Wednesday, June 5, 2013

Re: Location! Location! ?

Location! Location! ?

The value of real estate is said to depend on Location. I would change the rule and say that it also heavily depends on Moment, on the time, on the era or years that you are trying to buy or sell, along with the location.

I see offerings in Detroit of large homes for a few thousand dollars: Detroit is a large city in the richest country of the world, I see offers in Bulgaria of similar homes (crappier anyways) the same for a few thousand dollars.

What do they have in common ? They are in an era or perdiod of time of bad economy, small prospects of economic growth and so forth: if no one wants to be in a place (anymore?), the value of the homes can become zero, there is no real objective values for real estate, it is totally variable.

So maybe the same home in Detroit in 1950 would have been worth ten times more than today (relatively), so it should be that moment, period of time is just as important as location, just saying...
Last edited by nameta9 on Wed Jun 05, 2013 12:36 pm, edited 1 time in total.
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Re: Location! Location! ?

Postby Kriswest » Wed Jun 05, 2013 11:36 am
Location = demand and maintenance costs. Insurance rates also cause drastic price changes. Here on the gulf coast, Beautiful old mansions and regular homes are being torn down, private families cannot afford the premiums on these homes, nor can they afford to make them FEMA compliant. The land is cheap now where once an acre 10 years back would havr been 50,000$.
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Re: Location! Location! ?

Postby nameta9 » Wed Jun 05, 2013 12:29 pm
And then you have the psychology of high prices: if everyone is brainwashed and self brainwashes themselves, an entire city self brainwashes itself that its property is oh so valuable, they remain high no matter what, look at London, crazy prices from any point of view, or any European city for that matter especially Rome and Madrid etc. And then you have international funds, investors who have trillions of dollars and end up simply pumping up the value of real estate in London, New York, San Francisco, Moscow etc. so they use their cash as a weapon against everyone who is not rich and so forth.

And of course there are all kinds of power struggles, feedback effects, a lot of people live off rents being paid for their property, and they have the same interests of rich investors, keeping home values high, companies create jobs in hot areas like San Francisco and let prices go through the roof by imitating each other (pray tell me, how can any chunk of cement or chunk of wood, a piece of cement or wood, etc. since a house is just a box of wood or cement, simply a box to live in) be worth 500,000 dollars in San Francisco and 50,000 dollars in Florida ? actually the one in Florida is even bigger and nicer and has a swimming pool ad so forth.

So it is all a variable, all a wild number a society decides to impose upon itself, it is a way a society self punishes itself, a way to make a society beat itself up by this real estate war and so forth.

So they say that home prices going up is good for the economy: how on earth can anyone say this seriously ? and yet it is what everyone says and believes in.

I say that it is much easier for fake high home prices to come crashing down than it is to pump them up, it is easier to go Detroit than the other way around: after all the prices going up is a make believe bubble, only due to a dominating psychological and cultural artifact that can change course very quickly never to go back up again.

Now Shanghai, or Sao Paolo Brazil tomorrow Mexico City or Saigon or Hanoi will become the mega hot spots, go pump the prices up in those cities and so forth, the cities with high economic growth expected (and pray tell me what is the difference between economic growth and simply home prices growing ? the same thing ? home prices punish those who can't afford it).

Of course New York City, Los Angeles, London, San Francisco will forever be considered hot spots and will always have high home prices, how I wish they would crash and collapse like a brick in all of those cities, they should all go Detroit, 10,000 dollars for a nice 4 bedroom home!

Of course the theory goes that a home is worth the area it is placed in because the area offers good jobs and so forth: but if companies are always restructuring, cutting costs, changing and technology is always changing everything who will gaurantee that an area will always be a hot spot ? another bet on the future, another risk and so forth, so the home you paid 300,000 dollars for may be worth 50,000 dollars in 20 years if all the companies in an area find a way to cut costs, and fire everyone...

And then you have the cases like Madrid and Rome that have zero economy, no possible future growth and home prices that are frozen sky high: of course the banks and the people in those countries will have to wait a long time to finally wake up and realize they live in third world dumps with zero jobs prospects before those prices collapse like crazy, the sooner the better!
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Re: Location! Location! ?

Postby nameta9 » Wed Jun 05, 2013 12:33 pm
Kriswest wrote:Location = demand and maintenance costs. Insurance rates also cause drastic price changes. Here on the gulf coast, Beautiful old mansions and regular homes are being torn down, private families cannot afford the premiums on these homes, nor can they afford to make them FEMA compliant. The land is cheap now where once an acre 10 years back would havr been 50,000$.


Where is that ? and anyways you also have the wild card of property taxes changing, increasing whatever. How much is insurance ? and property taxes there ? for a 200,000 dollar home for example ? is the area a "hot spot" for jobs and such ?

Of course I assume you are in the USA, so those costs are local to the USA, my theory is more general, worldwide, real estate is always instable, a kind of war, a complex affair that already caused a massive recession in the USA and especially in Europe.

Wait and see what happens in China, they have millions of empty homes, they have this idea that real estate is a way to store value, to save money in bricks or something like that.

Pure illusion , pure make believe, pure hope and imagination, when China gets their wake up call, watch out, the world economy will go straight into a depression...