Buffett: "Dumb lending always has its consequences. It's like a disease that doesn't manifest itself for a few weeks, like an epidemic that doesn't show up until it's too late to stop it Any developer will build anything he can borrow against. If you look at the 10Ks that are getting filed [by banks] and compare them just against last year's 10Ks, and look at their balances of 'interest accrued but not paid,' you'll see some very interesting statistics [implying that many homeowners are no longer able to service their current debt]."
We should *all* be very concerned about the local bubbles that are affecting certain areas of the country. History has shown that these bubbles dont deflate- they pop and spectacularly so. What's worse is that the current bubbles have been fed primarily by lax lending standards. I am not eloquent enough to argue these points- so let me point you to those who are. These specificially deal with Cali, but I am betting they apply just as well to other speculative housing booms like Boston and NYC. www.housingbubblecasualty.com www.piggington.com There is a housing bubble. It is going to burst. The only question is how bad will it hurt? My uneducated guess: a lot!
buying a house to live in is 100% always better than renting. buying a house for rental income is currently not better than trading. it is like it is cheaper to drive a bmw to work or to buy a bus pass? We, traders/investors with great income should not be so cheap. We need to show our class. However, when making a real estate invesment vs investing in stocks, I will pick stocks.
I agree with buying if you plan to live there long term. Buying as rental/investment is the safest way for an average guy to be wealthy with minimal or zero investment and little risk. Personally I prefer real estate to stocks. Stocks are basically a legal pyramid scam with the exception of dividend paying stocks. Real estate I can see it, plus it's a finite resource, as long as the population is growing in the long run there is only one direction it can go. Up.