John Paulson sez by real estate

[BigBagel]

http://blogs.forbes.com/robertlenzne...lation-coming/

John Paulson: If you don't own a home buy one. If you do buy five more.

[Gnosis]

Re: John Paulson sez by real estate

Really? Here in So.Cal the prices continue to drop. Why buy now? RE looks to go another 20% south before the inflation can catch up. Besides, if the rates rise, won't that kill the market?

[Slimprofits]

Re: John Paulson sez by real estate

Paulson's arguement is that inflation will carry home prices.

As this is the best time in 50 years to buy homes, Paulson advised his listeners, crowded into 3 separate dining rooms, to issue 30 year mortgages to buy a home as “your debt and interest payments get locked in at record lows, while the price of your home will rise.”
“If you don’t own a home buy one,” Paulson recommended; ” if you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”

[karim0028]

Re: John Paulson sez by real estate

Paulson's arguement is that inflation will carry home prices.

As this is the best time in 50 years to buy homes, Paulson advised his listeners, crowded into 3 separate dining rooms, to issue 30 year mortgages to buy a home as “your debt and interest payments get locked in at record lows, while the price of your home will rise.”
“If you don’t own a home buy one,” Paulson recommended; ” if you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”

He must have invested in REITS

I think in normal inflation it might do allright nominally, but im sure there are better investments for inflation. If we have an interest rate shock i just cant see how 10-15% interest rates can lift up RE...

[ER59]

Re: John Paulson sez by real estate

Really? Here in So.Cal the prices continue to drop. Why buy now? RE looks to go another 20% south before the inflation can catch up. Besides, if the rates rise, won't that kill the market?

I don't think prices are still dropping in So.Cal. I think in OC they began to rise already.

[jacobdcoates]

Re: John Paulson sez by real estate

Posted by babbittd

......"If you don’t own a home buy one,” Paulson recommended; ” if you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”


This only makes sense if hyperinflation is just around the corner. A leverage bet on real assets with other peoples money.

[ASH]

Re: John Paulson sez by real estate

Posted by babbittd

......"If you don’t own a home buy one,” Paulson recommended; ” if you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”


This only makes sense if hyperinflation is just around the corner. A leverage bet on real assets with other peoples money.

I'm still thinking hard about the first part: "If you don't own a home -- buy one."

Even if home prices fall "a lot" (like another 30% - 50%) as the result of the high mortgage interest rates that would accompany high inflation -- and even if prices drop in nominal terms as well as real terms -- I would have a tough time coming up with enough cash to buy a home without some sort of financing in the next 5 years. In fact, a drop in real value, but an increase in nominal value, is more along the lines of what I expect in that scenario. So I'm thinking if I don't buy a house before major inflation hits, it could be a long while indeed before the next opportunity arises.

[jk]

Re: John Paulson sez by real estate

this is the key sentence guys

your debt and interest payments get locked in at record lows, while the price of your home will rise.

in the 1970's home prices rose nominally, actually lost a little real. BUT the mortgages turned into jokes. the profits were in the [declining real value of the] mortgages, not the houses. a balance sheet has 2 sides. you can make your profit on either side [or both, of course].

i'm not ready to buy a 2nd house, but about 1.5-2 years ago i did a CASH OUT refi at 4.375. [last summer i put much of the cash into a geothermal heating system for my house as a peak cheap oil play - after the tax break on the system, that system paid me back 10% in energy cost savings over the last 12 months. i expect more savings if/when oil goes up more. i put the rest of the cash into loonies.] if rates fall much further i will refi again, and again will take out any cash i can. if you believe there will be inflation, 30 year fixed rate debt can't be beat.

[KGW]

Re: John Paulson sez by real estate

I don't think prices are still dropping in So.Cal. I think in OC they began to rise already.

There is no, I repeat NO parity with income at this point in Southern California. . .Wherever you are. This is for the region as a whole. The "average " income in California is $55-60k. Even if someone was to want to borrow money for such, could they qualify?

Paulson is speaking to his "choir."

