Cashed up and still expecting to wait another 6 months... :)
Printable View
Thanks for that summary MD.
You should start a thread called 'tips for homebuyers,' or something.
Always good to learn a bit more before I take the plunge...
No rush to take the plunge though...
Housing slump for 3 years - Bollard
Homeowners face at least a three-year wait before properties begin to return to current values, says the Reserve Bank.
In a gloomy report on the economy, the bank predicted house prices would fall 13 per cent over the next three years.
that will quite possibly work out quite well for me getting in to my first house presuming i land the right job, shrewd out of interest how old are you? Im guesing your 22-24
im bang in the middle Remy...
Thanks for post replying MD...
I'll probably buy a house around the time of your attendance at a chch NC meeting anyway.....:D
...
Thanks for the article Steve...
I took the picture in the Article and turned it into my Avatar...
is it a Leaking building or a leaking asset...?Quote:
mackdunk-All the wall needs is one little pin hole in the wall for the wall to suck water up, even uphill like sucking water through a straw.
put a pin Hole in the wall and Dollars pour out onto the street...
:cool:
.^sc
shrewdy i reckon the rb is underestimating that pick eh..
didnt they say 13% nominal in next 18 months?
we have had circa ~ -2% in last 12 months and 4% inflation --> ~ -6%
inflation looking to average 4.5% over next 18 months and 13% drop --> ~ -20 %
theres 26% in 18 months from now...and 30 months from peak.
30% real terms will happen.
Bollard only makes calculated forecasts so they can't be deemed lies can they?
Thats right tim123...imagine if they were to come out and say 'we think prices will drop 40% over next 3 years in real terms....'
There would be havoc..but if they tell a wee lie now...or dont say the 3 year prediction, no one will get in trouble in 18 months. It would be a little 'mis-calculation' :D
should he be making comments like that ? not so much the prediction of market direction but the very specific amounts he predicts for it to fall
I guess they (Central Bankers) have a history of jawboning bubbles so as to prevent excess and inevitable pain but once the bubble has burst it kind of seems wrong to predict so much pain so assertively. His actions should speak these thoughts imo.
The RB have been warning us for a few years about the housing bubble. It comes to no surprise that it did burst. Some choose to listen and cashed up, while others just fell on deaf ears. The RB do pick it right most of the time, maybe their timing is abit out, but it will happen.
I really dont see any recovery in the property market till (maybe) late 2009/2010. But then the realty agents will tell you otherwise and their views is that the market never drops.
and the burst has just begun, more of a leak at this stage I reckon!
I really dont see any recovery in the property market till (maybe) late 2009/2010. But then the realty agents will tell you otherwise and their views is that the market never drops.[/QUOTE]
Unless your the vendor then the agents will tell you must drop your price till the agent can sell it and make a commission even if you paid alot more -Agents #1 job is to make themselves and the firm money -- Buyers&vendors come 2nd
whole lot of pain coming for realestate agents-and over leveraged home owners
.^sc[/QUOTE]
"The Police would come and find the Gang with our mate Joe king tearing it apart..."?
Shrewdy...A retrobate I might be but a vandal...NO! Grow up. :(
Thats right joe king... And we were going to Toast marshmellows and set up camp, if my mind serves me right...Yes... I was being deadly serious....
cant you tell....
Hey... Lets cut the chit chat eah... lets get down to serious business...
First of all... I had no idea what a 'retrobate' was.... so I went to www.Dictionary.com and punched it in...
heres what I came up with...
http://dictionary.reference.com/browse/retrobate
as you can see it came up as no results found...
But, under dictionary suggestions, third one down it had...
rent-rebate:D
I clicked on this link and it said " a rebate on rent given by a local government authority"...
what that basically means is "A rent rebate is given to people on a low income, you basically get a bit of money off your rent so youre not paying the full amount"....
Joe king, are you trying to tell me something here...? haha...
what are your views of a possible Rent rebate as Property prices crunch on homeowners...
Lets have a civilised debate, I promise I wont say how you told me to buy a house at the very top of the market again... its already fallen 10% and my mate Alan Bollard reckons its going to fall 22%, and my mate upside down reckons it could fall 30%...
I assure you Joe, if anything happened to my mate Mackdunks house, id be up in Auckland quick flash and Id go on a real rampage...
you will have to take my word for it, as I am being deadly serious and cant be taken light hearted...
any thoughts on Rent Rebate... what a topic...
surely would help all these struggling famlies....
shrewd crude >:cool:
Joe,Quote:
A retrobate I might be but a vandal...NO! Grow up
So is that a spelling mistake or are you trying to say
A 'rent Rebate', I might need, but a vandal.... No Grow Up...
I would not be surprised to hear The wider community struggling in such tough times...
wish you and others all the best through these hard times... I dont mean to get satisfaction out of other peoples losses...
as for the rent rebate bit... you gotta agree that was a tad funny eah?
http://www.urbandictionary.com/defin...term=retrobate
urbandictionary can be good for words that aren't actually real...
Good future interest rate analysis:
http://www.goodreturns.co.nz/article/976494122.html
If oil price goes above $150 we can see the property market get hit much harder than RB forecast. I say, property will come down 50% or more if oil price goes above and stays over $150.
It makes more cents to rent than own
People who do not have a mortgage on their home could be financially better off if they sold their property and rented instead.
This would be particularly true for people with higher value properties, but would also also apply to those with low-value homes.
The Sunday Star-Times prepared three case studies of the financial implications of selling a home and renting one instead.
The property market is very ugly out there. Those that are desperate and holding on expecting the market to pick up anytime soon are just waiting for more pain. Just only have to look over at the US property market to see what is gonna happen in NZ. The pain will be long and hard.
Last time I heard, the housing market was in dead lock with buyers waiting off, and sellers holding firm...
Smartest thing ever would be to sell out at any cost right now.....
if its on the market for 575k... then take 500k....
wave one has come and gone... wave two is simmering, and it will swing into action with a flurry of falls (if it has not already begun- Ive seen no evidence to suggest that it has)... Real estate Agents are going out of business... Jobs are being lost in the Sector big time, as Those agents are not collecting fees in the standoff... houses are sitting on the market for longer... This is the worst time to buy a house in the history of NZ housing.... bar nothing...
Its a double whammy...
Its a loss of asset value, and a loss as time errodes away at other possible investment returns ......
Dr Who, over time you have offered me some of the best advice, backed up my thoughts...others have too, but you have been persistant with your message...
its much appreciated... Some of us could have been in big trouble had those knowledgeable buffs advised us...
