...any theoretical change in value is theoretical and not real.
This is total garbage and I really would expect better from you.
No you wouldn't - you would rather criticise than understand.
I do understand and that's why I know your statement is garbage.
I'm always happy to criticise the bulls and slap them down when they speak nonsense but I've really been astounded by some of the arguements and justifications being used by the bulls as the property market deteriorates.
This old line about a loss not being real until the asset is sold will never cease to amaze me.
I dont understand your problem with
"a loss not being real until the asset is sold"
Its completey correct. Take the example in this post, do you believe they have lost a "real" $60k? What about if house values jump $100k tomorrow. Have they made a real "win"?
The value of your house is the value you paid for it at the time of sale. The houses value will change the next time it is purchased. Any price stated between those two points is a theoretical price, not a real one.
Same as shares
I bought shares at $6. They dropped to $2 during the GFC. Had I mad a paper loss at this stage - sure. had I made a real loss - no.
I recently sold then shares for $9, did i make a real loss or real win on these shares?
I dont understand your problem with "a loss not being real until the asset is sold"
The problem is it’s wrong.
Quote:
Its completey correct. Take the example in this post, do you believe they have lost a "real" $60k? What about if house values jump $100k tomorrow. Have they made a real "win"?
Yes and Yes.
Quote:
The value of your house is the value you paid for it at the time of sale. The houses value will change the next time it is purchased. Any price stated between those two points is a theoretical price, not a real one.
Completely wrong. The current market value is the real value of the house the original price paid is irrelevant.
Quote:
Same as shares
I bought shares at $6. They dropped to $2 during the GFC. Had I mad a paper loss at this stage - sure. had I made a real loss - no.
I recently sold then shares for $9, did i make a real loss or real win on these shares?
You had made a real loss when they were $2 and a real gain when they were $9. It would appear that you're getting confused by the word "real", just because you don't convert the asset into cash it doesn't mean that the gain/loss isn't real.
Why do you think that putting your fingers in your ears and singing la la la means that the value of an asset isn’t changing over time?
This old line about a loss not being real until the asset is sold will never cease to amaze me.
Just a few letters make all the difference: a loss is not realised until the asset is sold.
An unrealised loss, OTOH, has impacts that are entirely context dependent:
(1) an otherwise cashed-up owner may temporarily--or even indefinitely--ignore the loss, and keep holding the asset in the expectation that the market for that asset will turn around. Whether that is wise or not depends on any interim return from the asset (noting that owner-occupation, if applicable, constitutes an in-kind return), and the likelihood and degree of a future positive rebound for the asset price. If the owner's overall portfolio is substantial enough, and broadly-based enough across asset classes, s/he can ignore temporary impairment of the value of any given asset. Or, if the asset value decline actually proves unrecoverable over time, there is (one hopes) other net worth against which to set off the loss.
(2) an owner for whom the asset is substantially, but not quite entirely, their only store of real wealth will generally be greatly constrained by an unrealised loss. S/he will be aware that crystallising the loss by selling would substantially wipe them out. But *not* sellling may well limit their opportunities to recover their losses in other realms, e.g. the owner won't pursue better employment opportunities outside his/her immediate location because s/he is underwater on the family home.
(3) an owner for whom the asset (particularly a house or unit) provides a negative net worth, unleavened by other positive equity, is in a position to walk away and start again, albeit with severe temporary restrictions on access to credit.
Peter Fraser's comments are quite valid with respect to Scenario (1). Wisebear's are quite valid with respect to Scenario (2). (I'll leave Scenario (3) to be fought over.)
Your friend exchanged cash to buy a house that was worth to him - one house.
It's still worth one house, and will always be worth one house, until he converts that back to cash. Until that moment any theoretical change in value is theoretical and not real.
So according to your theory people have real (monetary) debt and theoretical assets (homes) with no real monetary value? So, most of that huge Australian wealth (all but $37k) is not real wealth but rather theoretical.
Come on Mr Fraser, who know better than anybody how this loss can effect people. You want to tell me this is only a paper loss, wrong . It can just be a paper loss but if somebodies intension was to get ahead quicker ,pay down their loan a bit and then perhaps buy an investment property for my future. If I have a loss on paper the lender for my potential IP will ask for valuations on my house. When they see I am in negative equity they will refuse my loan and set me back many many years from my investment potential. Paper loss
Come on Mr Fraser, who know better than anybody how this loss can effect people. You want to tell me this is only a paper loss, wrong . It can just be a paper loss but if somebodies intension was to get ahead quicker ,pay down their loan a bit and then perhaps buy an investment property for my future. If I have a loss on paper the lender for my potential IP will ask for valuations on my house. When they see I am in negative equity they will refuse my loan and set me back many many years from my investment potential. Paper loss
Yes Ted for some people in the short term a negative equity situation could cause financial distress, but I was talking about a buyers who wants to raise a family and remain there for perhaps 20 years.
That buyer will be more concerned with interest rates in the first 10 years that capital gains. He/she will be concerned about capital gains when selling is being considered, but not so much until then.
You've heard the old saying about counting your chickens before they are hatched?
Any expressed market opinion is my own and is not to be taken as financial advice
Hell yes I have far too many real issues to be concerned with to be bothered doing theoretical calculations on the value of my home on a daily basis.
What sort of a wierdo would?
couple points...
for the guy who paid 700 for the house that's now worth 650, its too late now. No good will come from him worrying about the current value of his house.
but, he would be better off now financially if he had waited 6 months and bought the same house for 50k cheaper
the point is, now is not always the best time to buy (despite what real estate agents and mortgage brokers might tell you). And the message is not for that guy. Its too late for him. The message is for you if you are considering buying now.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy