http://activerain.com/blogsview/25232/A-Realtor-s-Guide

It’s a feature of the government continuing to borrow money to finance the war in Iraq, it devalues the currency and increases inflation. In addition, the OPEC countries, China and Japan are diversifying their holdings out of US dollars because of the fall in value. This brings more dollars back to the US and again, pushes up inflation. With increased inflation goes increased interest rates to soak up the money.

It’s worth noting that the increased inflation in housing prices is a symptom of inflation in the economy. There’s an inevitable bust after the boom when interest rates increase.

This does not make any sense to me, everything in this world is only worth what someone else will pay for it. You can say the same for stocks, businesses, etc… So I guess nothing creates wealth?

Yes, houses require maintenance. They require property taxes. They require insurance. The cost of home ownership is relatively steep.

HOWEVER…it is still an amazing way to make money if you know what you are doing. 100% of the interest paid on your primary residence is a tax write off. That means on an interest only loan EVERY PENNY you pay on your mortgage is a tax write off. Other than kids can you point to another tax shelter like that? Not that I know of.

Ten years ago the houses that were $230,000 were worth a little over $110,000. In California, especially the valley, houses are always going up. We saw a temporary reduction after the Northridge earthquake but we’ve averaged over 8% appreciation in value over the last 40 years.

Now some of you are going to point out that stocks have a higher rate of return. But as I’ve said before you can purchase a house effectively on margin which you simply cannot do with any other investment. I can put $30,000 into a $300,000 house and if get 8% appreciation on the total value of the house I get 80% return on the $30,000 I invested.

Can you point to another investment that will net you 80%?

Now all of that aside payoption ARMs are very risky. I know as I’m the vice president of a mortgage bank. When we sell a loan like that to someone we make sure to educate them about the risks. If the borrower makes the minimum payment each month they are shooting themselves in the foot, and the loan should only be used by those responsible enough to make the 15yr or 30yr payment. The minimum payment is there in case you lose your job or are in a job that pays commission.

All ARMs come with some risk, but the longer the fixed term the lower that risk. A 5yr or 10yr interest only loan in California will, historically, be a very wise investment.

Can you get screwed by an earthquake? Sure. But you can get screwed in any investment. The trick is being educated before making any sort of choice.

Do I think now is a good time to buy a house? Definitely not. Values will continue to fall for at least a year if not longer. But at least in California that correction is likely be somewhere around 10% which means your $230,000 house is still worth $450,000 a mere 4 yours later. Pretty good return on your money in my opinion.

I also dug up some data on historical interest rates and posted those too.

Lastly, I suggested a few different ways of getting involved in real estate investing such as finding an REIT in your area, or getting involved with them on public exchanges.

Nick

It can give you good return only when you find a bigger fool for your property!

You can become a millionaire by working and investing, selling hot dogs,harmburgers.

You can also become rich by buying real-estate, cultivating organic foods, and buying stocks.

Why go into something we don’t understand or don’t have the passion to learn about it?