Law School Discussion

Home Ownership and Wealth Building

Re: Home Ownership and Wealth Building
« Reply #20 on: May 12, 2005, 03:30:22 PM »
that's a perfect analogy!!! None of us are going to take a commission based job as our only source of income...it's like playing the lottery.. i could win 56 million dollars.. but am i going to bank on that happening? never that



Okay, let's stick with my employment analogy: Imagine  you have two choices 1) a job that pays a flat 50K per year and 2)a commision based sales job that has the potential to pay more than 50K per year. Ofcourse the sales job can pay more than 50K, but you would not want to ignore the fact that the sales job could potentially pay far less than 50K depending on how you do.  This is my point.  The machine ignores this possibility, and further ignores the fact that risk is multiplied (risk measured by volatility of returns or just shortfall risk (possibility of not achieving your goals))
 


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Re: Home Ownership and Wealth Building
« Reply #21 on: May 12, 2005, 03:41:33 PM »
BP, could you send me that financial guide?

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Re: Home Ownership and Wealth Building
« Reply #22 on: May 12, 2005, 03:43:16 PM »
A lot of economists have been warning about a bubble around the housing market, any thoughts/opinions on this subject?  horrible time to buy?

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Re: Home Ownership and Wealth Building
« Reply #23 on: May 12, 2005, 04:33:38 PM »
A lot of economists have been warning about a bubble around the housing market, any thoughts/opinions on this subject?  horrible time to buy?

There are huge differences between the stock market and the real estate market.  The speculative bubble in the stock market was driven by insane stock valuations, the internet phenomena, a gambling mentality (every Tom male private part and Harry thought they could get rich overnight), and great marketing by new companies and brokerage houses.

On the other hand, the increase in home prices has been driven by more "honest" demand.  People need a place to live, and in certain areas of the country that are more attractive for people to move to (DC for example) demand has just been crazy.  This coupled with a favorable interest rate environment and somewhat limited housing supply, prices had no way to go but up.  This is a somewhat simplified explanation, but I'm trying to get this across: the drivers that pushed stock prices to those astronomically insane levels are far different from those that have moved the real estate market to current levels. 

Furthermore, (daymn this is getting long), for there to be a "bursting of the bubble" there has to be some liquidity, like the stock market, where prices can drop 50% in a day.  There is no such liquidity in the housing market, so the worse we can probably see is a "fizzle"...i.e price appreciation slowing down over a reasonably long period of time.

I can send you some info on this if you like.  Oh, and I'll bring the financial guide stuff to work tomorrow, and send it to you.
HTH   







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Re: Home Ownership and Wealth Building
« Reply #24 on: May 12, 2005, 05:37:57 PM »
BP is going to buy my house.  ;)

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Re: Home Ownership and Wealth Building
« Reply #25 on: May 12, 2005, 05:48:53 PM »
A lot of economists have been warning about a bubble around the housing market, any thoughts/opinions on this subject?  horrible time to buy?

There are huge differences between the stock market and the real estate market.  The speculative bubble in the stock market was driven by insane stock valuations, the internet phenomena, a gambling mentality (every Tom male private part and Harry thought they could get rich overnight), and great marketing by new companies and brokerage houses.

On the other hand, the increase in home prices has been driven by more "honest" demand.  People need a place to live, and in certain areas of the country that are more attractive for people to move to (DC for example) demand has just been crazy.  This coupled with a favorable interest rate environment and somewhat limited housing supply, prices had no way to go but up.  This is a somewhat simplified explanation, but I'm trying to get this across: the drivers that pushed stock prices to those astronomically insane levels are far different from those that have moved the real estate market to current levels. 

Furthermore, (daymn this is getting long), for there to be a "bursting of the bubble" there has to be some liquidity, like the stock market, where prices can drop 50% in a day.  There is no such liquidity in the housing market, so the worse we can probably see is a "fizzle"...i.e price appreciation slowing down over a reasonably long period of time.

I can send you some info on this if you like.  Oh, and I'll bring the financial guide stuff to work tomorrow, and send it to you.
HTH   








please do

faith2005

Re: Home Ownership and Wealth Building
« Reply #26 on: May 13, 2005, 09:09:52 AM »
BP is going to buy my house.  ;)

really? where? (j/k regal) :)

Re: Home Ownership and Wealth Building
« Reply #27 on: May 13, 2005, 09:11:19 AM »

seu2002

Re: Home Ownership and Wealth Building
« Reply #28 on: May 13, 2005, 09:13:47 AM »

Re: Home Ownership and Wealth Building
« Reply #29 on: May 13, 2005, 09:19:30 AM »
so is anyone trying to buy a home anytime soon? :)