Real Estate: Can You Handle the Truth?
It'll end in tears.
When I was growing up, that was one of my mother's favorite battle cries, as she stormed into the room to break up yet another fight between my brothers and me. Recently, that phrase popped into my mind again -- as I was thinking about today's overheated housing market.
We have entered the silly part of the real-estate cycle, where folks are saying things and doing things that are utterly ridiculous. Don't want your housing foray to end in tears? My advice: Never forget these seven harsh truths.
? 1. A house is an undiversified bet on a single piece of property.
Even in today's booming real-estate market, making big money isn't guaranteed. Sure, we have all heard about the hefty gains in places like California, Rhode Island and Washington, D.C., where home prices have more than doubled over the past five years, according to home-finance corporation Freddie Mac.
But not every market is like these three. Indeed, homeowners in Alabama, Iowa, Indiana, Mississippi, North Carolina, Nebraska, Ohio, Tennessee and Utah have eked out cumulative gains of less than 25% over the past five years.
? 2. Real estate doesn't always go up.
When the current real-estate frenzy dies, the downturn probably won't look like the 2000-2002 stock-market rout, with its terrifying plunge in share prices. Instead, the housing market will likely see moderate price declines accompanied by a sharp slowdown in sales, as homeowners balk at selling their properties for less than what they deem fair.
To get a sense of how much prices might drop, check out the early 1990s performance of two of today's hotter markets, Boston and Los Angeles. According to Freddie Mac, prices in the greater Boston area sank 10% during the 30 months through mid-1992, while Los Angeles was hit with a grueling six-year 21% decline.
? 3. Leverage bites when you get it wrong.
Homeowners often quip that the bank owns most of their house. This, of course, is nonsense. The bank has merely lent these folks money. Whether their property is 60%, 80% or even 95% mortgaged, they are still the owner and thus benefit from every $1 of price appreciation and suffer every $1 of loss.
Usually, that's reason to cheer. Suppose you buy a $300,000 house, putting down $60,000 and borrowing the other $240,000. If your home's value climbs 20% to $360,000, your home equity would double, from $60,000 to $120,000.
This leverage, however, can also work against you. Let's say you bought that $300,000 house in Los Angeles in the early 1990s, just before prices dropped 21%. Suddenly, your house is worth just $237,000 -- and your down payment has been wiped out.
What if you need to sell? With any luck, you will have whittled down a decent chunk of your loan balance with your regular monthly mortgage payments. Still, once you figure in the brokerage commission you will pay to sell, there is a chance you could leave the closing empty-handed.
? 4. A house is a long-term investment.
Because it costs so much to sell real estate and because the combination of leverage and a home-price decline can be so devastating, you shouldn't purchase a house unless you plan to stay put for at least five years and even longer if you are buying in one of this year's frothier markets.
Yet, today, stories abound of people buying properties with a view to unloading them in a matter of months. What can I say? A few years from now, we will look back and marvel at such foolishness.
? 5. The big money is in the rent.
Unlike today's housing "day traders," most successful long-term real-estate investors don't buy properties solely for price appreciation.
Instead, these investors are focused on the rental income they can collect and how that rent compares with each property's monthly mortgage payment, property taxes and other costs.
There's a lesson here for home buyers. The biggest reason to purchase a house is so you can, in effect, rent it to yourself. Indeed, the value of this "imputed rent" will likely be far greater than any gain you score from price appreciation.
The bottom line: When you buy a house, focus on finding a place that you will enjoy living in and where you can envisage staying put for a good long time -- and view any price appreciation as a bonus.
? 6. Home improvements aren't an investment.
Many homeowners think that remodeling the kitchen, adding a deck or replacing the roof somehow constitutes an investment. It just isn't so. In 2004, Remodeling magazine analyzed 18 home-improvement projects. In all 18 cases, the magazine found that homeowners were unlikely to recoup the full cost when they went to sell.
In other words, if you fix up your home and sell it a year later, you might recover 80 or 90 cents out of every $1 spent. And the longer you wait to sell, the less you will get back, because your home improvements will look increasingly shabby.
That doesn't mean you shouldn't fix up your home, especially if you will get a lot of pleasure from the resulting improvements. But think of these improvements as spending, not investing.
? 7. Mortgage debt has to be repaid.
These days, I hear stories about folks borrowing against their homes to take vacations and buy new cars.
Their justification: Whatever they borrow is less than their home's price appreciation, so they are still ahead of the game.
Eventually, however, all this mortgage debt will have to be repaid. But when? In many cases, homeowners plan to trade down when they reach retirement and use the proceeds to pay off their loan balance.
This plan may work. But keep in mind that trading down can involve unpleasant choices. To get your mortgage paid off while buying a comparable home, you may have to move to another state.
Alternatively, you could opt to purchase a smaller place in the same part of the country. Problem is, you will probably be inclined to buy in a better neighborhood or get a home with a better view. "I've had people downsize in size," says Charles Farrell , a financial consultant in Medina, Ohio. "But they don't downsize in price. The price is pretty comparable."
