Land And Housing,
or landandhousing.com,
a new style of real estate service.

INVEST

1. Real estate is a good investment for the long term . . . when the business plan is to buy at a reasonable price, keep, utilize, and maintain, and don't depend on reselling to pay back borrowed invested dollars.

2. What really happened in the real estate bubble? Europeans wanted to invest in some safe investment, like american mortgage funds. Wall Street wanted to have aggregated bunches of american mortgages to sell (for simplicity we shall call MortCDs, or MBS - mortage backed securities). Wall Street sells CDs and gets commissions. The stock market seemed to have gotten too high too fast, so some cautious stock investors withdrew, sold off shares or delayed buying more high priced additional shares. These investors had cash to place somewhere, so they also looked at MortCDs. Wall street found willing (used car) salesmen, who gained commissions for individual mortgages sales, through phone solicitations, without any due dilligence about repayment ability of the borrower. The borrower had confidence in their own ability to repay . . (under the "greater fool theory") that after a purchase, some new investor would pay an even higher price with those same wall street funds through those same "car salesmen" who were making loans by cold calls and web site solicitation. The bundled mortgage investments (MortCDs) began to default as the low income buyers were unable to sell quickly enough to make their own payments as they faced direct competition with new construction. Growing default lowered the investment ratings of the MortCDs , that had been falsely certified as investment grade. Wall Street began to have difficulty in selling the degraded defaulting MortCDs. The car salesmen began to have no funds to offer to the unqualified borrowers. Europeans began clammoring for their safe investment to be honored. Wall Street crashed. The car salesmen were out of business . . but kept their vast commissions, and had no reputation on the line to lose. Fannie Mae and Freddie Mac had lowered their standards so they could furnish mortgage funds in competition with the car salesmen. Fannie Mae and Freddie Mac crashed. Developers and unqualified borrowers were stuck with overpriced real estate. Average homeowners who had purchased in good faith at the higher prices found that they could not sell as mortgage dollars became very hard to get due to investors losing faith in the defaulting realty market. Astute buyers purchased property at forced sales . . leaving the overpriced realty to default, and thus be devalued.
3. Here is a graph of farm land as an investment over the long term.

4. Here is a graph of residential real estate as an investment over the long term.
5. Below is a non-realty workable investment, with enough variety to both miss dangerous bubbles and ride out dips. NON REALTY

6. Real wages will now "buy" .

7. Housing costs over time .

8. Houses are underpriced .

9. Home prices are still too high.

10. Compare the S&P, Treasurys & "REITs" .

11. What is an "REITs" .?? If we look at home mortgage REITs, a) Underwriters borrow at low rates and remain heavily leveraged, promising 15% returns while not mentioning a 4% default rate. When interest rates go up, leveraging backfires. b) If we look at commercial REITs, an investor will face almost 20% vacancy rates.

12. More data on "REITs" .

13. Compare the P/E of stock, and interest rates. The P/E is price per share/earnings per share. When you pay more you must get a larger dividend or else you must have brisk growth . Think Apple.

14. Foreclosure is on the horizion still for many .

15. Arbitrage is the principle that says "smart money" follows any good investment . . until the advantage is lost. By the time you hear about the Comstock silver strike, all the good claims are already filed.

16. You have to buy today based on the prices of today. Dividends must be higher to give a return equal to the purchases of yesteryear.

17. If you owned bank stock for the last decade . . YOU LOSE!! . Who'd have thought? Asset -backed?

18. Bond returns compared to stock dividends .

19. You can count on "ups and downs" in the economy Can you shelter yourself and eat during the downs??.

20. The S & P over the longterm requires diversity and patience, plus you cannot eat nor live under the paper .

21. Realty has two risks. Liquidity, and default. Liquidity risk leads to dropped prices, when default happens on a large scale.

22. Realty is considered to be "asset backed". We try to be safe with "asset backed"" securities .

23. CDS (Credit Default Swaps) might confuse the reader. They were unregulated insurance policies that required no insurable interest, often based on pure speculation, like short-selling stocks.