Real Estate Bubble? Robert Kiyosaki aka "Rich Dad" thinks so

[warlock5]

I know there has been more than a few threads about the real estate bubble on here. You guys should read this article in the latest Rich Dad newsletter:

http://www.richdad.com/pages/article...isis_part2.asp

I haven't even read any of his books, but I know millions of other people have. If he's saying things are moving south a lot of amateur investors are going to be listening.

[vink]

Thanks for posting that.

[JJ Gold]

Never in the history of markets has a "bubble" been called during the uptrend. It didn't happen with tulips and it didn't happen with tech.

The mere fact that people are yelling "bubble!" is the very reason there won't be an implosion.

[Mako]

Yes and no.

Interest rates control demand, demand controls appreciation.

Until interest rates on home loans move beyond 6%, which they haven't for half a decade now, the demand will remain strong, and appreciation will continue. Once rates do begin to rise significantly, which GMAC and other companies I've consulted with felt would occur in 2003 (didn't) 2004 (didn't) 2005 (didn't) and are now saying 2006 (maybe), then inventory (the amount of homes for sale) will exceed demand, and appreciation will slow.

Will it be similar to the early 90s bubble that many Californians are familar with? Where home values seemed to plunge by -30% overnight? No. But we won't be appreciating anywhere near the +15 to +20% per year that we are now, that is certain.

[Big Ray]

Originally Posted by JJ Gold

Never in the history of markets has a "bubble" been called during the uptrend. It didn't happen with tulips and it didn't happen with tech.

The mere fact that people are yelling "bubble!" is the very reason there won't be an implosion.

lol.. Where were you in 1999 and 2000? All you heard was "tech is a bubble".

[JJ Gold]

Originally Posted by Big Ray

lol.. Where were you in 1999 and 2000? All you heard was "tech is a bubble".

I was in the middle of the action. Where were you? You have selective memory if you recall anybody calling tech a "bubble" prior to the collapse.

By 1999-2000 the house of cards had already started to implode.

[Mako]

Nobody called the Nasdaq hitting 5000 points for the first time in the last week of 99 "a bubble".

I was part of an ownership group that sold www.sharkyextreme.com to www.internet.com for $7.4M in November of 1999, and even at that lofty valuation we had no idea what was coming.

Within just six months, that $7.4M would have dropped to less than $1M in terms of a realistic price. That's how out of control it was.

Bottom line: We got lucky. Anyone claiming they "knew" the bubble was about to pop wouldn't be posting on GFY. They'd be sitting in their Boeing BBJ sipping thousand-dollar-a-bottle wine before landing, because they made billions by shorting the hell out of the tech sector prior to those fateful months in early 2000.

And there are a few who did exactly that.

[High Plains Drifter]

Originally Posted by JJ Gold

I was in the middle of the action. Where were you? You have selective memory if you recall anybody calling tech a "bubble" prior to the collapse.

By 1999-2000 the house of cards had already started to implode.

I was in the middle of it and I heard nothing but "tech is a bubble". Everybody was rushing to IPO because they knew the collapse was coming.

[Mako]

Originally Posted by skinnywussy

I was in the middle of it and I heard nothing but "tech is a bubble". Everybody was rushing to IPO because they knew the collapse was coming.

Totally. I remember CNBC even running a "Nasdaq: 5000 and Beyond" special the first week into 2000 and thinking "Jesus, where will this ride end?"

Three months later I had my answer.

Hindsight is always 20/20. No one knew jack SHIT besides a lucky few. And if they did, yet didn't put any money behind their opinions by shorting these bubble-targets, that's worthless as well. Anyone can "call" a bubble. Put your money where your mouth is, go short Toll Brothers or other associated real-estate bubble related stocks that have seen massive growth the past three years, then when this real estate bubble collapses come tell us about how you did.

Money talks, bullshit walks.

[EroticySteve]

Real Estate is still a safe investment. Location is key though.

Interest rates are keeping things affordable but there are many other factors. Look back to 1986, interest rates were no where near 6% but there was a huge buying frenzy maybe even bigger than what's going on right now.

[Mako]

Originally Posted by EroticySteve

Real Estate is still a safe investment. Location is key though.

