Homestead mailing list

[Gene GeRue <genegerue AT ruralize.com>]

> "Local real estate analysts say 80 percent of the units in some projects are
> bought by speculators. "

Speculators/investors, unlike most homesteaders, have a lot of money that 
needs a home. CDs and T-bills are secure but give low interest. Muni bonds 
the same plus tax-free. Real estate securities pay a bit more but low by 
historical rates. Right now, as for the last three or four years, maybe the 
last couple hundred years, real estate offers almost certain appreciation, 
not to mention modern tax advantages. Think leverage. Invest small cash, 
get a, say, six to thirty-percent appreciation magnified because the 
investor gets appreciation on the total value, including the bank's money.

Here in the Phoenix residential market, some so-called analysts say a large 
percentage of homes are bought by investors. My view from personal 
experience and talking to other Realtors, is that less than 25 percent of 
buyers are investors. We get an overflow from southern California, where 
real estate has made many millionaires but where homes are about double the 
cost as here. Lots of money looking for something to buy. I currently have 
two investor-buyers. The first is a local father of girls aged five and 
ten. He wants the investment for their college costs. The other is a 
southern California lawyer whose motivations I don't clearly know yet; he 
just wants a good Scottsdale investment.

The weakness I see in the investment stampede is that there are fewer 
renters due to the several-year low interest rates that have allowed more 
young people to buy rather than stay renting. I predict an inevitable 
adjustment period as investors are unable to cover enough of the carrying 
costs with rental income. But for now, all indications are that the current 
hot real estate market will continue in those areas with good employment.

Beyond the land, tools, books, buildings, animals, seeds, etc., that we 
homesteaders value, does anyone know a better investment than real estate?