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patientrenter
ParticipantNeetaT, I think there WERE, in the past, some differences between buying a home and making any other investment. In the past, home prices were a much lower % of incomes, and most of the decision about how much to spend on a home was connected with how nice a place you wanted vs how much of your income you wanted to spend on it.
In recent times, buying a home for most people means paying a price that is many, many multiples of their discretionary after-tax income. Therefore, it has become more of a speculative asset purchase in places like So Ca. With loans offering less than 20% down and low initial monthly payments, it’s even done with extreme leverage, so it’s become an EXTREMELY speculative transaction.
Your emerging market investment may not be any more risky than a typical home purchase, especially if it’s for less than a typical home’s price. If homes could be bought and sold on an open market like the stock markets, then the price you’d get for selling a home within 10 seconds might indeed go up and down as much as the stock market. The market for homes is not very liquid/efficient, so you can’t see the second-by-second impact on prices of sentiment and market information. In other words, the underlying volatility of the market for homes may be just as high, but no one tells their agent to sell their home in 10 seconds, so the impact of the volatility is not as obvious. If you were to sell your stocks using the same method you use to sell a house, fixing a price and waiting a few months at a time to see if it sells at that price, then the stock market wouldn’t seem as volatile as it does.
Finally, NeetaT, I would suggest not investing in “hot markets”. If prices in a stock market segment (like emerging) have gone up 400% in 3 years, then you should exercise the same caution you would for real estate that’s gone up by 400% in a short time. Maybe find something less trendy. You seem to have gone from the most cautious investment – CDs and the like – to volatile “hot” stock funds in one step. Why not aim to diversify by buying, slowly, various stocks/funds that are focused on different things, and maybe emphasize dividends to give you a back-up reward in case prices go down?
Patient renter in OC
ParticipantNeetaT, I think there WERE, in the past, some differences between buying a home and making any other investment. In the past, home prices were a much lower % of incomes, and most of the decision about how much to spend on a home was connected with how nice a place you wanted vs how much of your income you wanted to spend on it.
In recent times, buying a home for most people means paying a price that is many, many multiples of their discretionary after-tax income. Therefore, it has become more of a speculative asset purchase in places like So Ca. With loans offering less than 20% down and low initial monthly payments, it’s even done with extreme leverage, so it’s become an EXTREMELY speculative transaction.
Your emerging market investment may not be any more risky than a typical home purchase, especially if it’s for less than a typical home’s price. If homes could be bought and sold on an open market like the stock markets, then the price you’d get for selling a home within 10 seconds might indeed go up and down as much as the stock market. The market for homes is not very liquid/efficient, so you can’t see the second-by-second impact on prices of sentiment and market information. In other words, the underlying volatility of the market for homes may be just as high, but no one tells their agent to sell their home in 10 seconds, so the impact of the volatility is not as obvious. If you were to sell your stocks using the same method you use to sell a house, fixing a price and waiting a few months at a time to see if it sells at that price, then the stock market wouldn’t seem as volatile as it does.
Finally, NeetaT, I would suggest not investing in “hot markets”. If prices in a stock market segment (like emerging) have gone up 400% in 3 years, then you should exercise the same caution you would for real estate that’s gone up by 400% in a short time. Maybe find something less trendy. You seem to have gone from the most cautious investment – CDs and the like – to volatile “hot” stock funds in one step. Why not aim to diversify by buying, slowly, various stocks/funds that are focused on different things, and maybe emphasize dividends to give you a back-up reward in case prices go down?
Patient renter in OC
ParticipantNeetaT, I think there WERE, in the past, some differences between buying a home and making any other investment. In the past, home prices were a much lower % of incomes, and most of the decision about how much to spend on a home was connected with how nice a place you wanted vs how much of your income you wanted to spend on it.
In recent times, buying a home for most people means paying a price that is many, many multiples of their discretionary after-tax income. Therefore, it has become more of a speculative asset purchase in places like So Ca. With loans offering less than 20% down and low initial monthly payments, it’s even done with extreme leverage, so it’s become an EXTREMELY speculative transaction.
Your emerging market investment may not be any more risky than a typical home purchase, especially if it’s for less than a typical home’s price. If homes could be bought and sold on an open market like the stock markets, then the price you’d get for selling a home within 10 seconds might indeed go up and down as much as the stock market. The market for homes is not very liquid/efficient, so you can’t see the second-by-second impact on prices of sentiment and market information. In other words, the underlying volatility of the market for homes may be just as high, but no one tells their agent to sell their home in 10 seconds, so the impact of the volatility is not as obvious. If you were to sell your stocks using the same method you use to sell a house, fixing a price and waiting a few months at a time to see if it sells at that price, then the stock market wouldn’t seem as volatile as it does.
Finally, NeetaT, I would suggest not investing in “hot markets”. If prices in a stock market segment (like emerging) have gone up 400% in 3 years, then you should exercise the same caution you would for real estate that’s gone up by 400% in a short time. Maybe find something less trendy. You seem to have gone from the most cautious investment – CDs and the like – to volatile “hot” stock funds in one step. Why not aim to diversify by buying, slowly, various stocks/funds that are focused on different things, and maybe emphasize dividends to give you a back-up reward in case prices go down?