Those buffs have taught me a valuable lesson here, and the lesson was free of heavy losses.... Ive been lucky like that in other investments aswell...
yeeeaagghhhhh hahhhharrrrgggghhhhhh...... riding cowboys...its so exciting to be alive.....
I will live in a tent before I go out on a heroic mission and buy...
be smart, dont be heroic...
I will chop my arm off with a hacksaw before I bought in this market, at this time...
Id rather live in the trees and swing from branches like a big ape... oh oh aahhh
what a disaster this will be for the Near Term NZ housing market, and in particular those that bought in the last year...
Please keep the reports and articles coming people..... thanks steve... I have not seen or heard much on the housing market in weeks... Newspapers have been blamed, and threatened (REINZ) for the current situation (hahaha) so they have somewhat backed off...
Roll on with the reports...
Saying the NZ house market has fallen because of the press, is the same as saying Oil has risen in price because of speculators... its all just rubbish talk...
keep em coming...
thanks...
Well despite all the doom and gloom
Property prices are still holding up, NZ needs a serious surge in unemployment to have any form of meaningful correction.
Still no relief for the 1st time buyer.
Your right, there wont be any serious correction without unemployment rising up to the RBNZ target...thats right, they have a target, and its around 5%. They have also stated real term decline of upto 26%..so far we're over 5% decline in real terms from the top...just wait till this starts gaining momentum.
http://www.stuff.co.nz/4615973a10.html
this sort of mentality starts to kick in...'we're losing in the long term..'
My experience came from learning the hard way. I ve been through a few market crashes and have had my fair share of blood being spilt onto the streets. I promise myself never again, so I cashed up a few years back. The art is not to go with the crowd. PArty hard and enjoy the fun, but make sure you get off the ride before the music stops.
Tok3n... abit like an earthquake. You first get the minor tremour before the big destructive quake that follows. Unemployment will follow once the firms starts seeing downgrades in their profit and have no choice but to reduce cost to stay alive. Unemployment is coming, just watch the space. Like a Tsunami, it will hit hard and fast.
I think this Tsumani is worst than any other I have experienced in the past. Stagflation is a real long term killer. I have never seen global equities markets been hit so hard before, it is a sign flashing in our faces, yet we fail to see it. The broking firms (abit like the realty firms) will never tell you to sell. It is in the broking firms interest to tell you to keep buying in the equities market.
Cash is King until the cloud clears, which maybe a long time away.
DR who,
I agree... I see bad times coming, and Stagflation is the worst killer... I have not seen it like this in my life time... US inflation must be 10% or close now... raising the Fed rate in the short term is not good news, but is almost a must for long term sustainability... Home owners are getting savaged by their home values, time of fall, and higher inflation erroding away at their investments... ( US inflation is unofficially 7-10%)....
....
eg,
If inflation is 5% in New Zealand for the next year... and House price values stay exactly the same then the asset of the house get diluted by 5%...(well actually house prices are falling so its a double whammy, (aswell as the time component)....
Increased savings (for a larger deposit) and lower house prices will reduce The total loan term by up to, or over 10years...
House prices dont need to be falling, for them to be falling in real terms...
Others explain that wage increases cancel this out diluted house value?
Are wages keeping in pace with inflation? haha...
Which sectors wages are rising by 4% for the foreseeable future...
boycouts... Minimum wages are going up next year...
broarder society will soon be at minimum wage if wages dont go up.....
My friend was a manager of an entertainment business and he was on less than $15 per hour...
Inflation will top out at 5%, and watch out if RBNZ starts cutting rates.... what would national do?..... RBNZ have given every indication that they will cut rates in the 4th quarter.. I orginally thought that this view might slowly start to draw out until 1st quarter 09 ......Foreign Exchange Markets were factoring in Interest rate cuts, in the tune of 70-80% chance for 4th quarter... Im now expecting less of a chance in the tune of 50-60% chance... US Oil could easily shoot to $200... I will explain when I enter my pick in the POO competition...
Two of the largest US mortgage brokers in the US crashed about 50% each over night... happy to see DOW down less than 200 pts... Oil up...
Big crash is not until next year...
Dow falling is reducing that risk everyday...
US will have to start bailing large banks...
As these banks/firms are too big for The Government to stand by and watch...
This brings on Moral hazard where Banks takw on unforseen risks in the hope of being bailed... (which will happen)....
:cool:
.^sc
The simple answer in many economies is that they will allow (have allowed? can't control?) inflation to rise and diminish the value of debts. This won't help assets prices, particularly financial assets, but it will keep the debt side of the ledger a little more manageable.
I suspect the statistics demonstrate that doing absolutely nothing is the correct response to financial crisis but we can't resist politics or attempts at cleverness.
Back here in the New Zealand a combination of valuation and sale price property market the data I've seen is at odds with the REINZ median sale price. I'm only seeing a partial picture but it would conservatively suggest a 12 to 13% correction has occurred in Auckland (I can't name the source). My hunch is we are half way through the correction in real dollar terms.
On the positive side immigration seems to have picked up. Highly indebted households should be boosted by the inflationary impact on those debts as long as they can keep their jobs!
I recall a couple of years back people laughing at me when I told them I am holding cash.
This is the average persons perception of holding cash.... Interest 8.5% - Inflation 5% - Tax 2% = 1.5% net return. My version of holding cash is the opportunity lost of investing in a deflationary asset during a down turning environment. For example... if I had $500k (crude and simple calculations).
Cash
$500k
1.5% = 7.5k
Net Return = 507.5k
Properties
$500k
Leveraged to invest in a $1m house
Negative 15% = -150k
Expenses including agent fees = -50k
Gross return = $300k
Made a lost of = $200k (assuming you can sell the house)
Shares
(assuming you listen to the brokers and invest in brokers pick this year)
$500k
Negative 25% = -125k
Brokerage rate = -5k
Gross Return = 370k
If you have invested in oil/gas, then you would have made a good positive return this year. :)
If you invested that 500k in gold or silver bullion your'd be up 43% over the last year
I wish I took my own advice years ago and brought bullion instead of being greedy and investor the funds into jnr goldies thinking they would do better.
Still Think theres pently growth to come esp. in silver over the next couple year $100+ could well be reached within a couple yrs crazy but so was $140bbl oil back when $40bbl seemed high to most analysts
How on earth do you reach the conclusion that 'immigration seems to have picked up'? Net immigration has been consistently falling over the past year, there is record migration to Australia, net immigration from Europe is plummeting and overall net immigration is effectively zero (and is trending negative). This is offset by record immigration from the likes of India and the Phillipines, immigrants least likely to buy property but will put pressure on rentals.
