[EconProf]

Your basic thesis is that all the money creation and monetary stimulus of QE2 will lead to inflation in most everything, so that by borrowing now at artificially low (temporarily) interest rates you will reap long term profits by paying back with cheaper dollars and have a highly appreciated real estate asset.
I’ve been saying the same thing for years. And I’ve been wrong. But like you, I have hope that some day I’ll be proven right. After all, a broken clock is right twice a day. I also own a lot of real estate assets that would benefit from such a scenario.
Why might you and I be wrong in the future? The inflation we have had in commodities and other assets has not spread to real estate (except Midwest farmland). Past inflationary periods have been fueled by jumps in aggregate demand. The fiscal and monetary stimulus has not fueled a broader economic recovery because the first two components of aggregate demand, consumption and investment (remember GNP = C + I + G) remain weak, and look to continue weak. If 9.6% unemployment is the New Normal, and the housing inventory remains bloated, and housing speculation remains dead, then how will your investment go up in value? In fact the fiscal and monetary stimulus has scared the crap out of consumers and investors, which normally make up about three-fourths of aggregate demand. Both sectors leveraged to the hilt during the bubble, and likely have much more deleveraging to do. A final straw may be rising interest rates that typically accompany rising inflation, thus clobbering real estate demand.
In short, I hope you are right, but selfishly fear you are wrong.

[EconProf]

Your basic thesis is that all the money creation and monetary stimulus of QE2 will lead to inflation in most everything, so that by borrowing now at artificially low (temporarily) interest rates you will reap long term profits by paying back with cheaper dollars and have a highly appreciated real estate asset.
I’ve been saying the same thing for years. And I’ve been wrong. But like you, I have hope that some day I’ll be proven right. After all, a broken clock is right twice a day. I also own a lot of real estate assets that would benefit from such a scenario.
Why might you and I be wrong in the future? The inflation we have had in commodities and other assets has not spread to real estate (except Midwest farmland). Past inflationary periods have been fueled by jumps in aggregate demand. The fiscal and monetary stimulus has not fueled a broader economic recovery because the first two components of aggregate demand, consumption and investment (remember GNP = C + I + G) remain weak, and look to continue weak. If 9.6% unemployment is the New Normal, and the housing inventory remains bloated, and housing speculation remains dead, then how will your investment go up in value? In fact the fiscal and monetary stimulus has scared the crap out of consumers and investors, which normally make up about three-fourths of aggregate demand. Both sectors leveraged to the hilt during the bubble, and likely have much more deleveraging to do. A final straw may be rising interest rates that typically accompany rising inflation, thus clobbering real estate demand.
In short, I hope you are right, but selfishly fear you are wrong.

[EconProf]

Your basic thesis is that all the money creation and monetary stimulus of QE2 will lead to inflation in most everything, so that by borrowing now at artificially low (temporarily) interest rates you will reap long term profits by paying back with cheaper dollars and have a highly appreciated real estate asset.
I’ve been saying the same thing for years. And I’ve been wrong. But like you, I have hope that some day I’ll be proven right. After all, a broken clock is right twice a day. I also own a lot of real estate assets that would benefit from such a scenario.
Why might you and I be wrong in the future? The inflation we have had in commodities and other assets has not spread to real estate (except Midwest farmland). Past inflationary periods have been fueled by jumps in aggregate demand. The fiscal and monetary stimulus has not fueled a broader economic recovery because the first two components of aggregate demand, consumption and investment (remember GNP = C + I + G) remain weak, and look to continue weak. If 9.6% unemployment is the New Normal, and the housing inventory remains bloated, and housing speculation remains dead, then how will your investment go up in value? In fact the fiscal and monetary stimulus has scared the crap out of consumers and investors, which normally make up about three-fourths of aggregate demand. Both sectors leveraged to the hilt during the bubble, and likely have much more deleveraging to do. A final straw may be rising interest rates that typically accompany rising inflation, thus clobbering real estate demand.
In short, I hope you are right, but selfishly fear you are wrong.

[EconProf]

Your basic thesis is that all the money creation and monetary stimulus of QE2 will lead to inflation in most everything, so that by borrowing now at artificially low (temporarily) interest rates you will reap long term profits by paying back with cheaper dollars and have a highly appreciated real estate asset.
I’ve been saying the same thing for years. And I’ve been wrong. But like you, I have hope that some day I’ll be proven right. After all, a broken clock is right twice a day. I also own a lot of real estate assets that would benefit from such a scenario.
Why might you and I be wrong in the future? The inflation we have had in commodities and other assets has not spread to real estate (except Midwest farmland). Past inflationary periods have been fueled by jumps in aggregate demand. The fiscal and monetary stimulus has not fueled a broader economic recovery because the first two components of aggregate demand, consumption and investment (remember GNP = C + I + G) remain weak, and look to continue weak. If 9.6% unemployment is the New Normal, and the housing inventory remains bloated, and housing speculation remains dead, then how will your investment go up in value? In fact the fiscal and monetary stimulus has scared the crap out of consumers and investors, which normally make up about three-fourths of aggregate demand. Both sectors leveraged to the hilt during the bubble, and likely have much more deleveraging to do. A final straw may be rising interest rates that typically accompany rising inflation, thus clobbering real estate demand.
In short, I hope you are right, but selfishly fear you are wrong.

