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>A land with a house on it does not somehow increase in productivity to produce more housing, like a share of Apple generally does with smartphones. It's just a
by acwan93 5y ago
>A land with a house on it does not somehow increase in productivity to produce more housing, like a share of Apple generally does with smartphones. It's just a pile of concrete, steel, wood, bricks, and so forth that slowly falls apart over time. Buying a house ought to be roughly analogous to buying a car — a thing that (with rare exceptions) decreases in value over time, because it wears out.
Funny, this is the opposite of what I've heard from pretty much anyone bullish on real estate. "You can always live in your investments" is the rebuttal whenever I mention that a share of AAPL could generate more return. Don't forget "land is a finite resource."
On a related note, housing seems like a "bigger sucker" situation right now. A 1100 sq ft living area, 5000 sq ft lot SFH next to me just sold for 50% ($500K) over asking price. If we go with the mantra that "house prices always goes up", who on earth is going to pay for a small house in the millions, let alone where is that money coming from?
- numbsafari 5y agoHousing prices don’t always go up. At some point an over leveraged market will deleverage and it will suck for everyone. Remember 2008? Sometimes a neighborhood goes to shit because jobs leave, or natural resources are depleted or you have a shit government. House prices don’t always go up and don’t let anyone tell you otherwise.
- acwan93 5y agoI totally agree, a Vegas Airbnb I stayed at was a prime example. It was purchased for $500K in 2005 and Redfin estimated its value in 2018 at $220K. Cities like Detroit or Pittsburgh (until recently) are also examples. Large cities along the west coast could probably be too new to suffer a collapse in prices yet.
- numbsafari 5y agoIt's all relative and cyclical. Even SF was it by the 2008 crisis. If you bought in 2008 and had to sell any time prior to 2014, between carrying costs and transaction costs you most likely lost money. By the same token, I bought a house 2 years ago on the East Coast and made bank selling it this Spring. Only time will tell what buyers in this market are going to experience.
- JMTQp8lwXL 5y agoThere's a finite number of shares. You can look up the market capitalization, divide by the price, and get the number of outstanding shares, though it's also a reported statistic on its own.
- i0exception 5y agoCompanies can always issue new shares to dilute you (or in Apple's case, buy them back to reduce the number of shares)
- JMTQp8lwXL 5y agoCorrect, but the number of shares outstanding isn't infinite: it's always a fixed number. Just like there's a fixed number of square miles of land. And you can make and remove land. Lots of dredging along coastlines is done to make land. It isn't a great analogy and investment decisions should not be based on the concept.
- fshbbdssbbgdd 5y agoOver time, incomes grow. Also, housing costs as a share of income can grow. Combine these effects together and a price that was insane in the past could be normal in the future.