Chad said (April 28, 2017):

This article is not factoring in the bazillions of Chinese who’re feverishly buying properties in the United States. More specifically, California. So long as someone can pay the mortgage and with the competition for homes increasing, you won’t see a crash any time soon.

In my part of the country, the Chinese are driving the prices of even a dump to over a million dollars. Where does it end? Are Americans getting priced out, likely. This is why you see controls in countries such as Canada and Australia, limiting foreigners from going whole hog on property purchases.

I’d suggest this article primarily applies to the domestic audience. Rich foreigners? Eat your hearts out.

Alan C said (April 28, 2017):

All paper assets can disappear overnight with stroke of the pen a new law or fear and market panic. I personally am looking into paying the taxes on my 401k now that I have passed the penalty stage and would rather start accumulating RE that can be paid back in a 10 year time frame rather than 50 plus years in paper assets.

Yes RE may be headed for a crash but ALL markets are cyclical and the value only matters when you buy or sell. Today people are financing everything from cars to education and they are not saving or investing, so they are perpetually in slavery.

The word for borrowing money for a house is called a Mortgage which means "death pledge" and can result in a triple payment of the original amount borrowed. However due to the rising values most people who owned for an extended period and upgraded property have done ok especially when they pay off the the loan. Now they are only burdened with property taxes and maintenance.

Renters will never be paid off and car and education loans on average rarely get a good return. My bet is still in favor of owning and investing in the tangible asset known as Real Estate.

Tony B said (April 28, 2017):

Houses are like everything else. Sometimes a good investment, sometimes not.

As a young man about to be married in 1955 I bought a new, three bedroom & carport, California tract house on the usual size lot. If memory serves, the announced price was somewhere around $5800 but on a 30 year loan of $53.10 per month at ???? maybe 5%, I don't remember. Two bucks an hour was a decent wage in those days, a buck fifty would get you by.

In a short time I discovered that I would never live there long enough to pay the place off; that I was just a renter but a renter who also had all the responsibilities of keeping the place up and livable. The only solution was to make double payments (no interest on the second part) bringing down the almost all interest payments in a hurry. But that sacrifice was part of the reason my wife decided not to stay and I walked away from the place as a bad deal even though it was only a few years old.

Now, in my old age, I had a few bucks in my pocket at the time I wanted to settle for good so I checked in places with an economy of few jobs for what I wanted at my price and was able to cash out an old, worse for the wear, place for less than half what most people today pay for a new car. Two bedroom house, shop almost as big as the house on a little over half-an-acre so the dog could run. I have replaced the plumbing and some of the electric, put metal roof on everything, always paying cash for the materials and doing the work myself. My income was meagre but sufficient. Still is. My only regular bills are utilities. Property taxes here reflect the lack of jobs - almost nil. No matter what happens I have a roof, I heat with wood and can make as big a garden as I wish. My water comes from a good well - garden watering is almost free - which I didn't know I had when I bought the place as it had been closed off for years when city water was cheap. All it cost was a submersible pump, plumbing and wiring, My work was "free."

My neighbor took down lots of chain link fencing in his yards, had it loaded on a trailer for the dump. When I inquired he gave it all to me for hauling it off. Again, I put it all up on my property myself. Rusty or not, it keeps the dog in. Note that almost all my costs have been "one time" costs and not a cent for labor. Most would say this place is a bad investment with lousy resale value. I say it's my home and I don't care if it isn't worth a dime to anyone else, it's a really good investment for me.

Vickie said (April 28, 2017):

This is the first time responding to one of your articles and am doing so because it is right up my alley! I would like to preface that I am a 20 year veteran real estate agent, real estate investor and also a fan of Kiyosaki. I have read all of his books and agree that an asset puts money IN your pocket and a liability takes money OUT . A piece of real estate can be either!

However, to parallel to investing in stocks, etc. please know that the intrinsic value of real estate is never ZERO nor a negative number! You can also go short on a stock and OWE just as you would if you were upside down on the mortgage. Now, how much the property is collateralized for (over collateralized ) is really the crux of his article. The author does not mention buying real estate with saved cash nor substantial down payments.