Without net immigration of wealthy cashed up individuals the fundamentals are simply not there to support current property valuations and lousy yields. The imbalance has to be addressed and still has a long way to go.
SEC
Dont you hate it when realty agents treat you like a complete idiot?
I am constantly looking around to keep in touch with the property market. Have had a run in with a realty agent who treats me like a I am an idiot. He tried the hard sell technique and constantly toells me that the market will turn soon and I will miss out and why I should pay a premium for the property.
I even had an agent who tried to sell me her house and had dummy buyers (her friends) who pretended to be genuine buyers. I found out it was the agent's house when I spoke to a kid playing outside who happens to be her son. The kid disclosed everything... LOL
Give me a freaking break. Hope you realty agents out there are reading this. It only turns away a cashed up buyer like me and there are not many cashed up buyers in the market.
You are right Dr Who; most of them are order takers, the art of actually selling is now not when the fish are jumping in to the boat. As for the usual line it'll get better in spring, trouble is its a few springs away!
Went to an open home at Latitude37 in the Viaduct Harbour two weekends ago. Nice f/f studio apartment , 36sqm ... angled view from balcony to the water outside Stratis at Lighter Quay. Agent told us the guy bought it for $280k in 2001 ... has been rented out solidly since but due to various costs ( body corp, leasehold land , rates , rental mgmt fees ) net return to him was only around $12k per year. Was going to auction on Wed 9th and expectations were around the $200k mark. We were flying to Queenstown that day so couldn't go to the auction. Rang him yesterday .... 1 bidder only in the room , vendor sold it for ..... $140,000 !!! Now even if you'd just stuck $280k in the bank 7 years ago you'd have around $350k now .... what a CATASTROPHIC investment. Might be a good time to start going to auctions soon , looks like there are some horribly desperate sellers out there !!
Great story Gold guru,
My dad was talking to his real estate agent, and the company had 4 open homes that weekend... Only 1 group showed to 4 open homes...
This is going to get worse...
:cool:
.^sc
Friends in Wgtn had home on market for a 3 week tender period - open homes got 17. 14 and 12 groups through ... got 3 offers with one being just 2K under RV of $500k so they are one happy couple
A month ago a property I was interested after one open home for $650k
And i see Gary McComicks old seaside villa in Island Bay only had the For Sale signs up for a couple weeks before the SOLD sticker went on it .... price in excess of $700k
Still seems to be plenty of action around these parts of the woods
They are goosdstories but I hink overall the market even in the captal is a bit flat, you can see that in the reduced size of the Dompost real estate section each Saturday, I sepecially noticed the reduced number of pages by Tommys.
This week in the ODT they stated that in June, there were 131 sales in Dunedin - for an estimated 300 agents in town!! The sighs of sympathy could heard in unison from everyone reading their morning rag.
One sale of $650k. Advertising well down on where it use to be, but most for sale are at the 'lower end' of the market. Not alot at all for sale around the more upper market neighbourhoods.
Be very careful about buying in the Viaduct. Leasehold has no demand, just wait till renewal of lease. Also body corporate fee is a killer. The properties in Beamount, Victoria Park market area is leasehold. The investors paid around $350k and sold it for around $50k.
There's been alof of BS stories being told by property developers and realty agents about how great the property still is. It is all BS. These guys are just talking up their own book and self interest. Those that are paying a premium in this market are complete fools. These jokers manipulate the market during the boom times so fools pay a premium and now they are trying to talk up the premium market to flick off their dead stock they cant sell.
DR WHO, You generalize to much. Property developers are not all the same, neither are real estate agents. I only sell at my sell price, and only buy at my buy price regardless of what stage in the cycle the market is at. I dont rely on banks to prop me up into leverage positions where i am forced to sell. If the maket crashes its good i buy, if it goes the opposite way i sell.
This year i sold a lifestyle property about $80000 above what some panic cover his bum valuer valued it at. I also bought a new B&T at $125000 below its initial starting price. I do it all my way, my sell price, my buy price thats it take it or leave it, if anyone tells me different i sack them.
The people you generalize about are the mug punters, that run with the herd, getting boxed up in the corners trapped by their own greed, and stupidity. There is always great bargains to be had at any stage in the market, and you can sell anything that the market wants at anytime. People die, they get married, have children, they retire into lifestyle properties, the world still goes round along with the market. Macdunk
Real estate agents will tell you anything to get a sale. I am in the process of moving back from Kerikeri to Christchurch & inquired about a property on Cashmere Hills. I asked the Agent if the property was sheltered from the North West winds (as the last house I owned on Richmond Hill in Sumner was belted during the summer months) & was told "nor westerlies" are not very common in Chch. She didn't realise I grew up in Chch!
Yep, Viaduct Harbr in Auckland AMR. Leasehold land is the killer , people just don't want to know !!! Too many unknown's , you can hardly blame them. The America's Cup sure caused a few people to get caught in the Auckland waterfront apartment market hype ... paying the price now !!!
I'm renting in Devonport ... we have just moved to Auckland from Blenheim , we want to buy but will leave our money in our vineyard and dairy farm investments till late next year of early 2010. Pull out half then and buy our dream villa near Cheltenham Beach. We have been keeping an eye on the the market since the turn of the year. Some properties that were listed then are still stuck on the market now , no price reduction, no fresh marketing , 2 open homes per weekend .... the quality of some agents is very questionable , seems they can't tell the vendors the truth ... "you just won't sell your home in this environment at this price , you need to drop your price by at least 10-15% to have any chance" ... lots of deluded people still ... vendors and agents.
The Great Gold Guru I am helping somebody look for a property in west Auckland. Most of real estate agents are still telling their clients it will be all over by Christmas. Saw the best bit of BS on saturday agent rushed an asian family to an auction handed a list of sales in the area over the last two years gave them a quick tour of property and talked them in to paying roughly the top price for a house in good condition for the area. (this is my impression of the way the realestate agent acted) When house needed about $80000.00 worth of renovations to put it into good condition. Now they will use this sale to inflate value of all property in the area.
Oh goodie... hes coming back... He must be missing the main event NC...Quote:
brut-Real estate agents will tell you anything to get a sale. I am in the process of moving back from Kerikeri to Christchurch & inquired about a property on Cashmere Hills
Brut,
its so true about real estate agents... they are worse than car salesmen...I say this because Real estate agents grind away at both the buyer and the seller whereas car salesmen can only grind on a buyer...
