, you could pick 25% inflation and 25.4% HPI... it's a moot point given a) the guy doens't state this himself, so we're only guessing , b.) he doesn't compare it against anything else and c) who do you know that invests in property for 110 years?

For most people the investment in buying a house isn't the price increase, but the fact they don't have to pay to live in their home after 20/25 years

That differential only gets bigger too, in 2031 who thinks they could rent the place they're in for the same price as today?

Why don't people get this?

People here must agree with the above on some level or they wouldn't care what house prices were.

Just realised that I've been working with 104 years not 114 but the numbers come out about the same anyhoo, buying bad via leverage, never get into debt and you cant be made bancrupt

Ok, from the briefest of searches I have http://observationsandnotes.blogspot.com/2009/03/average-annual-stock-market-return.html from 1900 a return of 4.8% price only increase in the dj stocks, from the inflation calc with 0.4% over gives HP's of 3% average over almost the same period, so with stocks over the time scales you'd be about 6 times wealthier had you taken the money and put it in stocks.

With the same site we have the dj increasing 341% from 1990 - 2010 and from

http://www.fhfa.gov/default.aspx?Page=86&Area=State&AreaID=NJ&PurchaseQtr=1991Q1&ValuationQtr=2010Q4&Price=100000

a house in New Jersey increasing by 124%, now let me guess where Mr Average US Home Owner would have wanted his money with hindsight. But he had 80 years of djia data showing 4.8% annual and HPI for 80 years showing 3% annual and could have used that hindsight as foresight had he chosen to and now take the profits and buy outright. Both the long and mid term data tell you can do it outright with profits from elsewhere. This does not even consider the divi's from holding stocks, never mind the reinvestment returns, over houses and the maintainance costs of such.

Edited by zebbedee

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OK, fair enough, there may be another 3 to 5 percent or so to fall over the next year or two but if you could buy now with a long term fixed mortgage and with the Funds rate at 0.25 percent there seems to be very little down side risk. Certainly when compared with the possibility of further money printing, currency crises or sudden interest rate spikes. The US economy is now growing fairly strongly (at least when measured in fiat money) as their crash has been and gone. The UK is of course still hugely overvalued.

Calculated Risk reckons another 10% to go on the case-schiller, and he's quite optimistic about jobs and gdp growth - slow but steady. Of course, places like Nevada and Florida may already have hit bottom.

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http://www.businessi...me-again-2011-3

Financial:

A) Cash Gone. You have to write a big fat check for a downpayment. "But its an investment," you might say to me. Historically this isn't true. Housing returned 0.4% per year from from 1890 to 2004. And that's just housing prices. It forgets all the other stuff I'm going to mention below. Suffice to say, when you write that check, you're never going to see that money again. Because even when you sell the house later you're just going to take that money and put it into another downpayment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: "$100,000 R.I.P."

B) Closing costs. I forget what they were the last two times I bought a house. But it was about another 2-3% out the window. Lawyers, title insurance, moving costs, antidepressant medicine. It adds up. 2-3%.

C) Maintenance. No matter what, you're going to fix things. Lots of things. In the lifespan of your house, everything is going to break. Thrice. Get down on your hands and knees and fix it! And then open up your checkbook again. Spend some more money. I rent. My dishwasher doesn't work. I call the landlord and he fixes it. Or I buy a new one and deduct it from my rent. And some guy from Sears comes and installs it. I do nothing. The Sears repairman and my landlord work for me.

etc.

Read more: http://www.businessi...3#ixzz1H5kSZETI

It's worth noting that he's talking about renting in the US. For all it's a capitalist paradise, renters have far more rights in most US states and cities than they do in the UK. If your choice is between renting somewhere you have a good chance of staying in for as long as you want with legal protection against unreasonable rent increases vs. buying, then what he says may make sense. If it's a UK AST where you can be turfed out at a landlord's whim, then it's a whole different issue.

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There is no security of tenancy in the UK, any tenancy contract will allow the landlord to take posession

or the mortgage company if they decide to sell, At most you get 2 months notice.

Even worse all Landlords serve notice as early as possible, they can then leave the decision right up until

the last day as to if they will extend the contract or take posession. Myself and many others all get served

notice and then a new contract is offered right at the end but the landlord could always take posession, they

served notice.

