Tuscon, Arizona after Trump

Donald Trump is a well-known property developer and licensor of his brand name. Property developers know the greatest value of real esate and greatest demand for real estated is waterfront properties.

Thanks to Donald Trump dumping the Paris Accord more and more of America will soon become much more valuable as waterfront properties.

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American house prices: realty check. The Economist Magazine

The Economist magazine has an article and interactive chart of housing in America. From the article:

FIVE years after the house price crash that nearly took down an entire financial system, America’s property market appears to be in rude health: prices have appreciated by 17% over the past three years. But that statistic hides vast differences in housing markets across America. In San Francisco, thanks to a tech boom and constrained supply, prices have increased by 50% over the same period, and have now surpassed their 2005 peak. While prices in Las Vegas—where housing was built like billy-o leading up to the crash—have increased by the same amount, they still remain 40% below their peak.

As a gauge of frothiness, The Economist has compared prices against two affordability metrics: income and rents. On this basis, affordability looks stretched in San Francisco with prices at nine times household income and nearly 20 times annual rents. This compares to a long-run city average of six times income, and a national average of 3.3 for income and 11 for rents. By comparison, housing looks particularly cheap in Detroit and Pittsburgh where prices are just over two-times median household income. Over time prices should adjust (or equivalently incomes and rents will rise) to return affordability ratios to their long-run averages. But gauges of affordability are affected by interest rates, which are at an all-time low, making housing artificially cheap to buy. As and when interest rates do normalise, prices will face pressure to return towards their long-run relationship with income and rents. But even if they do stand firm, who wouldn’t prefer a small slice of San Franciscan silicon over a rusting lump of Pittsburgh steel?

Read the complete article in The Economist and play with the interactive map at this link.

Rent or buy a home calculator

Is owning a home a good investment?  “Never put all your eggs in one basket” is one saying everyone should remember when it comes to investing.

I was in real estate for many years and often told prospective purchasers that they should buy a home, but that was 20 years ago and my viewpoint was changing even then.

The reason my opinion on owning a home was changing 20 years ago was that a home was quickly becoming a main source of expected future wealth. In other words, housing had become part of the “greater fool theory” in that there will be someone dumber than me to take this turkey off my hands in x-number of months or years down the road. We all know what happened in the United States and other countries where the “greater fool theory” was fully realized.

Government mandated inflation of 1% to 2% per year assures some assets, as well as taxes, increase each year. Mandated inflation also assures a tipping point will be met at some future time. The idea is to get out of your investment before the masses realize the tipping point has been reached.

Smashed investment bubbles, like real estate in the United States and elsewhere, remind people not to keep all their eggs in one basket.

So how do you know whether or not to rent or buy a home? And how do you know when it is a good time to buy a home? Every real estate market is different, with many cities having areas where prices will increase while other areas of the same city have prices decreasing.

If you decide to rent instead of buy, you should place the money you would have spent on a mortgage in other investments. Spending the extra money on non-investment items like holidays or cars or TV’s or furniture or clothes is just pissing your money down the drain.

Owning a home means property taxes, mortgage, insurance, maintenance and repairs, lawn and gardening expenses, utility expenses and all the other little expenses that can easily exceed the cost of renting a similar or better abode.

To find out if you should rent or buy try this handy little calculator from Vancouver City Credit Union.