The property can be insured via both homeowner's insurance and a home warranty policy, to hedge against some of those disasters mentioned in the article, and even if the house burns down to the ground the actual land still carries value! You can always plant crops, pave it and charge for parking, etc!

And don't forget about the tax write-offs you get for maintaining the investment property, this includes mileage too!

However, your own home (personal residence) should NOT be construed as an investment - you have to live somewhere! If you aren't living in your parent's basement, (the millennials are living in their parents basements in record numbers) then you only have two choices, own or rent. However, purchase what you NEED and can AFFORD - don't try to keep up with the Jones'! Many mortgages at these interest rates are substantially less than what a similar home would rent for.

What is the price of being at the mercy of the landlord and his/her whims? Before I entered into this profession, I rented a lovely home for 5 years and the landlord suddenly, after 5 years of on-time (and advance ) rental payments, gave us a 30 day notice to vacate because his daughter was getting married and he wanted to give the house to her! How about the renter who pays on time and then gets evicted due to foreclosure courtesy of the landlord not paying his/her mortgage? Owning at least gives you some control ( yes, you still have to pay the mortgage and property taxes) but at least they can't take it out from under you! (eminent domain is another story). You pay = you stay!

All real estate is said to be local, and it has been my experience that demand is UP only in certain desirable neighborhoods (that are priced well) and the inventory is limited. The first time and first move-up market homes in these desirable neighborhoods are "flying off the shelves" in our area. However, the more expensive and overprice homes linger on the market.

As interest rates increase, affordability decreases thus followed by lowering of list prices to offset this. The man who has cash is king when interest rates rise - thus free to demand exorbitant rent!

I disagree with the article in reference to loose lending Self-employed/small business owners ( who employ 70% of the American workers and foster the economy) are still a pariah in the mortgage world. This is the globalist way of restricting capital. FHA lenders will require the seller to remove a second stove in a house if it's not zoned for multi-unit in an attempt to thwart in-law and multi-generational co-habitation. Agenda 21.

First time home buyer grants are needed to get their foot in the door - however, their "sweat equity" includes extensive home buying and foreclosure prevention counseling. This is a Good thing! And they fuel the entire housing industry!

And remember, the landlord is unlikely to give you the property after 30 years!

TW said (April 27, 2017):

I'm not sure how a crash couldn't be inevitable, Henry. How can anyone say with a straight face that the dilapidated shack, sandwiched between two other houses no less, shown at the beginning of the article is worth $2.4 million?

Interest rates cannot stay low forever. Once they start to steadily rise, this madness will cease. Those who were silly enough to pay these outrageous prices will suddenly be in over their heads when it comes time to renew their mortgages and they find they can no longer afford the payments. Wages have not kept up with the insane price inflation of homes. Not even close.

The current situation is twisted and we need a sense of normalcy restored. I don't know why Canadians are so smug and think a crash cannot happen here.

Dan said (April 27, 2017):

As for a crash, in the US we have a 'boom / bust' economy, so I've lived through several real estate booms and the crashes. Enough to see that the beneficiary of the crashes are a handful of buys that can afford to buy up billions of defaulted mortgages for peanuts from HUD. NOTE: there was US real estate boom during the late 70's -early 80's that crashed in 1985. The scam back then had been selling 'YUPPIES' (young upwardly mobile people) overpriced houses on a 'balloon' mortgage, on the gamble that they would make more money exponentially each coming year.

In fact when the economy slowed down, not only did income freeze, it shrunk due to double digit inflation. Tens of millions defaulted on homes without earning any equity. The nation was full of repossessed real estate during a recession. Billions in real estate ended up being held by HUD, who in turn put it up for auction in 1989. HOWEVER - it was auctioned in huge package deals to the highest bidder - and there were only four real estate conglomerates with the money to grab up billions in UNDERVALUED housing. See how it works? It's a racket.

We can now forecast that given Fred Trump's 1974 Brooklyn block busting deal with Lubavitcher 'Bunny' Lindenbaum may be repeated on a national scale down the line.

So I would be very careful about investing in a house. Don't gamble that economy is going to keep rising and that interest rates will stay low. They can turn on a dime.