Interest rates are keeping things affordable but there are many other factors. Look back to 1986, interest rates were no where near 6% but there was a huge buying frenzy maybe even bigger than what's going on right now.

Far too long ago, 86 is a bad example due to several other variables being present at that point, including inflation being tamed for the first time in 10 years.

But I digres...

This current real estate explosion was triggered by one thing: Falling interest rates. Rates control appreciation via demand, as they increase demand on inventory dramatically. Location is nice, yes, yes, all the other cute real estate cliches apply of course, but one dominant factor started this explosion in appreciation (falling rates) and it will end it as well (rising rates).

It's really that simple. As long as rates are below 6%, appreciation at high levels will continue in areas that deserve it. If rates climb above that level (signalling that the five year run is over) then appreciation will stall as it will take 4x as long to move inventory (sell homes).

[SleazyDream]

stockpile cash in liquid investments and when the bust comes buy positive cash flow real estate like crazy with proper down payments on it at rock bottom prices

[Mako]

Originally Posted by SleazyDream

stockpile cash in liquid investments and when the bust comes buy positive cash flow real estate like crazy with proper down payments on it at rock bottom prices

[Theo]

Originally Posted by JJ Gold

It didn't happen with tulips and it didn't happen with tech.
.

more likely you weren't listening

[jonesy]

old ass prediction - tons of people have been saying the same thing -

this is the root cause of the downfall and the PRIME time to buy because alot of people will lose their homes due to balloon mortgages ...


Not only are new buyers taking out bigger mortgages, but existing owners have increased their mortgages to turn capital gains into cash which they spend. As a result of such borrowing, housing booms tend to be more dangerous than stock market bubbles and are often followed by periods of prolonged economic weakness.?

[High_Times]

Originally Posted by SleazyDream

stockpile cash in liquid investments and when the bust comes buy positive cash flow real estate like crazy with proper down payments on it at rock bottom prices

The smartest thing on GFY today. Thanks.

[High Plains Drifter]

Originally Posted by jonesy

old ass prediction - tons of people have been saying the same thing -

Reminds me of the peak-oil-year predictions. The alarmists are bound to be right one of these years.

[Xenophage]

Check out these other gfy threads on real estat bubble

http://www.gfy.com/showthread.php?t=...ghlight=bubble

http://www.gfy.com/showthread.php?t=...ghlight=bubble

http://www.gfy.com/showthread.php?t=...ghlight=bubble


https://gfy.com/fucking-around-and-business-discussion/484179-real-estate-stocks-post7788410.html

https://gfy.com/fucking-around-and-business-discussion/492700-shit-expensive-live-post7794927.html


Look at Japan for ugly scenario that could play out.

[Rui]

Originally Posted by High_Times

The smartest thing on GFY today. Thanks.

Its common sense actualy (or at least it should be...)

[Xenophage]

Thanks I went out and got all the rich dad poor dad books.. some really great stuff in there

[bhutocracy]

Originally Posted by skinnywussy

I was in the middle of it and I heard nothing but "tech is a bubble". Everybody was rushing to IPO because they knew the collapse was coming.

yeah.. i had options vesting in late 2000 and all I wanted was for the bubble to hold up until then lol.

[VeriSexy]

Yup will be like the stock market in 2000 but prices always go back up cause population keep growing..........

[warlock5]

Heheh, didn't think I'd see this thread again. If you want another good wealth-building book, check out "Automatic Wealth" by Michael Masterson.

[rakeback]

I highly respect Robert, have read most of his books, and actually have met the man live in Chicago. I wouldn't be in Real Estate for an investment right now. The Nasdaq is just making so much more.

Here's an interesting piece on Housing Bubble:


DOUBLE WHAMMY

The US homeowner just got hit with a double whammy.

The first whammy is the recent run-up in prices, spurred on my low interest rate mortgages which stimulated what Allan Greenspan termed "frothing" but which more honest observers called "land flipping", with the intent to inflate property prices and create artificial equity which could be borrowed against. One third of recent home purchases were not primary residences, but investment properties and second homes for the ultra rich. Despite Greenspan's reassurances, the phenomenon looks like a bubble, walks like a bubble, and quacks like a bubble. When the bubble pops, people are going to be stuck making payments on homes forth far less than they owe, to banks able to raise the interest rates on the variable-rate loans whenever they wish.

