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Not having been here in SD in 91 or 96, what were the factors outside of low interest rates that started the buying trend? Were there any sound fundamentals – IE. job growth spikes, population spikes, etc. -or was it market perception, speculation, lax lending, etc?

Assuming you have exited the housing market and are a renter – If the market declines by 35%, and the rent vs buy values have relative parity, and alternative investments, discounted payback period are all taken into effect, what would be your advice to others? Buy or continue to rent?

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davelj – i understand how these securities work and i agree that some of these securities can become worthless at least temporarily – in the case of a fire sale or in instances of a liquidity crisis – but as a collective portfolio – for any bank / hedge fund, its not likely that their entire portfolio will become worthless. so sorry i didn’t get into specifics, i was merely speaking about valuations in general and porfolios whether they be long or short. i’m in the industry and how these securities get valued is up for a lot of debate, by everyone from regulators to those that holds these securities. how do you value a security that rarely trades for instance or when many of the benchmarks are indices comprised of synthetic securities? how do you determine a street value? i’m well aware of the difficulties – i’m merely saying that there are 2 sides to every transaction- something a lot of people seem to miss. and that someone is profiting off of this, and unlike many other security types, there are assets backed by these issuances.

traders are bidding to lose these days – there are a lot of investors who aren’t willing to buy up anymore subprime debt, but things quickly change, so my point is not whether a superfund is needed, its what the market perceives as the ability for upside, temporary or not. and there is always someone willing to buy. if the government steps in, there will probably be a few takers who will bet on the market stabiliziing – at least temporarily.

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davelj – i understand how these securities work and i agree that some of these securities can become worthless at least temporarily – in the case of a fire sale or in instances of a liquidity crisis – but as a collective portfolio – for any bank / hedge fund, its not likely that their entire portfolio will become worthless. so sorry i didn’t get into specifics, i was merely speaking about valuations in general and porfolios whether they be long or short. i’m in the industry and how these securities get valued is up for a lot of debate, by everyone from regulators to those that holds these securities. how do you value a security that rarely trades for instance or when many of the benchmarks are indices comprised of synthetic securities? how do you determine a street value? i’m well aware of the difficulties – i’m merely saying that there are 2 sides to every transaction- something a lot of people seem to miss. and that someone is profiting off of this, and unlike many other security types, there are assets backed by these issuances.

traders are bidding to lose these days – there are a lot of investors who aren’t willing to buy up anymore subprime debt, but things quickly change, so my point is not whether a superfund is needed, its what the market perceives as the ability for upside, temporary or not. and there is always someone willing to buy. if the government steps in, there will probably be a few takers who will bet on the market stabiliziing – at least temporarily.

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The people selling backyard wrapped McD burgers are trying to sell them to Burger King employees – this is not a naive group we’re talking about here.

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The people selling backyard wrapped McD burgers are trying to sell them to Burger King employees – this is not a naive group we’re talking about here.

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I don’t speak in specifics, you will always find winners amongst the funds, this is about averages and historical average. If you have enough money to buy into a top hedge fund, many far outperform the market. But for the average guy who doesn’t want to have to “pick” a fund, and bet right, go buy the market funds. George Soros and Warren Buffett clearly defy the efficient market hypothesis.

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I don’t speak in specifics, you will always find winners amongst the funds, this is about averages and historical average. If you have enough money to buy into a top hedge fund, many far outperform the market. But for the average guy who doesn’t want to have to “pick” a fund, and bet right, go buy the market funds. George Soros and Warren Buffett clearly defy the efficient market hypothesis.

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Government bailout / meddling and big banks looking to make more money. Why is anyone shocked? LTCM was bailed out because they made stupid bets. No ones wants to see foreigners owning too much of America.

Whether its right or wrong, if it presents a wide spread economic impact by doing nothing – read recession – then would you rather they get together and prop each other up so that good ol Americans don’t lose their jobs?

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Government bailout / meddling and big banks looking to make more money. Why is anyone shocked? LTCM was bailed out because they made stupid bets. No ones wants to see foreigners owning too much of America.

Whether its right or wrong, if it presents a wide spread economic impact by doing nothing – read recession – then would you rather they get together and prop each other up so that good ol Americans don’t lose their jobs?

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ETSs are all the rage – and they more closely represent the live market because they trade – so for better liquidity, buy ETSs. Assuming you have a 401K, you probably have the choices of traditional mutual funds – like others have said, go global. If you are years from retirement, don’t worry too much about it – pick a large fund manager – you don’t want the fund shutting down on you – and hope it goes lower or stays relatively cheap for the next 10 or 20 years – and then hope it appreciates for the 10 years leading up to retirement. Lower prices means more buying opps!

The market always beats the managed funds, so if you want to be able to buy and not have to watch it or worry, but an index funds. SPDRs for instance.

