🚀 go-pugleaf

In article <slrnb4d99p.hs.joel-garry@zr1.vista1.sdca.cox.net>, Joel Garry 
wrote:
>On Sun, 2 Feb 2003 08:17:29 +0000 (UTC), Don Klipstein 
><don@manx.misty.com> wrote:
>>
>>  If coastal California housing prices spend enough years outperforming
>>global average wealth of coastal property owners, then coastal California 
>>will run into competition.
>
>Assuming no population growth, true.  But that is a bad assumption.

  No, I was assuming whether population grew or not.  Housing prices will 
not outperform ability of people to pay for housing.

>>  My argument was in comparison of real estate to stock market index 
>>mutual funds.  Those include reinvestment of dividends and capital gains 
>>distributions into buying more shares of USA publicly traded corporations.
>>Long-term trend of that will be (at best) gains in USA GDP plus the 
>>recirpocal of whatever appropriately weighted average PE ratio of these 
>>shares.  That seems close to 10% annual rate of return averaged since the 
>>Industrial Revolution.
>>  Compare to real estate - despite good prospects of price appreciation 
>>outperforming that of other commodities, to what extent can this 
>>outperform wages of those who have to buy or rent it?  Can be positive 
>>due to demand increasing with supply constant, but how can that 
>>outperform the per-capita growth of the economy with the population 
>>growing?  With the population always experiencing new expenses such as new 
>
>Leverage.

  How is that going to make peoples' ability to pay for housing increase 
faster than per-capita GDP?  Or do you propose that mortgage payments will
be an ever-increasing percentage people's income?  Assuming long term 
stock market performance and economic performance of the past century, in 
order for housing prices to appreciate like the stock market you need 
house prices (and mortgage payments) to outpace wages by about 4% a year.
Assuming homeowners average spending 20% of their wages on mortgage 
payments, that would require mortgage payments 100% of wages in about 40 
years.

 - Don Klipstein (don@misty.com)