Real Estate agents go to the seller and say one thing and then say completely the opposite to a potential buyer, in these tough market conditions they get more and more desperate...
as in possums example, sometimes they manipulte the buyer to the point where little grinding needs to be done on the seller... More and more often now, its becoming a mixture of twisting buyers and sellers upside down, its never been this bad....
its a game of Trickery...Tom Foolery...
Real estate agents are so good that they could sell a toy car with a jet engine in it to a car salesman and get top dollar...hahaha...
Do not trust REINZ, property magazines, bulls, agency or organisations that stand to lose on a pesonal level through being honest, NZ property Mag is one...
You can usually trust the press, you can trust this thread, and you can trust a bear...
Its pretty bad in the US at the moment... We are only 6 months in, 2 years to go...
:cool:
.^sc
future buyer here at rock bottom prices..
If things fall into place as Ive planned then the life long loan term will not be required...turning 30yr sentence -> into 10yr walk in the park...
:cool:
.^sc
SC, yes that's the only reason I am moving back to chch so I can attend the National Convention.
My old mate Serpie has been kind enough to rent me one of his Rental Properties to us, hopefully he is not reading this as he should be getting it ready:)
I'm cashed up now so looking forward to having a good look around at the Chch market. Houses up here in Kerikeri are just not selling, so there are alot more rentals properties available.
SHREWDY, Your inexperience is showing. The bargain can be better bought in a rising market. I prefer looking for bargains in a booming market. You will find mortgagee auctions are best in boom times with a quick flick off. Times like this you are stuck with it waiting on the market to turn. There might be lower prices but harder to sell which makes bargain hunting in the good times a better paying proposition. Macdunk
If you look upon your mortgage as a millstone then it will be a life time sentence. However if you see it as a commitment to repay someone for the privilege of levering one asset for growth in other assets then its not a “sentence” - its a tool. Don’t let debt scare you – just be aware of your ability to repay!
There are studies that demonstrate highly indebted companies on average perform worse than their less indebted peers. I struggle to see how individuals would fare any differently. Debt works in rising markets, that's where the story ends. But debt also restricts ability to take risks at the same time as it increases default risk. Creativity and innovation are negatively impacted by tighter budgets (I know the semantics about creativity on a shoestring but the data doesn't support it).
We've just seen the impact of the "clever" Basel Accord theories - suggesting home lending is low risk and allowing lower capital ratios for both lenders and borrowers actually increases the risk profile, skews values and destroys the low risk argument. It hilarious that a product that was less than 10 years old could have a 1 in 10,000 year risk event tagged to it. There are too many bloody clever poeple around and not enough rational intellect to recall property corrections and what might cause them? We already have sages talking about a 1 in 100 year property event in Australia as if it should be some sort of surprise.
Tell that to all the high flyer property developers out there who are falling like flies in this depressed realty market. They were drinking Dom Perignon in their beach house just last year and now they are standing in court explaining to the judge why they shouldnt be liquidated by the finance firms.
Whos waiting for the market to turn?Quote:
mackdunk-SHREWDY, Your inexperience is showing. The bargain can be better bought in a rising market. I prefer looking for bargains in a booming market. You will find mortgagee auctions are best in boom times with a quick flick off. Times like this you are stuck with it waiting on the market to turn. There might be lower prices but harder to sell which makes bargain hunting in the good times a better paying proposition. Macdunk
Not me...mad men are currently waiting for the market to turn, they must have too much time on their hands waiting for that to happen...IE years...
theres no turning mackdunk, theres only falling...
The best buying at the moment Id say is Old kent road, Park lane, Euston st... other than that, leave the real buying until the best time...
mortgagee auctions best in Boom times with a quick flick off? "with a quick flick off", First homebuyers are not thinking about a flick off, they are thinking about buying their first house... in bad times mortgagee sellers become more desperate, and there are many more of them on the market... do you agree?
The 30yr sentence turned into a 10yr walk in the park is made possible through a greater saved deposit, lower house price, lower forward looking interest rates...
And the combination of that makes a future homebuyer better off than a buyer of 2-3 years ago...
House A would have sold for $500k last year in a good market...
House A sold for 420k now in a bad market...
Its pretty simple to me as to which market id prefer buying in...
you read the sharemarket exactly right, and called it before it happened, and sold before it turned big... how could you read the housing market situation so wrong? when you go the Sharemarket so right?...
:cool:
.^sc
The KING is back
A housing expert, (and shrewd crude) are both encouraging first home buyers to delay their plans and make the most of renting.
The property investors Federation says the weekly costs of home-owning are now around two and a half times that of renting.
Vice president Andrew King says prospective buyers could be saving around $20,000 a year by renting, which could then go to a down payment.
source: newstalk ZB... article on tele text...
Andrew King, any relation to our mate Joe?...
Costs of homeowning are 2.5 times that of renting....!..... huh?
what about the costs of owning a losing asset... that 300k asset is worth at least 30K less this year... So real savings (so far this year) are about 40K then huh....
:cool:
.^sc
SHREWDY, I hope for your sake you dont take JOE KING up on that golf match. He will get the shirt off your back mate. I have never lost on a property deal ever. I have seen property cycles come and go with the usual bunch of clowns staying out the market missing out time after time. Looking back my average increase in property value was over 10% my average mortgage was about 8% with my average rent at 7%. I have bought bargains and sold properties right round the various cycles used the banks money to my advantage never lost on a deal. Like i said SHREWD one dont play golf with joe i think he will take you to the cleaners. Macdunk
I dont care if he beats me or not... My handicap is 36...
I dont hand in score cards...perhaps thats why my handicap is the lowest...
and my golf clubs are too blame... damn bent clubs, (well one of them when it got rapped around a tree, the funny thing was I didnt realise for quite some time that it was bent)...
:cool:
.^sc
Geeze you blue eyed brigade just don't get it! This market is going to crash (after the Olyimpics) big time, I have my money in aussie dollars gaining interest. When the time is right I will be picking over the dead carcases of the property market, picking the bargains from the road kill:D!
LOL...
You blue eyed brigade never learn when you bought into PRC and NZO below $1.00, while I, McDunk made huge gains putting my money in Aussie and sold my lifestyle block properties at a huge premium to fools in a depressed property market who listen to my rambling about how the property market never drops. :D:D Shrewdy, have you learnt anything from me, McDunk yet? Listen and learn young fella!! LOL
ahh.. I put a post up and it did not quite sound right...
Before I go further I want to clear something up with mackdunk...
Quote:
SC-Pity the joe kings and mack dunks did not call the looming housing crisis before it happened...
Job only half compete Id say...