Renting is the worst way to live, even animals have greater stability.

Well, it's better than a cardboard box, but, you're right, it sucks, particularly if you have a family or even just a moderate amount of stuff that needs to be moved each time you're chucked out. Also, having to negotiate with some nylon suited spiv every 12 months for the chance to avoid all the grief of moving is, quite frankly, demeaning. Before ASTs came along, it was really hard to find anywhere to rent in the private sector due to the insane rental laws that made it almost impossible to get tenants out ever (or to put the rent up) now, it's impossible to find anywhere you can be sure of staying for even 3 years. Surely it can't be beyond the wit of man to come up with legislation that would allow landlords to make a living and tenants to have the right to stay put for the most part?

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Well, it's better than a cardboard box, but, you're right, it sucks, particularly if you have a family or even just a moderate amount of stuff that needs to be moved each time you're chucked out.

Buy less and own less stuff. I've been living on the 2 suitcase rule for yonks, I'm at 2.5 suitcases right now though due to some specialist equipment being added to it.

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Buy less and own less stuff. I've been living on the 2 suitcase rule for yonks, I'm at 2.5 suitcases right now though due to some specialist equipment being added to it.

I used to think that too, then I got married (every woman I've ever met is a pack-rat at heart) and had kids. Hoarders here I come...

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Ok, from the briefest of searches I have http://observationsandnotes.blogspot.com/2009/03/average-annual-stock-market-return.html from 1900 a return of 4.8% price only increase in the dj stocks, from the inflation calc with 0.4% over gives HP's of 3% average over almost the same period, so with stocks over the time scales you'd be about 6 times wealthier had you taken the money and put it in stocks.

With the same site we have the dj increasing 341% from 1990 - 2010 and from

http://www.fhfa.gov/default.aspx?Page=86&Area=State&AreaID=NJ&PurchaseQtr=1991Q1&ValuationQtr=2010Q4&Price=100000

a house in New Jersey increasing by 124%, now let me guess where Mr Average US Home Owner would have wanted his money with hindsight. But he had 80 years of djia data showing 4.8% annual and HPI for 80 years showing 3% annual and could have used that hindsight as foresight had he chosen to and now take the profits and buy outright. Both the long and mid term data tell you can do it outright with profits from elsewhere. This does not even consider the divi's from holding stocks, never mind the reinvestment returns, over houses and the maintainance costs of such.

except you're not counting the increasing cost of rent you'd have to pay as well whilst saving for the house. The house buyer has locked in their price at year X., you'll have to pay the house prices in year X+25. Those two factors tend to wipe out any extra money you make the stock market route. So, yes, stocks make more money in the long term. But similarly, a mortgage payment ends up cheaper than rent over 25 years - interest rates fluctuate, but rent goes up.

There's a thread here where some guy tries to pretend he could get a long-term index tracker at 6% above inflation to win the argument.... it's full of sums and supposition but in the end the two routes pretty much cancel each other out

http://www.housepricecrash.co.uk/forum/index.php?showtopic=153904&st=105

And again, no-one invests for 110-years

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'Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is low. You can’t argue the reverse, since new adults are always competing with you.'

Huh. Not seen it put quite that way before.

Well that's because it's not true. (1) You can move away - you sell you house, and (2) You can always argue the reverse, as old people retiring offset "new adults"

Renting is the worst way to live, even animals have greater stability.

Well I suppose battery chickens have more stability, but renting isn't so bad if you sign up to 12 month contracts

Buy less and own less stuff. I've been living on the 2 suitcase rule for yonks, I'm at 2.5 suitcases right now though due to some specialist equipment being added to it.

No thanks - I like to own more than 2.5 suitcases of stuff. My golf clubs and cricket gear alone take up more than that!

Stuff in quantity doesn't per se bring happiness but are you sure, Ken, that a couple more suitcases of stuff wouldn't make your life more practical? Or do you live an unusual life that doesn't require you to own much stuff? I'm certainly guessing you don't have kids...

