What is purchasing power? Well, if you bought your house in the 60s or 70s, you know exactly what it’s not today—it’s not power. It’s more like weakness. Take a look at the median income and median real estate sales through the years, and you tell me what’s happened to purchasing power (weakness). Remember, the “median” eliminates the big outliers that can skew the average. Median is the middle number. For example, in a sample of 30 houses, the 15th house is the median. You can see on the chart that from 1963 on, the growth of the median price of a house has outpaced the growth of the … [Read more...]
Do You Remember When You Purchased Your First Home?
Do you remember when you purchased your first home? If you’re old enough, you remember when interest rates were as high as 12 3/4%, as a client friend reminded me yesterday. “I didn’t worry too much about the interest rate because, in relative terms, it was reflected in the price.” The price was always the main driver of value. Still is. What’s always worth remembering, he reminded me, is you can negotiate the terms. But you can’t revisit the purchase price. And if banks aren’t interested in renegotiating the terms, you can do it yourself through the back door by doubling or tripling your … [Read more...]
Do You Know Who’s the Largest Owner of Farmland in America?
Are you down with OSB? It stands for oriented strand board. It’s used in construction similar to the way plywood is used—for roofs, subfloors, etc. A client of mine used to be an OSB trader. He’s stepped away from that a bit lately, but like any former pro, he still follows his team, so to speak. He tells me prices for OSB are at or near 2008-pre-real estate crash levels. That doesn’t mean he’s predicting a crash. He’s just telling me the lay of the land. Great conversation. He also tells me that as commodity prices rise, farmland ownership is getting more attractive. But, if you’re not … [Read more...]
Most Important Consumer Price Inflating at over 8% Annual Rate
Inflation is too low according to the Fed. That may be true when you incessantly make adjustments for quality, substitute goods, and exclude from your index, the single most important price for most consumers. That price would be the price of a home. You know, the American dream. Surely, even the PhD’s setting monetary policy are familiar. Instead of using the actual price of homes, the Fed uses a contrived proxy called owners equivalent rent. Rent inflation is falling, but home prices are going the other way. Home prices have increased over 8.4% over the last year. If you are in the … [Read more...]
Enjoying Christmas in a New Home Was Pricey This Year
When new home sales are falling because there isn't enough supply to meet demand, the only short term solution to balance the market is for prices to go up. It takes time to build new supply, but many of this year's home buyers are trying to escape the city now. They want to have Christmas away from the densely crowded, COVID-filled cities, and they don't care how much it costs. A combination of rising prices and short supply actually pushed down the number of sales in November. The Wall Street Journal reports: Homes sales slipped in November as the supply of properties for sale fell to a … [Read more...]
Red State Cities Booming as People Look for a Better America
What's to love about high taxes, high cost of living, high regulations, and business-killing coronavirus mandates? Nothing. That's why many of America's small business owners and entrepreneurs are leaving blue state cities where their retirement savings are treated like a piggy bank for politicians. They want to choose their own retirement life. They're moving to red state cities where governors and mayors look at business and entrepreneurs as something to be nurtured, not targeted for redistribution. One of the newest destinations for Americans fleeing their city is Nashville, … [Read more...]
New Yorkers Flee to Suburban Islands in Droves
COVID-19 and a summer of rioting and looting have driven New Yorkers to flee to the suburbs where they are creating islands of peace. The NY Post details where they left and where they went: Where they fled from Top zip codes New Yorkers exited between March 1 and Oct. 31, 2020, with the number of change of address requests for each area: 1. Upper West Side, 10023: 3,368 2. Upper West Side, 10025: 3,000 3. Murray Hill, 10016: 2,889 4. Upper West Side, 10024: 2,708 5. Chelsea/Greenwich Village, 10011: 2,520 6. Upper East Side, 10128: 2,165 7. Downtown Brooklyn, 11201: 1,836 8. … [Read more...]
Opportunities in Commercial Real Estate Are Too Good to Resist for Some Buyers
Esther Fung reports at The Wall Street Journal that some companies have begun taking a chance on buying historically inexpensive retail real estate. She writes: Struggling shopping malls are finding an unexpected boost from bargain-hunting retail operators. Such was the case in Stamford, Conn., where the Stamford Town Center mall lost popular tenants like H&M, Apple Inc. and Talbots to a competing shopping center that opened last year only 8 miles away. In October, home-furnishing company Safavieh purchased Town Center mall. Safavieh plans to open a home-design center and … [Read more...]
Why Vanguard is Too Big: Part X: A Lesson from My Father About Paying Too Much
Your Survival Guy learned how to be a successful real estate investor from my dad. He taught me that price always matters, but he also understood the magic of time. If you need to pay a higher price to be in the game, you get in the game, especially when you’re young. When Becky and I were buying our first home, my dad couldn’t believe how much we were paying. But he also realized that when you’re young, you have a better chance of surviving if you happen to pay too much. You have time on your side—and a job—and nothing focuses the mind like a mortgage. But what if you don’t have time? Price … [Read more...]
NYC Hotels’ ‘Temporary Shutdown’ Turns into Permanent Closure
Since the beginning of COVID-19 shutdowns in March, New York City has been suffering. At the top of the list of those businesses worst affected is the hotel industry. What were planned to be only temporary shutdowns have turned into permanent closures for many locations. Patrick McGeehan reports for the New York Times: Many of New York City’s biggest hotels closed their doors in March when the coronavirus wiped out tourism and business travel. The shutdowns were supposed to be temporary, but six months later, with no potential influx of visitors in sight, a wave of permanent closures has … [Read more...]
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