Mackdunk can you please explain "the JK's and MD's have dont just that"...Quote:
MD-SHREWDY the JOE KINGS and the Macdunks have just done that.
Do you mean that the JK's and the MD's have both sold out of the housing market?
:cool:
.^sc
and Mackdunk,
Do you have an opinion of the Article I posted...
Its pretty compelling eah?
The truth please, dont beat us around the bush...
:cool:
.^sc
SHREWDY, You can say house prices fall by this or that, therefore i must have saved such and such by being out the market clever me. Thats how the average dummy might see it, who cant see the wood for the trees. The market goes up, and down, on a general over all trend up over the years by over 10%. If the market goes down it is always followed by a steeper trend up playing catch up. If you buy a property at a cheaper price than the building cost at any stage in the cycle, you are on to a winner. It is better to buy a bargain on the up cycle for a quick profit, rather than in a downtrending market where it takes longer to sell.
If you want to buy to live in the property for ever and a day, as long as you buy at under building cost it does not matter what stage the cycle is at. The JOE KINGS understand the cycles, and sell at the top but buy at any stage in the cycle as long as the numbers stack up. The only people selling are the must sell brigade, the others wait it out. The smart investor knows that if a property is to high a price today, then tomorrow its the right price, then after that its a bargain.
Never buy simply because its cheap, position, potential,area, all come in to it better to pay to much as get second best. Hope you wake up in time to take advantage of it and learn to use other peoples money to your advantage. Macdunk
Quote:
SC-Pity the joe kings and mack dunks did not call the looming housing crisis before it happened...
Job only half compete Id say...
Quote:
SHREWDY the JOE KINGS and the Macdunks have just done that.
Mackdunk,
Ive learnt so much.... the most important thing that I have learnt is that I CAN NOT afford to MISS the opportunity which is presenting itself to me and will unfold before my eyes with the best buying time in two years time... give or take at this stage...Right now I have two years as it stands... that dream is still alive....
We both know Joe king was selling his housing positions at the best time... I say this because he disclosed it here on this thread... You have not disclosed what you have done... BUt you have said that infamous quote that I cant possibly ignore....and you have said..."the JK's MDs' have done just that",
Its quite cryptic, to me its a late message from you telling us that yes you did start selling, when you told us the exact opposite...
Lets get this straight Mackdunk...
why did you start selling when you told us the exact opposite?
Before I can move on I have to know what you did...
:cool:
.^sc
shrewd
Macdunk makes money in the market whether it's going up, down, sideways or in circles
Before you ask, a circular market is not a market at the circus, it is a market in which macdunk runs rings around everybody;)
In two years, buying a House will be the best decision you will ever make... Get in when Housing hits lows... (or starts to rebound).... Us newbies will be better off than all of those first homebuyers that bought in the last 5 years....
there is no urgency to buy, so I feel there is no urgency to disclosue the housing buffs rules (from a newbie)...
starting next year leading on, I will provide everything there is to know, I will show you how to work out your loan tables with all sorts of variables such as changing payment rates, changing interest rates, loan term, showing how increased payments effects total loan term, etc... I will show all the mathematics behind buying a house and just what you are stacked up against......
I will tell you how to get a mortgagee sale.....
I will describe how to leverage the housing asset... I will pick the best time to buy, and disclose it...(two years away at this stage)...
I will tell you the secrets that the housing buffs know but do not say...
they beat around the bush too much......
But most importantly I will show you the tools you need to know to work out your own individual amortisation table, everyones table is different and you will be able to work my example into your own....
As newbies we have alot to look forward to...
What can you do now to prepare yourselves for buying a few houses at the best time?
in the next few weeks I will start a thread from scratch (if there is demand) on exactly how a future first homebuyer should pursue their path to getting a house, and more importantly how to take advantage of the looming situation where you should pursue more than one house... You should be thinking of Houses not house...
thank you... good day...
SHREWDY, Your enthusiasm has got to be commended. Your approach is like a blind man setting himself up to be an artist. The first thing to learn in any new venture is to understand the fundamental basics of what you intend to do. With real estate you take a couple of weeks off work, and sit the REINZ exams in a classroom with other students. The do it at home version teaches you very little, i know having done both. The next thing to do is work with a builder off and on, getting to understand the basics of what you are buying or selling.
Get into your local council, and ask all sorts of questions, get to know a building inspector and tag along with him as a student observor. After all that, you will know how to spot a leaky home, what the building cost is, how the agents are taught, how to write out your own contracts.
Next thing is finance, which should be arranged before you even start looking, never after. The reason for that is, it allows you to negotiate a much lower price if everything is in order for you to can give an unconditional offer. The market has its ups and downs over the years, with real bargains being more plentifull in the downtrends, however the uptrends are where the best bargain is found for the quick turnover for the max profit. The reason for that is the time factor [months not years].
Finance.
1, Always place sufficiant deposit on a rental for the rent to pay outgoings.
2,always get a fixed three year loan.
3, after three years refinance with the same formula, and pocket the difference which should be enough to finance the next property. Dont worry about interest rates going up or down keep it to where you know the numbers.
When you sell its when the market is booming, when you buy its anytime you find that bargain. I know lots of people who do just that who are rich after only holding menial task jobs. The dummies cant see it keep saying you must time the market or you are all going under the market is crashing. Macdunk
MacDunk you said:
2, always get a fixed three year loan.
3, after three years refinance with the same formula, and pocket the difference which should be enough to finance the next property. Dont worry about interest rates going up or down keep it to where you know the numbers.
Why would anyone get a fixed 3 year home loan when interest rates are heading down?
It is quite simple really. They might also go up unexpectantly placing you in a high risk position. The golden rule is always know the numbers, never gamble in the unknown doing what is expected. Look at the people getting caught out the otherway.
If your loan after three years is at a higher interest rate the property on average rental would be that much higher. Property is a numbers game. Macdunk
Minimoke, thats a load of rubbish...oh well, I will accept your advice and let others to work it out for themselves...Quote:
minimoke-With all due respect - what do they say: “Those Who Can, Do; Those Who Can't, Teach."
I still want to show the finance behind Loan Amortisation tables, so I will start a thread on that next year.....thanks...
Brut, I totally agree.. Mackdunks theory of fixing the home loan for 3 years, is far from savvy...its a load of hoey, and costly...
Hey Ive got an idea,
If you really want to lock in your payments, Get a 3 year floating interest rate loan, and Send me the difference in cash savings, That way you "know what your interest bill is going to be over the next 3 years"....
Send me a Personal Message, or let me know if you are looking to lock in a those higher interest payments and I will gladly accept the difference between floating (savings) and Fixed (amateurs)...