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ETSs are all the rage – and they more closely represent the live market because they trade – so for better liquidity, buy ETSs. Assuming you have a 401K, you probably have the choices of traditional mutual funds – like others have said, go global. If you are years from retirement, don’t worry too much about it – pick a large fund manager – you don’t want the fund shutting down on you – and hope it goes lower or stays relatively cheap for the next 10 or 20 years – and then hope it appreciates for the 10 years leading up to retirement. Lower prices means more buying opps!

The market always beats the managed funds, so if you want to be able to buy and not have to watch it or worry, but an index funds. SPDRs for instance.

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This is assuming any 1 player is 100% leveraged in any 1 direction – not true. None of the big boys are. And are we talking about stakeholders as in Wall St boys losing their money, or stakeholders meaning pension funds and retirement systems, etc? If its Wall St, its the nature of the beast – institutional guys lose money, make money all day long. If its the latter – if you can self direct, put your money somewhere else.

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This is assuming any 1 player is 100% leveraged in any 1 direction – not true. None of the big boys are. And are we talking about stakeholders as in Wall St boys losing their money, or stakeholders meaning pension funds and retirement systems, etc? If its Wall St, its the nature of the beast – institutional guys lose money, make money all day long. If its the latter – if you can self direct, put your money somewhere else.

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Raptor – all I can say is that having looked at buying a home in the last few years myself – most agents out there are idiots who all jumped on the real estate gravy train. Its kind of like the headhunters who got in during the .com boom of which most of them are no longer headhuntres because they had no clue of the difference between a DBA and a LAN administrator. There are some very good agents who have brains, but I’d spend some time asking people you view as brighter than yourself for recommendations – at least that’s what I do. I find that I have far more sophisticated cash flow models analyzing rent vs buy vs alternative investments than many financial planners much less real estate agents. Unless you find an incredibly good one, I would not look to them for “advice” on what is a good buy – they should be relied on for finding homes that you dictate are in your buyer profile – and then completing the transaction for you. Do your own homework and analysis – the internet is a beautiful thing and allows you to do all your own research and comp analysis.

Like everyone else has stated – you should not view your primary home as an investment – its a home you should want to live in for 5-10 years. Property historically has always appreciated over time, but how much time is the question and when you bought is the other. If you need the down payment amount for other things, or would rather invest it, then rent. Evaluate the opportunity cost. There are many cash flow studies out there – and if you need to “stretch”, then hold off on buying. What is your PITI + Debt as % of gross income? If it exceeds 28%, do you have enough cash to support your lifestyle? Invest your down payment and use those gains and additional savings to properly buy the right home at the right time for you- not to mention this market will have continued to correct. Go rent that house you dream of buying.

If however the amount you’d spend renting exceeds the amount of your monthly net payments (tax benefits), or is relatively on par, then buy the home – particularly if it will provide a stable environment for you to enrich your life.

To Shari who knocks people who rent – perhaps you need to build your own financial model of evaluating why people do indeed rent vs buy – over 30 years – and still come out on top of those who spent their hole lives paying a mortgage, and at the end of it, have less money than those who rented for the same period. Perhaps then you will have the credibility to write about this topic or knock renters with some actual facts.

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Raptor – all I can say is that having looked at buying a home in the last few years myself – most agents out there are idiots who all jumped on the real estate gravy train. Its kind of like the headhunters who got in during the .com boom of which most of them are no longer headhuntres because they had no clue of the difference between a DBA and a LAN administrator. There are some very good agents who have brains, but I’d spend some time asking people you view as brighter than yourself for recommendations – at least that’s what I do. I find that I have far more sophisticated cash flow models analyzing rent vs buy vs alternative investments than many financial planners much less real estate agents. Unless you find an incredibly good one, I would not look to them for “advice” on what is a good buy – they should be relied on for finding homes that you dictate are in your buyer profile – and then completing the transaction for you. Do your own homework and analysis – the internet is a beautiful thing and allows you to do all your own research and comp analysis.

Like everyone else has stated – you should not view your primary home as an investment – its a home you should want to live in for 5-10 years. Property historically has always appreciated over time, but how much time is the question and when you bought is the other. If you need the down payment amount for other things, or would rather invest it, then rent. Evaluate the opportunity cost. There are many cash flow studies out there – and if you need to “stretch”, then hold off on buying. What is your PITI + Debt as % of gross income? If it exceeds 28%, do you have enough cash to support your lifestyle? Invest your down payment and use those gains and additional savings to properly buy the right home at the right time for you- not to mention this market will have continued to correct. Go rent that house you dream of buying.

If however the amount you’d spend renting exceeds the amount of your monthly net payments (tax benefits), or is relatively on par, then buy the home – particularly if it will provide a stable environment for you to enrich your life.

To Shari who knocks people who rent – perhaps you need to build your own financial model of evaluating why people do indeed rent vs buy – over 30 years – and still come out on top of those who spent their hole lives paying a mortgage, and at the end of it, have less money than those who rented for the same period. Perhaps then you will have the credibility to write about this topic or knock renters with some actual facts.

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