[EconProf]

Way OT here, but yeah, WY is truely windy. Years ago I biked through it on a cross-country trip and the prevailing westerly wind literally pushed me across the state.
If income tax rates are your consideration, WY and South Dakota have none. SD is especially business friendly and its biggest city, Sioux Falls, has attracted big banking and credit card companies and grown in population about 40% in the last decade. Lots of the amenities, shopping, and culture there, and a civic-minded Scandanavian/German heritage, clean government, etc. North Dakota, with a sub-4% unemployment rate is also business-friendly with a rapidly growing energy sector. Both states are propelled by the farm sector, which is booming thanks to the world’s demand for commodities. Grain prices have outpaced gold lately, so farm land is soaring in price–perhaps 50% in the past three years. Farmers with land holdings often cash out in their fifties and sixties and build a McMansion in town and retire millionaires. Accordingly, the cities in these agricultural states are thriving (but not the smaller towns, which are still depopulating).

Income taxes aren’t everything, however, since states often have high sales (Nevada) or property (Texas) taxes to make up for no income taxes. But for the very rich, California’s steeply progressive taxes and high top rate of over 10% are making many Californians establish residence for tax purposes anywhere else, i.e. in Nevada. California’s capital gains taxes are especially onerous. I sold one long-held property here without a 1031 exchange, and my CA capital gains tax was two-thirds the size of the federal capital gains tax.

[EconProf]

Way OT here, but yeah, WY is truely windy. Years ago I biked through it on a cross-country trip and the prevailing westerly wind literally pushed me across the state.
If income tax rates are your consideration, WY and South Dakota have none. SD is especially business friendly and its biggest city, Sioux Falls, has attracted big banking and credit card companies and grown in population about 40% in the last decade. Lots of the amenities, shopping, and culture there, and a civic-minded Scandanavian/German heritage, clean government, etc. North Dakota, with a sub-4% unemployment rate is also business-friendly with a rapidly growing energy sector. Both states are propelled by the farm sector, which is booming thanks to the world’s demand for commodities. Grain prices have outpaced gold lately, so farm land is soaring in price–perhaps 50% in the past three years. Farmers with land holdings often cash out in their fifties and sixties and build a McMansion in town and retire millionaires. Accordingly, the cities in these agricultural states are thriving (but not the smaller towns, which are still depopulating).

Income taxes aren’t everything, however, since states often have high sales (Nevada) or property (Texas) taxes to make up for no income taxes. But for the very rich, California’s steeply progressive taxes and high top rate of over 10% are making many Californians establish residence for tax purposes anywhere else, i.e. in Nevada. California’s capital gains taxes are especially onerous. I sold one long-held property here without a 1031 exchange, and my CA capital gains tax was two-thirds the size of the federal capital gains tax.

[EconProf]

Way OT here, but yeah, WY is truely windy. Years ago I biked through it on a cross-country trip and the prevailing westerly wind literally pushed me across the state.
If income tax rates are your consideration, WY and South Dakota have none. SD is especially business friendly and its biggest city, Sioux Falls, has attracted big banking and credit card companies and grown in population about 40% in the last decade. Lots of the amenities, shopping, and culture there, and a civic-minded Scandanavian/German heritage, clean government, etc. North Dakota, with a sub-4% unemployment rate is also business-friendly with a rapidly growing energy sector. Both states are propelled by the farm sector, which is booming thanks to the world’s demand for commodities. Grain prices have outpaced gold lately, so farm land is soaring in price–perhaps 50% in the past three years. Farmers with land holdings often cash out in their fifties and sixties and build a McMansion in town and retire millionaires. Accordingly, the cities in these agricultural states are thriving (but not the smaller towns, which are still depopulating).

Income taxes aren’t everything, however, since states often have high sales (Nevada) or property (Texas) taxes to make up for no income taxes. But for the very rich, California’s steeply progressive taxes and high top rate of over 10% are making many Californians establish residence for tax purposes anywhere else, i.e. in Nevada. California’s capital gains taxes are especially onerous. I sold one long-held property here without a 1031 exchange, and my CA capital gains tax was two-thirds the size of the federal capital gains tax.