...
You can get me on...
0800 Call shrewdy, or at www.Imabigidiot.co.nz... I have operators ready and waiting...
You are right Brut, absolute savage behaviour coming from the buffs...
:)
.^sc
SC, I actually wonder how many properties Macdunk has brought or sold over the last 10 years? I doubt that many... I actually think he has just read alot of Investment books???
Locking in a fixed 3 year term may have been good for the past 10 years but times have changed. Falling house prices & interest rates are expected to head down over the next 12 mths. If I was borrowing to buy an Investment property in this enviroment I would only lock in a 6 - 9mth term, then refinace after that.
Everybody is entitled to there opinion so good luck Macdunk on your 3 year fixed loan.
brut,Quote:
brut-SC, I actually wonder how many properties Macdunk has brought or sold over the last 10 years? I doubt that many... I actually think he has just read alot of Investment books???
Im not about to start speculating on how many houses mackdunk has or does not have...
Mackdunk is a living legend, and I pretty much caught him out on a rare mistake (which was admitedly a major mistake on his behalf)...
This mistake is so large that it outweighs him beating me in our two stock share picking competition... for real...
He was selling his houses when he was telling us 'it is never a better time to buy'...
At least Joe told us he had already sold his houses when he was saying
"Mackdunk is absolutely right, it is never a better time to buy than right now"...hahaha... :D... true story...all on this thread, pages back...
all im prepared to say is,
mackdunk would not buy me a beer at the auckland meeting so perhaps he is abit of a squirrel... haha...
No comment on how many playboy mansions he has......:D...
:cool:
.^sc
SHREWDY, You know only to well that i sold a lifestyle property, and bought a new house this year. I sold the life style well above valuation, and bought the new house well below valuation. To say i only say this or that after the event is untrue in property as it is in the sharemarket. I only ever sell at my price, and only ever buy at my price regardless of what stage the property cycle is in. I buy and sell at any stage in the cycle. The novice property investor who prattles on about not locking in loans has a lot to learn, thats if they ever have enough guts to actually do it some time. Right now is a very dangerous time not to lock a loan in with inflation ready to take off with the price of oil about to go sky high after the olympics. Its only a numbers game, get the numbers right, and sit back watching the smart greedy people doing nothing. Its a risky game trying to time it or risking numbers that might pop out the hat in tomorrows mareket. Macdunk
Mack dadunk...
heres the RBNZ OCR statement...
date 24 July 2008
The Reserve Bank today reduced the Official Cash Rate (OCR) from 8.25 percent to 8.0 percent.
Reserve Bank Governor Alan Bollard commented that “more unpleasant international news has emerged since the June Monetary Policy Statement, and there is a risk that the domestic economy will slow further. Moreover, the cost of funds raised abroad by banks has been rising in recent months as the international financial situation has deteriorated. Today’s cut will help to mitigate the effect of these increases on the actual borrowing costs paid by firms and households.
“Recent oil and food price increases mean that annual CPI inflation should peak around 5 percent in the September quarter of this year. However, we expect that inflation will return inside the target band in the medium term. The weaker economy is expected to reduce pressure on resources, making it more difficult for firms to pass on costs and for higher wage claims to be agreed.
“Economic activity is likely to remain weak over the remainder of 2008. The ongoing correction in the housing market, together with the very high oil prices, will limit household spending and constrain the extent of recovery. However, high export prices and an expansionary fiscal policy are expected to contribute to a gradual pickup in activity through 2009.
“Consistent with the Policy Targets Agreement, the Bank’s focus will remain on medium-term inflation. In this regard, it is important to note that monetary policy has been reasonably tight for some time, and is now restraining activity and medium-term inflation pressures. Provided that the outlook for inflation continues to improve and there is no excessive exchange rate depreciation, we would expect to lower the OCR further.”
"The novice property investor who prattles on about not locking in loans has a lot to learn"
mackdunk, Id like to make a bet with you... but you never take my bets on...
Aggregate demand is falling and therefore inflation is going to fall after its peak in a few months...its a fact... its a cycles game... Interest rates have stayed the same or risen every time over the last 5 years, and now a new cycle has started... We are on a new Interest rate cycle where OCR will be percents lower in 5 years as to where it is now!
8% now... in 5 years the OCR will be 6% or less...Probably much closer to 4.5%....
do you want to bet on it...?
I agree, "get the numbers right"... getting the numbers right means your loan should be floating...
Being a future homebuyer (minimoke, im not all talk, a doer here)... I have to take on these sorts of risks ie waiting for the market to bleed dry, get floating interest rate.. I have to take all the 'givens' that I can... Property prices are so expensive for us future first time homebuyers, that we can not take things for granted like you buffs do... I can not blatently pay more in interest payments just so I can have a set interest payments figure.....Man, you just brush that dirt off yah shoulder as if it were crumbs...Quote:
Its a risky game trying to time it or risking numbers that might pop out the hat in tomorrows mareket. Macdunk-
:cool:
.^sc
SHREWDY, When you play numbers you play with numbers that are fixed for the medium term, in order to avoid nasty shocks. Missing out on a few quid here or there because the numbers trend in your favour, is nothing compared to getting hit with a sudden leap in interest rates. When you get interest rates that we had in the past of 18%, along with a collapsed share market such as 1987, you might learn to be cautious. The share market is crashing, the economy is in trouble, The property cycle has dropped, yet you are smart enought to pick the inflation rate in tomorrows market.
The share market has dropped 30% this year, and will crash. The finance companies are dropping like flies, its the banks turn to get hit next. The one thing left is property, which when its all over is worth every cent you paid for it. Set it up in a cautious conservative way that you can afford, dont be a smart ass and try to beat the system. Macdunk
But who will be able to buy property Duncan if all that gloom transpires?
Duncan, many things have changed since the 1980's...to see 20 odd% inflation again would be very suprising. Unlike the 80's, we now have a floating exchange rate, and inflation targeting regime...property is only a partial inflation hedge, the best thing would be to go to the underlying inflation cause if you want to be fully protected. :D
Also, about the 3 year fixed etc, banks usually use a forward curve to predict rates and therefore trying to beat the market doesnt always work. 3 years ago, commentators were saying 'take out a 1 year fixed rate...' that wasnt wise advice.
a 3 year would have been marginally better, but you would still have been entering today at a high rate.
I guess it comes down to individual circumstances. 3 years definately does give certainty..but im with shrewd. I reckon a 2 year would be more beneficial at the moment. Then again, I've never been in the property market..!
Hiawatha- I cant answer your question without research... Hopefully someone can help...