Now comes the second whammy. The United States Supreme Court has just ruled that eminent domain can apply to private development. That means that a developer who is chummy with the local mayor can use the city to take away your home and use the land for a factory, shopping mall, bordello, anything that he says might produce more tax revenues the local government can use to, well, fund pay raises for the legislature, and make payments on all the loans they have recklessly made over the years.

And here is how it all works together. Eminent domain requires that the party seizing the land pay the owner what the property is deemed to be worth. The new law requires that the developer be able to claim his new use of the land will produce higher tax revenues.

When the housing bubble pops, and property prices drop (dragging property taxes down with them), not only will it be easier for developers to demonstrate that their new plan for the real estate will work, but the price they will have to pay for the land will drop as well. So this means that virtually every property in the US will be up for grabs, at a fraction of the price the owners paid for it, leaving the current owners stuck with the mortgage for the inflated price they paid for the land.

Boy did you just get screwed when you bought that two bedroom for $800,000!

[Sosa]

I've been reading Rich Dad / Poor Dad books for about 4-5 months now. I'm on the 4th book right now. Some damn interesting reading for sure.

[chowda]

Lol, i dont think this guy is a visionary. the sky is falling bs and what not.

Anyone can say we are headed for a burst, and he could be right, but no one would give u an acccurate time frame for that bust.

So will a bust ever happen? Yes, when? till the end of time there will be one. and that way, he is right.

OIL WILL GO UP TO 100 DOLLARS A BARREL
MAN WILL STEP FOOT ON MARS

thats what my rich dad taught me

[Rui]

Originally Posted by Sosa

I've been reading Rich Dad / Poor Dad books for about 4-5 months now. I'm on the 4th book right now. Some damn interesting reading for sure.

"books", isn't it only 1 book?

[pornguy]

That is one of the problems in the markets today. Tooo many people are sheep. Based on what one guys says, 2 million will pull out, making what he said come true. But if they had stayed in, the shift may not have happened.

[warlock5]

There is no point in argueing whether or not there will be a decline soon or not. No one knows. The stock market goes up and down every day, hour, minute, second, based on different information and events. Its the same shit with real estate. Markets are determined by what people "think" is going to happen in the future.

If a negative cashflow for a year or two won't hurt you. If a property value drop off for a few years won't hurt you -- then you have nothing to worry about.

But, some of you guys are overleveraged and will go bankrupt in a market down turn. I would not want to be in your position right now, even for a chance to walk away with a little extra money.

[jacksparrow]

I think this bust his horseshit to a certain extent. I have plenty of real estate investments and all have them are doing great. Even my families properties that saw the last real estate bust in california all made it through worth a lot more then they should be. I think the botom line is real estate is always a good investment if the properties are chosen wisely. A 2 million dollar house has some risk because people won't always be able to afford that and investors are hesitant with large properties. But on the other hand if you go buy 5 pre contruction condos in az or nv for 150-300k i would have to say your pretty safe because no matter what you can always rent brand new low cost places at their mortgage. Invest wisely and real estate will do great for you.

[rickholio]

Originally Posted by warlock5

There is no point in argueing whether or not there will be a decline soon or not. No one knows. The stock market goes up and down every day, hour, minute, second, based on different information and events. Its the same shit with real estate. Markets are determined by what people "think" is going to happen in the future.

If a negative cashflow for a year or two won't hurt you. If a property value drop off for a few years won't hurt you -- then you have nothing to worry about.

But, some of you guys are overleveraged and will go bankrupt in a market down turn. I would not want to be in your position right now, even for a chance to walk away with a little extra money.

Real estate isn't like the market. There's nowhere near the volitility.

The real estate bubble will pop based entirely on interest rates. Home loans specifically are based on interest rates for longer-term bonds, not the overnight rate, and those 10years haven't moved for shit for a long time now. When those rates start to rise, pain will follow... there's been so much 'free money' floating around, a lot of people have leveraged themselves into a really dangerous position.

