i agree w/you re: debt reduction. i've been debt-free since my early 30s (1998). i can't understand why so many people willingly beggar their futures to buy a stupid house at an average 8x income.
IN A RECENT COMMENTARY, MERRILL LYNCH'S David Rosenberg (we haven't done a genealogical search, but so far as we know he's not related to Joe) offers some very worthwhile statistics on real estate, which bear out our, well, bearishness.
For openers, he points out that residential real estate currently is valued at $22 trillion, almost double the 1999 total. During that stretch, house values have risen at an 11% average yearly rate and real returns have climbed a healthy 8.3% each year. By contrast, apartment rents went up a considerably more subdued 3.2% per year. The gap, David declares, is both unprecedented and unsustainable.
What's more, he reports, the cost of neither raw materials (which rose 2.9% a year) nor labor (2.5% annually) were the big drivers of the rise in home prices. Rather, the great housing price advance of 1999 to 2005, he says, is a classic example of how a boom (1999-2001) turns into a mania (2002-'03) and ultimately morphs into a bubble (2004-'05). Runaway house prices, he reports somewhat incredulously, are now equivalent to eight years of wage income.
online.barrons.com |