[EconProf]

Way OT here, but yeah, WY is truely windy. Years ago I biked through it on a cross-country trip and the prevailing westerly wind literally pushed me across the state.
If income tax rates are your consideration, WY and South Dakota have none. SD is especially business friendly and its biggest city, Sioux Falls, has attracted big banking and credit card companies and grown in population about 40% in the last decade. Lots of the amenities, shopping, and culture there, and a civic-minded Scandanavian/German heritage, clean government, etc. North Dakota, with a sub-4% unemployment rate is also business-friendly with a rapidly growing energy sector. Both states are propelled by the farm sector, which is booming thanks to the world’s demand for commodities. Grain prices have outpaced gold lately, so farm land is soaring in price–perhaps 50% in the past three years. Farmers with land holdings often cash out in their fifties and sixties and build a McMansion in town and retire millionaires. Accordingly, the cities in these agricultural states are thriving (but not the smaller towns, which are still depopulating).

Income taxes aren’t everything, however, since states often have high sales (Nevada) or property (Texas) taxes to make up for no income taxes. But for the very rich, California’s steeply progressive taxes and high top rate of over 10% are making many Californians establish residence for tax purposes anywhere else, i.e. in Nevada. California’s capital gains taxes are especially onerous. I sold one long-held property here without a 1031 exchange, and my CA capital gains tax was two-thirds the size of the federal capital gains tax.

[EconProf]

Way OT here, but yeah, WY is truely windy. Years ago I biked through it on a cross-country trip and the prevailing westerly wind literally pushed me across the state.
If income tax rates are your consideration, WY and South Dakota have none. SD is especially business friendly and its biggest city, Sioux Falls, has attracted big banking and credit card companies and grown in population about 40% in the last decade. Lots of the amenities, shopping, and culture there, and a civic-minded Scandanavian/German heritage, clean government, etc. North Dakota, with a sub-4% unemployment rate is also business-friendly with a rapidly growing energy sector. Both states are propelled by the farm sector, which is booming thanks to the world’s demand for commodities. Grain prices have outpaced gold lately, so farm land is soaring in price–perhaps 50% in the past three years. Farmers with land holdings often cash out in their fifties and sixties and build a McMansion in town and retire millionaires. Accordingly, the cities in these agricultural states are thriving (but not the smaller towns, which are still depopulating).

Income taxes aren’t everything, however, since states often have high sales (Nevada) or property (Texas) taxes to make up for no income taxes. But for the very rich, California’s steeply progressive taxes and high top rate of over 10% are making many Californians establish residence for tax purposes anywhere else, i.e. in Nevada. California’s capital gains taxes are especially onerous. I sold one long-held property here without a 1031 exchange, and my CA capital gains tax was two-thirds the size of the federal capital gains tax.

[EconProf]

If you have not built before, there is a real learning curve involved in which your first is overly-expensive, stressful, and likely has its share of mistakes. Given how far home prices have fallen, and the great inventory available compared to the peak years, I’d be looking to grab a bargain, especially with these interest rates.
Your selection is near Santaluz, which you may have already looked at. It has much lower density, is kid-friendly, and the design standards when built were exacting. Some bargains exist, but prices are edging up lately.

[EconProf]

If you have not built before, there is a real learning curve involved in which your first is overly-expensive, stressful, and likely has its share of mistakes. Given how far home prices have fallen, and the great inventory available compared to the peak years, I’d be looking to grab a bargain, especially with these interest rates.
Your selection is near Santaluz, which you may have already looked at. It has much lower density, is kid-friendly, and the design standards when built were exacting. Some bargains exist, but prices are edging up lately.

[EconProf]

If you have not built before, there is a real learning curve involved in which your first is overly-expensive, stressful, and likely has its share of mistakes. Given how far home prices have fallen, and the great inventory available compared to the peak years, I’d be looking to grab a bargain, especially with these interest rates.
Your selection is near Santaluz, which you may have already looked at. It has much lower density, is kid-friendly, and the design standards when built were exacting. Some bargains exist, but prices are edging up lately.

[EconProf]

If you have not built before, there is a real learning curve involved in which your first is overly-expensive, stressful, and likely has its share of mistakes. Given how far home prices have fallen, and the great inventory available compared to the peak years, I’d be looking to grab a bargain, especially with these interest rates.
Your selection is near Santaluz, which you may have already looked at. It has much lower density, is kid-friendly, and the design standards when built were exacting. Some bargains exist, but prices are edging up lately.

[EconProf]

If you have not built before, there is a real learning curve involved in which your first is overly-expensive, stressful, and likely has its share of mistakes. Given how far home prices have fallen, and the great inventory available compared to the peak years, I’d be looking to grab a bargain, especially with these interest rates.
Your selection is near Santaluz, which you may have already looked at. It has much lower density, is kid-friendly, and the design standards when built were exacting. Some bargains exist, but prices are edging up lately.

[EconProf]

Zeigeist: Where would I go? Nowhere. I can afford to stay here for the weather, amenities, ocean, etc. But only because I sold my real estate investments in San Diego years ago and exchanged into real estate in other states.
There is another lengthy thread going, “Why I am leaving San Diego” with lots of dialogue about the nonmonetary reasons to pick a place to live. They are compelling to me, but only because I can afford it. Now if I were younger, had a family, expected to move into a high tax bracket or wanted to start a business, I’d be looking at business-friendly states that had a better economic future.

[Author]

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