Over the last few years, a significant number of jobs created in the US over the last couple years have been in construction, primarily house construction. If interest rates rise, those jobs go bye bye. Additionally, people leveraged out the ass on ARMs and interest-only loans (what an abomination those things are!) will find themselves suffering more with each increase in rates, leading to loan defaults and bankruptcies. Add that up with some potentially serious inflation woes (sky high energy prices that just keep climbing) and you're all set for an economic catastrophie.

I should point out that one man's catastrophie is another's gold mine. Defaults on loans and bankruptcies for one person means cheap acquisition and future profits for another person. The wise man would be one who tries to eliminate as much floating rate debt as possible, and get positioned to buy when the market turns down... but then "buy low, sell high" isn't exactly a difficult concept to grasp.

[Sosa]

Originally Posted by Rui

"books", isn't it only 1 book?

actually there are more to the series. Rich Dad / Poor Dad is just the first one of the series. He recommends to read the other that get more into certain parts of investing. They are all pretty good so far.

[2477]

Originally Posted by LegendaryLars

Check out these other gfy threads on real estat bubble

http://www.gfy.com/showthread.php?t=...ghlight=bubble

http://www.gfy.com/showthread.php?t=...ghlight=bubble

http://www.gfy.com/showthread.php?t=...ghlight=bubble


https://gfy.com/fucking-around-and-business-discussion/484179-real-estate-stocks-post7788410.html

https://gfy.com/fucking-around-and-business-discussion/492700-shit-expensive-live-post7794927.html


Look at Japan for ugly scenario that could play out.

Exactly....Japan is still recovering from when their shit hit their fan

[Xenophage]

National Association of Realtors , sales of previously owned homes drop 2.6 percent

--------------------------------------------------------------------------------

http://biz.yahoo.com/ap/050823/wall_street.html?.v=15


The latest snapshot of housing activity suggested that the sizzling housing market may be cooling slightly. Wall Street has been closely watching home sales, worried that the housing boom is nearing its end.


Condos saw the worst hit and also price declines.

Get ready folks I called the top, we are starting to see the cracks now.

I am calling for a recession in the US in the next 6-12 months.

[dready]

Rising energy prices will be the push to higher interest rates.

[latinasojourn]

Originally Posted by Mako

Far too long ago, 86 is a bad example due to several other variables being present at that point, including inflation being tamed for the first time in 10 years.

But I digres...

This current real estate explosion was triggered by one thing: Falling interest rates. Rates control appreciation via demand, as they increase demand on inventory dramatically. Location is nice, yes, yes, all the other cute real estate cliches apply of course, but one dominant factor started this explosion in appreciation (falling rates) and it will end it as well (rising rates).

It's really that simple. As long as rates are below 6%, appreciation at high levels will continue in areas that deserve it. If rates climb above that level (signalling that the five year run is over) then appreciation will stall as it will take 4x as long to move inventory (sell homes).

all true.

right at this moment mortgage rates are artificially low in usa. but high fuel costs, iraqi war, and deficit spending will force us govt to print money forcing inflation and thus interest rates.

for those wanting to buy their first home there is a small window of opportunity in the next 4 months or so with re: to interest rates and market cooling as we come into fall.

do it now if you can.

[Xenophage]

gonna be ugly

[The Other Steve]

While Australia isn't quite the same as America where we live is one of the 5 fastest growing areas in the country.

In the last month housing prices have tumbled and demand has decreased. There are still plenty of lookers at open houses but few are buying.

In a town where a rental property was once hard to find there are more and more 'Rent Me' signs springing up as the rental market becomes saturated with houses.

Landlords are finding that houses they bought on a promise by realtors that they would rent for a certain figure can only be rented for a much lower than they were told. Many investors are now struggling to meet their repayments.

And even here in this fast growing area evictions and foreclosures are increasing. A local real estate agent told me the other day that we have still not reached the bottom yet and there will be worse to come.

[KingAsher]

Originally Posted by SleazyDream

stockpile cash in liquid investments and when the bust comes buy positive cash flow real estate like crazy with proper down payments on it at rock bottom prices

That sounds like a good idea, I was thinking about buying a condo next June putting about 175k down, good idea or bad in your opinion?

[dig420]

Why does this thread keep getting bumped? Who gives a fuck what Rich Dad thinks about anything?

For that matter why keep bumping these real estate bubble threads? Do you think if you bump it every day for nine years eventually your prediction will come true? Geez...