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except you're not counting the increasing cost of rent you'd have to pay as well whilst saving for the house. The house buyer has locked in their price at year X., you'll have to pay the house prices in year X+25. Those two factors tend to wipe out any extra money you make the stock market route. So, yes, stocks make more money in the long term. But similarly, a mortgage payment ends up cheaper than rent over 25 years - interest rates fluctuate, but rent goes up.

There's a thread here where some guy tries to pretend he could get a long-term index tracker at 6% above inflation to win the argument.... it's full of sums and supposition but in the end the two routes pretty much cancel each other out

http://www.housepricecrash.co.uk/forum/index.php?showtopic=153904&st=105

And again, no-one invests for 110-years

No no no, you miss my point, i accept that I have neglected rent but I have also neglected mortgage costs,maintainance and stock dividends. Also why obsess that noone buys over 100 years when I have given a specific recent example of a term over which people do buy. As for increasing cost of rent, my last rent increase was negative, if something breaks I phone up and get the landlord to repair or replace. I know you'll argue that I pay for it in rent but I have fixed costs, the LL cannot know in advance (although he should preempt) when his costs will rise and being human will probably not budget for increases until after the event. Whereas with a mortgage I have fixed costs via the interest rate but if something breaks there is an unexpected increase outlay required. I have no issues per se with your arguments that owning is more stable than renting but only at the right price and with as little leverage,ideally none, as possible. Also with renting the landlord may have the idea that he can choose to end our contractual relationship on a whim, but forgets that that option is also open to me but if I terminate the contract he has to replace me or suffer a void on his leveraged 'asset', meanstwhile there are an abundance of rental properties available to me and I suffer little financial cost as a result.

In addition, stipping out the inflation increase (putting things on an even keel) and reporting otherwise nominal terms over the same 20 year period gives a return on investment of 270% for djia and 140% for housing in the US so having an identical twin who bought in 1990 and yourself who put the same sum in the stock market, you can now buy his house for 140% nominal more and still have 130% nominal left in the bank so to speak, again discounting divi reinvestment which can only serve to better your position (perhaps you paid the rent with it :lol: ). Ofcourse by this point your bro is now destitute, on the streets and renting out his derriere since the bank took possession but he thought he was making a sound move because property only goes up just not as up as some other asset classes.

Edited by zebbedee

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Well, it's better than a cardboard box, but, you're right, it sucks, particularly if you have a family or even just a moderate amount of stuff that needs to be moved each time you're chucked out. Also, having to negotiate with some nylon suited spiv every 12 months for the chance to avoid all the grief of moving is, quite frankly, demeaning. Before ASTs came along, it was really hard to find anywhere to rent in the private sector due to the insane rental laws that made it almost impossible to get tenants out ever (or to put the rent up) now, it's impossible to find anywhere you can be sure of staying for even 3 years. Surely it can't be beyond the wit of man to come up with legislation that would allow landlords to make a living and tenants to have the right to stay put for the most part?

I thought of an extending tenancy, inital is 6-12 months then it has to be 18 months to renew, followed by 24 months. Break clauses allow the tenant to suggest someone to replace them at the moment

and the landlord should have to accept but this should be made clearer.

What we really need is professional landlords who are in it for the long term, not BTL amateurs. I'm all in favour of the professional landlords where the yield increases as house prices fall.

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Buy less and own less stuff. I've been living on the 2 suitcase rule for yonks, I'm at 2.5 suitcases right now though due to some specialist equipment being added to it.

ken_ichikawa I salute you! Many say this but few do it. As long as the "specialist equipment" isn't too dodgy you are probably the coolest person on this forum!

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I find that concept interesting. I've rented for nearly 5 years now. I've been in the same place all the time and have a great, professional landlord. I feel secure but at the same time I love the feeling of freedom it gives me. I can just up sticks whenever I like. There are a few houses in the village I moved to that have been up for sale virtually the entire time we've been here and watched them step-by-step come down in price.

Whose life is on hold?

Good point, but I don't think there's any right and wrong answer here.

Some people just feel anxious without a high degree of tenure over their dwelling space. For them owner occupation is right. For others the "geographic liquidity" of renting is right.

It's like preferring brown sauce over tomato ketchup, a personal choice.