I agree with Upside down apart from no locked Fixed interest rate would be more beneficial....
Give mack 'some slack' a dunk...Quote:
mackdunk-
1....SHREWDY, When you play numbers you play with numbers that are fixed for the medium term, in order to avoid nasty shocks.
2....Missing out on a few quid here or there because the numbers trend in your favour, is nothing compared to getting hit with a sudden leap in interest rates.
3.... When you get interest rates that we had in the past of 18%, along with a collapsed share market such as 1987, you might learn to be cautious.
4....The share market is crashing, the economy is in trouble,
5....The property cycle has dropped, yet you are smart enought to pick the inflation rate in tomorrows market.
6....The share market has dropped 30% this year, and will crash. The finance companies are dropping like flies, its the banks turn to get hit next. The one thing left is property, which when its all over is worth every cent you paid for it. Set it up in a cautious conservative way that you can afford,
7....dont be a smart ass and try to beat the system.
8....Macdunk
Never...:)....
1....I disagree....The reserve bank meets ever six weeks, if there was some 'nasty shock', then I would have abit of time to act before the next meeting...
Only those that are locked in for the medium term are worse off.... Its like going flatting and getting locked into a one year term....some flats ask you to sign an agreement, others dont....
what would you want?....
2.... A few quid.... ----> .25% on a 300k house is $750 per year... half a percent for a few years is serious dosh mate (if you are locked in)...If you are locked in for 3 years and there are multiple cuts then watch out... If you hold multiple mansions then best you get yourself a young gun in the know...
3.... the OCR was implemented in 1999 and we will never again have to suffer what your generation had to back 300 million years ago.... I mean 25 years ago...
Yes we need to be cautious at the moment, Im hoping for a market crash even though I hold shares... I will be back just like you to swoop, and I am looking to exit at some stage... I have time to run, Ive done it before and I will do it again (fact)... I hope to see the markets continuing to fall so it reduces my risk....
4....... look mackdunk, I dont want to hear it on the property section thread.....how about You give me a hard time on the sharemarket when my portfolio is down in negative territory, until then let me rest in peace... If you really want to know all my stock positions are up apart from CTP and CTPOA... ive got more than half my portfolio on CUE and LMP now... and the only other position I lost money on this year was FAR about $500...that postition was first time ever id locked in a short stop, thanks for that one.. I learnt that from you.....
... im bit mad about WHN though, which ran 50% and came all the way back down to breakeven... oh well....
5....Mackdunk, I dont need to be that smart, the RBNZ has said it all and they are impartial and the most open central bank in the world ( I even posted their statement on the thread)....... the most open Central Bank in the World... Period....
6....blah blah blah.... Im a fly swatter...(one of those magnetic ones), I gobble up flies for breakfast... banks smanks... Ive mentioned banks before... If you remember MD I got booed off the thread...they said I was paranoid etc, ...Houses will be worth every cent you paid for it, Yes.... at the bottom of the market...
7.... You of all persons know that systems are put in place to be broken....
8..... Shrewdie....
:cool:
.^sc
I'm not a first home buyer but feel like one, have never been so interested in property matters as now, never knew what property was worth till it sold and never cared.
After one year in our new house we have no regrets but I was so aware of the 'toppiness' of the market (May-June 07) that we locked in the 8.3% for 5 years, not because it will be necessarily cheaper over that time but because it gave us certainty that we could budget around.
We also paid off 5% of loan principal at no charge which I don't think one could do 10 yrs ago - things are more competitive now. Next year, if rates stay above 8.3 we may pay off more but if they dip below there will be a charge, but that's a risk we can live with. Also, what if rates are say, 15% in 5 yrs, I would want to have whittled that mortgage down a lot, at this rate we will only have about 120k owing. We may be done and dusted in less than 10 yrs and may have got into a second property if prices do drop.
If we had kept renting we may have got a house cheaper now but interest rates are higher. The only thing I should have done better was negotiate a lower price - asking 325k, started at 305, buy at 312, but should have started about 285 (itemising all the things that need doing) and bought maybe for 295-300k.
As I mentioned before on this thread the house gives us an incentive to work and save because you have to, one would need more discipline otherwise to save for a bigger deposit on an imaginary cheaper house in the future. I wonder also if there is an army of young first buyers out there just waiting to pounce as they will not want to miss out again should prices look like recovering.
Of course our ages dictated some urgency in buying as if we waited too long the banks could have an issue giving us a big loan. And it gives us security for the future, a younger person would not have that urgency and may well do better to wait.
Hard to know which camp is right at this point. Has the world really changed, is inflation really dead??
One of the risks to Shrewd Crudes approach is paralysis thorough analysis. That is never actually buying a first home. By the time SC has done all the analysis to time the property market right he then has to become a financial markets expert so he can time the interest rate market right. While all this is going on he isn’t enjoying the intangible benefits of being a first home owner.
Rather than all the analysis a person might just work out if they are going to be an owner or a renter. The numbers never really stack up to own your own home from a financial perspective – you do more financially by being a renter. However you don’t get the intangible benefits of owning your own piece of land and having security in location.
With the glut of rentals around now the question should perhaps be : Should I be a first home owner or a first home renter?
Minimoke, if thats the way you feel about me then so be it...Quote:
minimoke-One of the risks to Shrewd Crudes approach is paralysis thorough analysis. That is never actually buying a first home.
...By the time SC has done all the analysis to time the property market right he then has to become a financial markets expert so he can time the interest rate market right. While all this is going on he isn’t enjoying the intangible benefits of being a first home owner.
Rather than all the analysis a person might just work out if they are going to be an owner or a renter. The numbers never really stack up to own your own home from a financial perspective – you do more financially by being a renter. However you don’t get the intangible benefits of owning your own piece of land and having security in location.
With the glut of rentals around now the question should perhaps be : Should I be a first home owner or a first home renter?
first of all, I am studying to become a financial markets expert, its my future...
Ive not gone overboard on the analysis... Ive kept it very simple for others to understand...
I have not even gone into details, perhaps due to the opposition of me providing it...
The two most important Ideas that we have recently debated
1) dont buy a house because they will keep falling in value, and
2) go floating interest rate because we are on a new cycle
are both givens...absolutely cash in the bank mate...
certainty, no brainer... Its just a wait and see as to if they come true or not and I know Im right... Mackdunk wont even take a bet with me...
I cant believe it someone of your ability (minimoke) would pretty much recommend me buying a house now just so I can enjoy the intangible benefits of it while house values crumble around me... your just trying to be funny eah?
