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Buy Real Estate Now or Wait?

I recently wrote a 3 part article answering the question whether one should buy real estate now or wait.

Patrick Killelea from http://patrick.net was kind enough to post it on his site today. If you are looking to buy a home for yourself or as an investment, check out this article and Patrick's site which specializes on real estate values and see if you come to the same conclusions as he and I did (he wrote an article about 3 days after mine where we came to the same conclusion).

Here are the articles (I divided them into 3 parts because people's attention spans only go so far in reading something - the economic analysis is contained in the first two parts and the tables with the number crunching and conclusion in the 3rd part);

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I used that little 'scale'--

and discovered I am better off 'buying'--

the big difference, for me (and family), though, is that with buying we can plant trees and have as much garden as we wish--

we grow food on our place; if we were renting, and the landlord didn't like our having a garden, that would be hard--

it's hard to be awake; it's easier to dream--

California's Prop 13 or one of its offspring

The limit on property tax increases in California (commonly called Prop 13) is a property saver -- it was enacted to protect property owners from losing their property to taxes because the neighbors were selling at high prices. The tax is calculated at time of purchase and can only increase a predictable amount per year.

The key in any real estate purchase is to have fixed payments you can afford. When hyperinflation comes, your payments won't go up, but the value of the property will remain valuable. The Federal Reserve makes the payments easier and easier to make unless your income is fixed.

Real estate, like gold, is real and has real value. Plus, you can live in it or rent it out, plant vegetables, etc. Location, location, location is still a big consideration: if people flee the cities, you may have a downturn due to demand reduction, but it is still land with value.

Unlike gold, it isn't portable (unless it has gold on it).

Real estate bought on credit also has some tax benefits. Rates will be going up, soon, which can put downward pressure on prices; people buy based on the monthly cost, and one of the signs of the bubble was monthly payments cheaper than renting, in some cases.

Real estate is a great buy if you do it right. They aren't making any more of it, and time is always on your side as long as you can afford to wait.

What do you think? http://consequeries.com/



“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

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I get:

Page not found
The requested page could not be found.

when I click on your links.

Thanks LadyHawke...

I should check the links...but didn't. They're working now.


Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

IMO, buying real estate just

IMO, buying real estate just feeds the "beast". You will be trapped in a cycle of rising taxes that many local and state governments will want to implement to make up for their eroding tax base. My basic idea: Don't work if you can afford it. No income = little to no taxes. Raise your own food. Get off the grid... again, only if you can afford it and it makes sense.

If it's possible, ride out the current administration by not contributing to its hunger for every earned cent.

I disagree.

There aren't many that can afford not to work unless they enjoy living in the gutters. It's hard to get off the grid or raise your own food in an apartment. And your "beast" will be fed through higher rents that landlords pass on to their tenants.

Land prices are low now and expected to drop lower before they start their long climb back up. I managed to find a pre-foreclosure, 3 acres, for considerably less than the 3x my annual income rule of thumb. My mortgage payment will be about $200 less than my rent payment is.

The way I figure it, if we are in for a period of inflation, my wages will inflate as well. The house and land will be paid off rather quickly with cheap dollars and my property taxes are low. If the inflation does not materialize, I will still be paying less for land and house than I am in rent. For me, I can't lose buying real estate right now.

re: I can't lose buying real estate right now.

Yes, only if one sells could they lose.

I set out to do the calculations for my sister who is renting, but tired of paying the landlord when she thinks she could do better with the write offs by paying herself (in reality the bank).

Every situation is going to be different, but the economic data point to a decline in prices. I wanted to see whether the decline in prices would justify waiting to buy in light of potential higher interest rates.

The calculator Velveeta uses below is the same one Patrick used for his analysis. The one thing that calculator assumes is that you sell the property. I don't think it makes sense to include this if one plans on living in the property for 5-10 years or longer.

In fact, as long as one can pay their fixed mortgage, the only real change that can occur is a potential of higher property taxes. I don't see that coming for many years.