Patient renter in OC
ParticipantFSD, I don’t know that the case you cite is an argument to preserve stated income loans.
In the case you cite, the borrowers felt pretty strongly that their income would be enough to support the loan, taking all the facts and circumstances into account.
Why couldn’t they have gone to the lender and laid it all out, with full documentation? Why would the full-doc lender not reach the same positive conclusion the borrowers did? And why isn’t it the lender’s prerogative to make that judgment, whether positive or negative?
By going stated income, it just seems that the borrowers were allowed to self-underwrite. Regardless of the outcome of the underwriting on each case, I think I want to live, and be a saver, in a society where the lenders are in competition, but are in full control of the loan underwriting.
Patient renter in OC
ParticipantFSD, I don’t know that the case you cite is an argument to preserve stated income loans.
In the case you cite, the borrowers felt pretty strongly that their income would be enough to support the loan, taking all the facts and circumstances into account.
Why couldn’t they have gone to the lender and laid it all out, with full documentation? Why would the full-doc lender not reach the same positive conclusion the borrowers did? And why isn’t it the lender’s prerogative to make that judgment, whether positive or negative?
By going stated income, it just seems that the borrowers were allowed to self-underwrite. Regardless of the outcome of the underwriting on each case, I think I want to live, and be a saver, in a society where the lenders are in competition, but are in full control of the loan underwriting.
Patient renter in OC
ParticipantFSD, I don’t know that the case you cite is an argument to preserve stated income loans.
In the case you cite, the borrowers felt pretty strongly that their income would be enough to support the loan, taking all the facts and circumstances into account.
Why couldn’t they have gone to the lender and laid it all out, with full documentation? Why would the full-doc lender not reach the same positive conclusion the borrowers did? And why isn’t it the lender’s prerogative to make that judgment, whether positive or negative?
By going stated income, it just seems that the borrowers were allowed to self-underwrite. Regardless of the outcome of the underwriting on each case, I think I want to live, and be a saver, in a society where the lenders are in competition, but are in full control of the loan underwriting.
Patient renter in OC
ParticipantFSD, I don’t know that the case you cite is an argument to preserve stated income loans.
In the case you cite, the borrowers felt pretty strongly that their income would be enough to support the loan, taking all the facts and circumstances into account.
Why couldn’t they have gone to the lender and laid it all out, with full documentation? Why would the full-doc lender not reach the same positive conclusion the borrowers did? And why isn’t it the lender’s prerogative to make that judgment, whether positive or negative?
By going stated income, it just seems that the borrowers were allowed to self-underwrite. Regardless of the outcome of the underwriting on each case, I think I want to live, and be a saver, in a society where the lenders are in competition, but are in full control of the loan underwriting.
Patient renter in OC
ParticipantFSD, I don’t know that the case you cite is an argument to preserve stated income loans.
In the case you cite, the borrowers felt pretty strongly that their income would be enough to support the loan, taking all the facts and circumstances into account.
Why couldn’t they have gone to the lender and laid it all out, with full documentation? Why would the full-doc lender not reach the same positive conclusion the borrowers did? And why isn’t it the lender’s prerogative to make that judgment, whether positive or negative?
By going stated income, it just seems that the borrowers were allowed to self-underwrite. Regardless of the outcome of the underwriting on each case, I think I want to live, and be a saver, in a society where the lenders are in competition, but are in full control of the loan underwriting.
Patient renter in OC
Participant“Are they going to verify income so that buyers can’t game the system like they have been doing so far?”
kev374, you already knew the answer to that question before you asked it. C’mon, own up.
Patient renter in OC
Participant“Are they going to verify income so that buyers can’t game the system like they have been doing so far?”
kev374, you already knew the answer to that question before you asked it. C’mon, own up.
Patient renter in OC
Participant“Are they going to verify income so that buyers can’t game the system like they have been doing so far?”
kev374, you already knew the answer to that question before you asked it. C’mon, own up.
Patient renter in OC
Participant“Are they going to verify income so that buyers can’t game the system like they have been doing so far?”
kev374, you already knew the answer to that question before you asked it. C’mon, own up.
Patient renter in OC
Participant“Are they going to verify income so that buyers can’t game the system like they have been doing so far?”
kev374, you already knew the answer to that question before you asked it. C’mon, own up.
Patient renter in OC
ParticipantSorry, Rus, I wasn’t questioning your personal principles. I just thought I’d read once that, when it came time to define tax law for the self-employed, the tax law principle was established that separation of the annual increase in business value between immediately taxable income and deferrably taxable gain was done using a fair value for the working / managing contribution of the owner to the business. Once you go from principles to practice, it gets complicated, but I thought that was the general guiding principle in this area. I am no tax authority, so I just don’t know if I got that right. I am sure it’s somewhere, but I don’t have the expertise or energy to look it up.
Patient renter in OC
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