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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (27082)	2/10/2005 1:41:32 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 306849

Isn't it interesting that a sophisticated investor such as yourself doesn't feel they can make a reasonable return with 5% money no, it is instead the case that the value of my house is small compared to my portfolio. i don't have all my money in stocks anyway, because i believe in some degree of asset allocation and the most basic allocation decision is the split between fixed income and equities. since i don't have all my funds in equities, it follows that i have a fixed income allocation. if one is allocating to fixed income, obviously one of the first steps is to pay off any debt, such as a mortgage, since mortgage debt will obviously have a higher yield than a like govt bond. this is what is known in the business as a "no-brainer." in a state like Texas, with fairly conservative homestead laws, there is another benefit to owning your home outright--it is protected to a large degree from legal confiscation, as long as one pays one's taxes. this is probably more important to people in categories that have a high likelihood of being sued. like doctors. i know a few who have bought extremely expensive houses and put all their cash into it, then they scrimp on or skip medical malpractice insurance. i believe this is done in Florida as well, and is called "going naked" or something like that. and oh, that quaint thing--"peace of mind"--that's priceless. but, most simply, paying off one's home as part of a fixed income allocation strategy is something that makes sense imo. there aren't too many other good deals in fixed income. What you don't say is what drives you to live in a fully paid off house. You are risk averse. you should look at a person's portfolio before making a blanket statement like that. i don't think i could have had the returns i have had if i'd been risk averse. i find it very curious that you consider paying off one's house risk averse.

To: GraceZ who wrote (27082)	2/10/2005 9:32:10 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 306849

I predict Chris will never be able to afford to buy a house of equal value to the one he sold in Southern CA again. why do that? it could turn out he is able to afford it for any number of reasons. the most likely one, of course, is that some sanity is restored to the SCA real estate market. there is too much unpredictability in markets. you might as well say Chris could never afford to buy a beachfront property in Phuket--certainly more expensive property than 20 miles inland in LA. but now that Thai beaches got wiped out by a once-in-a-lifetime tsunami, maybe people don't want to pay $5 million to have a front-row seat to the next one. so maybe he can afford it. i don't think Hell-A real estate will do to well in an era of expensive ground transportation. all it takes is one well placed bomb in Ras Tanura and oil goes to $150. that bomb alone could be enough to kill the Southern California economy and make LA very affordable on the way to ridiculously cheap. instead of being covered with floating carcasses, i imagine it will be strewn with bankruptcy notices.