You may have to ride the storm out for a few years and eventually higher rates will come and things will look good for you. It's a timing issue and since you bought a foreclosure, you may have got a better deal than the average Joe.

Velveeta...you can buy some farmland too eh? and pitch a tent? dig a well? buy some chickens? and a cow?

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

I've been thinking about

I've been thinking about buying some land, but not in the US. I'll may end up retiring in a place where they are friendly to Americans and it costs pennies a day to eat... but I'm not retired yet, just "tired". ;)

It's rather bizarre ...

to think of "not seeing the possiblity of higher property taxes coming for many years." How else do you think they'll start making the move to pay off huge debt? How else do you think states are going to try to avoid deep budget woes. You can't charge sales tax when people aren't buying ... so why not just raise property taxes some more, because people who owe land cannot avoid the property taxes. In my county, because of budget crunches, you can bet those property taxes keep right on going up. Every year there is an automatic increase, and if you don't agree on property valuation, you have to go fight to try to keep them from going up. And good luck with that.


My economic analysis shows lower real estate values for the years ahead. This would obviously result in lower property taxes for those years, albeit the rates can be raised higher some by your cash starved particular county.

The reason one is in gold and silver is because the potential of things unraveling can be rather quick. It makes for a better insurance against the U.S. Dollar decline that we all know will come and one can possibly profit if they play their cards right.

Real Estate won't move as quickly up as the price of gold and silver as it's not liquid. Yes, in hyperinflation, the debt will be "inflated" away. "Inflate or die" as Richard Russell says. Yes, in hyperinflation, real estate will move higher, but it still has to be bought by someone else who can purchase it.

Real Estate is still in a deflationary cycle with this latest run up in prices stimulated from a bounce off the lows and government incentives. The banks have not been forthright with their mark to market accounting of homes being lived in by folks who aren't paying a dime. There are many problems coming for real estate. Prices will fall.

I think we're in agreement on the long term if government doesn't stop their spending madness...which they won't. We possibly differ on the timing.

When I advise people, I try and do so without invoking fear that we'll turn into Zimbabwe. Japan is much worse off than us at present and gold priced in YEN has been outpacing gold priced in U.S. Dollars for 6 months. I'd keep an eye on what occurs with Japanese real estate for clues. They have an aging population and a much higher debt to GDP ratio than the U.S.

I'd rather stick with what I perceive to be the facts based on my own research and make my assumptions than listen to what others say. That's why I am thorough in my analysis. I have a pretty good track record in doing so because of this thoroughness.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Keep in mind also that the

Keep in mind also that the massive retiring population of "Boomers" will radically affect real estate. The generation that follows is much, much smaller. Real estate is probably going to tank in a huge, lasting way.


I mention that in the article. Baby Boomers will be downsizing and thus some larger homes will flood the market.

However, it is possible, as the boomers get older, the kids move in to take care of them. The kids themselves may be hard up, without jobs and at least their parents have a stream of income from social security and pensions they can sponge from...or at least get free housing.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

From my perspective, the only

From my perspective, the only thing that could support both the housing market and the economy over the next 20 years would be a massive influx of immigrants (Mexican, Chinese, etc.) becoming "legal tax-paying Americans". Other than that, the status quo is on the way out.


As a Boomer I can say you had better have them paid off and a very good will and trust set up.

If I disappear from a discussion please forgive me. My 24-7 business requires me to split mid-sentence to serve them. I am not ducking out, I will be back later to catch up.


as a Boomer, many are not aware they can take the fully paid house they are living in, turn over the rights to the home to a qualified charity, receive an income tax deduction AND a stream of income for life.

Of course I wouldn't recommend that now unless the situation is dire as we're in a low interest rate environment.

Additionally the U.S. dollar stream of income would need to hedged with gold/silver to counter any decline in currency value.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

It's a simple calculation

It's a simple calculation for most to decide whether or not they should rent or buy.


Based on my particular circumstances, it would never make sense to buy.

Wow, thanks

it is good to get some discussion on this. Many people have this very question.

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