房地产投资者，你能接受真理吗？
到时候你们就哭吧。
小时候，每当妈妈冲进屋、拉开正和兄弟们扭打在一起的我时，这是她最常说的话之一。近来，当我思考如今过热的房地产市场时，这句话重新浮现在我的脑海里。
现在的房地产市场已经发展到一个狂热的地步，市场参与者的言行举止无不荒谬之极。你难道想让对房地产的投资成为一段惨痛的经历么？听我一句苦口良言吧：千万别忘了以下7条真理。
1. 投资单一房地产市场风险无法分散。
尽管今天的房地产市场一片红火，但谁也不能保证大笔投资一定会只赚不赔。没错，我们都听说了，联邦住房贷款抵押公司(Freddie Mac)的数据显示不少地方的房价都大幅上涨，加州、罗得岛和华盛顿特区三地过去5年间的房价涨幅甚至超过了一倍。
但其他州的房价并不都像这三个州一样火爆。实际上，亚拉巴马、艾奥瓦、印地安纳、密西西比、北卡罗来纳、内布拉斯加、俄亥俄、田纳西、犹他几个州过去5年来的累计房价涨幅只有不到25%。
2. 房地产价格并不会只升不降。
本轮房地产泡沫破灭之时，房地产市场的衰退或许和2000年至2002年股价大幅下挫的熊市不大一样。相反，房地产市场的价格有可能会温和下滑，与之相伴的是房屋销售的急剧萎缩，这是因为业主在认为出价没有到达他们心目中的合理价位之前是不会把房屋售出的。
要想推测房价可能的跌幅，不妨看看今日比较炙手可热的两个地方－－波士顿和洛杉矶房地产市场在上世纪90年代初期的表现吧。联邦住房贷款抵押公司的数据显示，截至1992年年中的30个月波士顿及其周边地区的房价下跌了10%，而洛杉矶的房价在6年间累计下跌了21%。
3.房价下跌时住房信贷会给你造成沉重负担。
大部分业主往往会开玩笑地说银行才是房子的真正主人。当然，这是无稽之谈。不论他们抵押贷款占房价的比例是60%、80%还是95%，贷款者都是房屋的主人，因此不论是房价升值1美元还是贬值1美元，他们的财富都会随之起起伏伏。
通常来说，这是一个值得高兴的理由。假设你买了一栋30万美元的房子，首付了6万美元，向银行借入了24万美元的抵押贷款。如果你的房价升值20%至36万美元，那么你的房屋净值就从6万美元增至12万美元。
不过，按揭贷款也会让你损失惨重。假设你在上世纪90年代初期洛杉矶买了一栋30万美元的房子，但之后房价下跌了21%。于是你的房价市值缩水至23.7万美元，这意味著你的首付也就等于付之东流了。
要是你必须出售怎么办？通过每个月的按揭还款，一大笔按揭贷款已经得到偿付。尽管如此，一旦你计算出你为出售房子所需支付的经纪手续费，你可能最后还是两手空空而归。
4. 房地产是一项长期投资。
由于出售房地产代价高昂，而且抵押贷款加上房价下跌可能造成毁灭性的影响，因此除非你计划至少5年内按兵不动，否则你不应买房，而如果你打算在今年充满泡沫的市场上买房的话，你等待的时间甚至要更长。
但时下，处处可见人们购买房地产以期在几个月之内出手的例子。我能说什么呢？几年后，当我们回首现在，我们将对这样的愚蠢感到惊讶。
5. 赚大钱的地方是租金。
与今天房地产市场的“短线交易员”不同，多数成功的长线房地产投资者购买房地产的目的不仅仅是为了升值。
这些投资者关注他们能够收回的租金收入以及租金与房贷月供款、地产税和其他成本的比较关系。
对于住房购买者来说，这是值得学习的一课。买房一个最大的理由是，那样一来，你实际上可以把房子租给自己。确实，这种“估算的租金”价值可能要远远高于你从升值中获得的收益。
底线：你在买房的时候要关注找到一个你喜欢居住的地方，而且它是你可以预见将在相当长的时间内保持不动的地方－－并把任何升值看作额外的收益。
6. 家居装饰不是投资。
许多业主认为重新修缮厨房，装饰或替换一个屋顶也构成一项投资。事实并非如此。2004年，Remodeling杂志对18个家居装饰项目进行了分析。在所有18个项目中，该杂志发现业主不大可能在出售的时候收回全部的成本。
换言之，如果你将房子修缮一新并在一年后出售，你可能只能收回80%或90%的装修费用。你等待出售的时间越长，你能够收回的部分就越少，因为你的家居装饰看起来将日益陈旧。.
这并不意味著你不应修缮房子，尤其是你将从随之而来的改进中得到很多快乐。但要把这些装修看作支出，而不是投资。
7. 抵押贷款必须还清。
这些天，我常常听到人们将房产作为抵押借钱度假或购置新车的故事。
他们的理由：只要借款金额低于房价升值，他们仍然可以掌控局势。
不过到最后，所有这些抵押贷款都必须偿清。但是什么时候呢？在许多情况下，业主计划在退休的时候折价出售房产，并利用出售所得来偿清贷款余额。
这样的计划可能会行得通。但记住折价出售可能牵扯不快的选择。为了偿清抵押贷款，而同时购买一处相当的房产，你可能不得不移居另外一个州。
另一方面，你可以选择在同一个地方购买一所小一点的房子。问题是，你可能会倾向于在一个邻里环境较好或者风景较佳的地区购买房子。俄亥俄州Medina的财务顾问法雷利(Charles Farrell)称，他已经促使人们降低对房子大小的要求。“但价格并没有降低，仍具有相当的可比性。”