Look mini,
its nothing to do with timing the interest rate cycle (that comes last, perhaps an added bonus only)...
its a mixture of many things in harmony for the best entry time (most profitable outcome).... I will save a decade off my total loan term.... WHAT dont you understand about that...?
Im off for abit, catch you up when I get back...
see you at the national convention, 23rd August Lone Star Riccarton...! check out the appropriate thread for more details...
catch all you buffs in the next round...
In a few years us newbies will be laughing straight to the bank with this...
All of the buffs will all be proven wrong, you just watch me...
its a story in the making...hang around to find out what happens
thank you...bye for now...
:cool:
.^sc
But here in lies the problem. Are you buying a home or a house? On your return I‘ll look forward to continuing the debate on one or other – or even both but lets not confuse the two. In the meantime enjoy life as a renter. Your landlord will appreciate you paying his mortgage. Oh – and also enjoy that 5% gross you’ll be getting with your money on the bank. The government will appreciate your tax contribution – but watch out as those rates drop!
I ve noticed that a number of sellers are putting prices very close to the 2005 CV valuation. Things are starting to bite and sellers are becoming more realistic when there are no buyers around.
Hey Shrewd. If you are buying a home to live in, it is ok to pay abit more. If you can get property below 2005 CV, it is worth considering. There are plenty out there for you to choose from mate.
I was speaking to a group of lawyers and they remarked that they have noticed more than a few sales and valuations at and sometimes below 2005 CVs. Wonder if anyone still hopes this market isn't correcting?
A friend of mine just bought a house in a central Auckland Suburb at 16% under the 2007 CV and in no way does he believe he got a bargain (Any Auckland real estate still seems pricey to me but then I don't have a vested interest... or any interest). He simply made the offer he thought it was worth and refused to move. After weeks on the market with little interest the vendor capitulated.
If I was to put a number on it I think the market will correct 20 to 25% in real terms but inflation may hide some of the drop.
But that’s a meaningless conversation. RV’s/CV’s are simply a tool to divi up a Councils rapacious finance needs. They are not a reflection of an actual property’s value. At best they give a ball park figure – which is why banks have been happy to accept them when looking at security for a mortgage. And it is only for a very short time that a CV is in sync (but not necessarily accuralty reflecting) with the market.
Agree totally minimoke I still see ads qouting RV, GV (does not even exist!) & CV what garbage they are largely meaningless even registered valuations can date pretty quickly.
To me that meaningless conversation confirmed the industry data I've seen first hand. The Auckland market at least has dropped by double digits in the last 12 months.
The residential property market is screwed and those with an investment bias towards the sector will do it tough. A house is a house and if you are buying for emotive or practical purposes rather than financial then fair enough. I can't see a compelling need to rush though. At best the market will show neutral movement while inflation will favour deferral strategies.
Nothing new there. High original purchase price, high interest rates and low ish rental demand all has spelt danger for more than the last few years. Property values may be temporarily deflated as desperate owners try to quit their “rental yield” investment in the face of crippling costs in a talked down market. Indeed I suspect it is these people who are loosing in the current market as they are simply selling. Whereas residential owners are selling and buying in the same market space. If they are selling a lower valued property they are also able to pick up a lower valued property – so they are just as well off.
So presumably today’s buyers are cashed up – but where have they parked their Cash. Higher interest finance companies are risky. The share market is in the doldrums. Bank Interest rates are falling and inflation has probably eaten away any net income. Money has to find a home - the first three options aren’t great: some say property isn’t great - but the money has to go somewhere. Meaning property doesn’t look so bad – and at the end of any fall off you are still left with a piece of dirt, bricks and mortar. Perhaps a reason why the property fall won’t be as bad as some suggest.
I've had a cash bias for almost two years and been strongly in cash the last 12 months. The 1% real return after tax in the last 12 months has been handily compensated by the 15% to 25% boost to purchasing power it has enjoyed thanks to falls in real estate and equity markets. Going long in falling asset classes hasn't been a compelling argument against low real returns in cash.
Some people I know went to USA a yr ago to buy a house and ended up
buying two as they were so cheap.
With news that owners are defaulting and walking away, their purchases are
probably worth less now so if I didn't own a house I may wait a yr or two
in case this situation repeats here.
Thats only a 9-10% return if the property goes up in value. If it stays stagnant, you are essentially paying interest costs, which the price of borrowing. Ie. The opportunity cost to use that money. There is no return if your investment stays the same.
Its exactly the same as borrowing money for a stock on the sharemarket, and it doesnt move all year. You pay back the loan, but the stock is still worth the same. There is essentially a loss on your interest paid - an expense.
I fully understand if property is rising at the same rate of borrowing costs - its a bit like compulsory saving.
If I have $100 in disposable income I could pay $100 off my mortgage and save my self $10 a year on my interest bill. So I now have $100 extra in equity and gained another $10 to do something with. This means I now have $110 dollars to invest elsewhere.
The same applies if I have borrowed for shares – except a bank won’t lend me so much to buy shares – it prefers property.
If I just put my $100 in a bank account I’d have around $106 to invest elsewhere.
How is that saving or a return when your underlying asset (house) is still worth the same? Ie, If you liquidate your asset, then you are left with only $100 and an expense over the period amounting to the interest...so your amount returned is a (-) ?
$100 (sale of asset) - $110 (repayments including interest) = $90.
Purely for comparision, even though it doesnt make sense, would be to borrow and put money in the bank.
$106 (money end of period including interest) - $110 (repayments including interest) = $96
By borrowing money, and putting it in the bank you would be better off. Of course, you wouldnt have a roof over your head.
Putting it another way...
If I didnt take out that loan of $100, then my disposable income would automatically be $110 because of no interest costs. My return for the year would be $110*1.06=$116.60 to invest elsewhere. More than your $110 from taking out the loan and paying it off right?
Assuming house values stay the same then on sale I’d get my $100 back, and in the mean time didn’t have to pay interest on $100. Remember – I’ve changed my asset / Debt ratios. Trying to work formulas around debt interest costs is a lot more complex because this is the cost of having a roof over your head.
SEC I think you have a bone to pick with me but my story has been quite consistent. In 2005 there was still plenty of trading and a few holds in my activities. In 2006 there was trading only in lower portions and when between trades it was of course converted to cash. From Mid 2007 onwards the cash bias has been very full, with only sporadic trades in smallish portions - although given most of these have been shorts my cash position was technically topping out at around 110% less the short obligation.
I haven't been on the right side of every trade but my contrarian position on cash has so far been beneficial… despite your attempt to characterise me as disingenuous.