looks as though a great deal of emphasis is being placed on price alone,well in reality there are other costs such as
-----projected cost of finance expressed as a dollar value
----- projected cost of interest as a component expressed as a dollar value
------ total cost of ownership
------- projected cost of rental as opposed to equity based ownership
the bottom line says there is a strong probability that should interest rates rise significantly and prices drop 30% the actual dollar cost of ownership over the life of the property will change,the question is will it really be cheaper if prices should fall dramatically against a background of higher int. payments.
so if you are looking at timing your entry into r/e using finance as opposed to 100% or a cash flow based rapid growth equity,which scenario is cheaper in the full sense of a total dollar cost environment.
my picture says that today with all factors considered is the best time to buy.
some two decades ago i met an absolute dynamo in the earthmoving business, at that time he operated with 120 staff and in excess of 30million dollars worth of equioment, the amazing thing was the man was illiterate with exceedingly poor numeracy skills that only allowed recognition of a value,he could not do basic plus or minus.
he had no idea wether a shop assistant gave him the correct change,he developed his business with considerable trust in those around him and three simple questions when leasing equipment
1---what is the cost per month 2---what is the cost of the equipment 3---what is the total cost over the term of the contract
whoever provided the cheapest outcome ,he took it
Given that simple approach he built a very successful business and empowered his staff with his implicit trust in them
so real estate is not a single cost,below are three different scenarios with a cost base
based on a loan of 350000 over 30 years at different average rates of int for purchase of the same property in different economic scenarios to arrive at a value based on the same dollar value total expenditure over the life of the loan with disregard to inflation because we are projecting todays value
using the information above it tells me that those hoping for real estate to drop in value are probably the same ones who believe they can somehow make a fortune trading r/e on the basis of price alone,or that it will somehow be cheaper,
good luck with that theory,you will need extraordinary cashflow to build equity or a raging inflationary market that allows you to stay 20% above your cashflow curve year in and year out,investors create free cash flow over a period of time and that is the wealth free cash flow, in the end it all gets down to an equity driven return the purchase price is only a small part of the equation although most focus solely on that and not personal affordability