[karim0028]

Re: John Paulson sez by real estate

this is the key sentence guys

your debt and interest payments get locked in at record lows, while the price of your home will rise.

in the 1970's home prices rose nominally, actually lost a little real. BUT the mortgages turned into jokes. the profits were in the [declining real value of the] mortgages, not the houses. a balance sheet has 2 sides. you can make your profit on either side [or both, of course].

i'm not ready to buy a 2nd house, but about 1.5-2 years ago i did a CASH OUT refi at 4.375. [last summer i put much of the cash into a geothermal heating system for my house as a peak cheap oil play - after the tax break on the system, that system paid me back 10% in energy cost savings over the last 12 months. i expect more savings if/when oil goes up more. i put the rest of the cash into loonies.] if rates fall much further i will refi again, and again will take out any cash i can. if you believe there will be inflation, 30 year fixed rate debt can't be beat.

Great summation! Folks seem to think they will make real money on RE. If you can get ahold of 30 year debt at 4% in an inflationary environment you will win in the sense that the debt itself will lose value. The house itself may actually lose real value as well... Its just a pure inflation play, if you can put money elsewhere that will do great in inflationary times you will do better as compared to the house itself... Then with your profits you can pay cash! A house cant normally appreciate more than folks can pay for it in rent; ie. incomes.

I am awaiting EJ's part 2 for the next 10 years.

[loweyecue]

Re: John Paulson sez by real estate

And here I was thinking of selling my house and getting whatever equity I have in it changed into PMs or buy a house in India. The only issue is rents will probably rise along with inflation and my mortgage payment will stay constant. But I am still missing how home prices are going to rise as much as these guys seem to be predicting.

Unfortunately I can't buy Brazilian govt bonds otherwise I would. I called Fidelity and you need a minimum 100K invested in them to buy through them. But those 10% yields look really enticing.

[karim0028]

Re: John Paulson sez by real estate

And here I was thinking of selling my house and getting whatever equity I have in it changed into PMs or buy a house in India. The only issue is rents will probably rise along with inflation and my mortgage payment will stay constant. But I am still missing how home prices are going to rise as much as these guys seem to be predicting.

Unfortunately I can't buy Brazilian govt bonds otherwise I would. I called Fidelity and you need a minimum 100K invested in them to buy through them. But those 10% yields look really enticing.

Selling your house after 30-40% declines is not a good idea Unless you have no equity of course... Rents dont necessarily have to move up with inflation unless incomes rise with inflation. I still keep thinking of 10% interest rates and i am not sure how.. Incomes would have to go up 3x to cover that interest rate from these prices....

[jpatter666]

Re: John Paulson sez by real estate

Great summation! Folks seem to think they will make real money on RE. If you can get ahold of 30 year debt at 4% in an inflationary environment you will win in the sense that the debt itself will lose value. The house itself may actually lose real value as well... Its just a pure inflation play, if you can put money elsewhere that will do great in inflationary times you will do better as compared to the house itself... Then with your profits you can pay cash! A house cant normally appreciate more than folks can pay for it in rent; ie. incomes.

I am awaiting EJ's part 2 for the next 10 years.

Mmmmm.....now my thinking the refi has gone into high gear. We've got a mortgage but it is essentially (last year) paid off.

[karim0028]

Re: John Paulson sez by real estate

Mmmmm.....now my thinking the refi has gone into high gear. We've got a mortgage but it is essentially (last year) paid off.

But, there is also carrying costs for the mortgage... So, If its investment prop then i would think its cool, bc rent should cover it... If personal residence, i would sleep better knowing im not encumbered in case anything happens to income.

[karim0028]

Re: John Paulson sez by real estate

Selling your house after 30-40% declines is not a good idea Unless you have no equity of course... Rents dont necessarily have to move up with inflation unless incomes rise with inflation. I still keep thinking of 10% interest rates and i am not sure how.. Incomes would have to go up 3x to cover that interest rate from these prices....

Also, everyone keeps comparing to the seventies... BUT, the seventies there were alot of unions that gave employees pricing power and really sweet contracts... How do we get pricing power now? Not sure... I think we just get poorer this time around...