What's sad is that even with declining house prices the restrictions on credit availability means that fewer and fewer people will have that choice. By the time my kids are grown I'd guess that half the population will be renting whether they like it or not.

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When property fails to be the cash machine/investment it has become via manipulation of the VIs.....when renting becomes more renter friendly and secure for the good renters that care and pay their rent on time......owning property will cease to be the be all and end all ultimate aspirational goal that it is today.......rent over your working life, moving as it suits, whilst making wise investments elsewhere such as in yourself, your business and a few quality stocks with quality forward thinking companies.....then use that cash to buy your retirement home with low outgoings and running costs with cash....... ;)

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They problem is life is very short. And fretting about buying or not and putting your life on hold is not a great idea. This article is written quite well:

The 'problem' (it is what it is) is that life is very long.

If we were mayflies we wouldn't give a t0ss about houseprices, pensions, investments, GDP. inflation, deflation, the money system, blah blah.

Right idea, but for totally the wrong reason. :)

The lifespan of an adult mayfly can vary from just 30 minutes to one day depending on the species.

Imagine being born on a sh1t day!

http://en.wikipedia.org/wiki/Mayfly

Edited by Red Karma

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No no no, you miss my point, i accept that I have neglected rent but I have also neglected mortgage costs,maintainance and stock dividends. Also why obsess that noone buys over 100 years when I have given a specific recent example of a term over which people do buy. As for increasing cost of rent, my last rent increase was negative, if something breaks I phone up and get the landlord to repair or replace. I know you'll argue that I pay for it in rent but I have fixed costs, the LL cannot know in advance (although he should preempt) when his costs will rise and being human will probably not budget for increases until after the event. Whereas with a mortgage I have fixed costs via the interest rate but if something breaks there is an unexpected increase outlay required. I have no issues per se with your arguments that owning is more stable than renting but only at the right price and with as little leverage,ideally none, as possible. Also with renting the landlord may have the idea that he can choose to end our contractual relationship on a whim, but forgets that that option is also open to me but if I terminate the contract he has to replace me or suffer a void on his leveraged 'asset', meanstwhile there are an abundance of rental properties available to me and I suffer little financial cost as a result.

In addition, stipping out the inflation increase (putting things on an even keel) and reporting otherwise nominal terms over the same 20 year period gives a return on investment of 270% for djia and 140% for housing in the US so having an identical twin who bought in 1990 and yourself who put the same sum in the stock market, you can now buy his house for 140% nominal more and still have 130% nominal left in the bank so to speak, again discounting divi reinvestment which can only serve to better your position (perhaps you paid the rent with it :lol: ). Ofcourse by this point your bro is now destitute, on the streets and renting out his derriere since the bank took possession but he thought he was making a sound move because property only goes up just not as up as some other asset classes.

I was just wondering, if it's a better way of doing things, investing in shares and then buying a house, it must have been attempted before and it occurred to me...

isn't this pretty much just a variation on an endowment mortgage?

The interest is your rent and you pay into a vehicle that pays off the house at the end of the term?

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ken_ichikawa I salute you! Many say this but few do it. As long as the "specialist equipment" isn't too dodgy you are probably the coolest person on this forum!

Why is only owning 2.5 suitcases worth of stuff cool?

Surely the worth of a person is not related to the number of suitcases of stuff they own, whether a large or small number?

We probably all have a natural equilibrium number of suitcases that keep us content. Why is less more?

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I was just wondering, if it's a better way of doing things, investing in shares and then buying a house, it must have been attempted before and it occurred to me...

isn't this pretty much just a variation on an endowment mortgage?

The interest is your rent and you pay into a vehicle that pays off the house at the end of the term?

and replying to my own post...

furthermore, an endowment mortgage has the advantage of locking in the price of a house when you start the investment vehicle, as you pay the interest on the house as your 'rent' - rather than renting somewhere else and having to amass enough share equity to cover the inflated price of a house in 25 years time

I expect that'll be why no-one goes down the "buy shares to buy house whilst renting" route

So I conclude that in the long-term buying still wins

weird to think endowment mortgages are now seen as spiv material thanks to the "mis-selling scandal" though

Edited by noodle doodle

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  • 317 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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