Hello friends. I'm sorry for taking so long between posts but I've been enjoying the fruits of my housing labor. I took a week long trip to Egypt. I flew first class, ate at the finest restaurants, and stayed at five star hotels. It was a trip to remember and the nicest part was I was earning money to take this trip. "How so," the confused renter asks? I used my credit cards to pay for the trip and earned a lot of points. Now I'm paying off the credit cards with my home equity line of credit (HELOC for those in the business) and not only do I get the good feeling of once again being debt free, but I also get to deduct the cost of the trip from my taxes (in the form of a mortgage deduction). Ah, being a home owner means living the high life. I get points, tax deductions, and the security of having no debt. As a wise man once said "owning a home is like printing my own money."

While in Egypt I went sailing down the Nile. I discovered that "the nile" is not just a river in Africa. No my friends, it is a state of mind. It is seeing the future stretching out, limitless, before you. Nothing seems impossible when you are in the nile. Next time you see some smart entrepreneur with 8 homes, each one more leveraged than the last, tell yourself this person is in the nile...and you'll know the truth about their success.

Somewhere a village is missing you: Now it is time for today's financial advice: be a contrarian. Look for a property nobody wants. Find one where everyone says only an idiot would buy that house. Become that idiot and buy that house. For soon that "idiot" will have an asset that people will clamor for. Need proof? If I told you 10 years ago that homes in Watts would go up more than any other area of California you would have thought me mad. You would have told me only an idiot would buy a home there. But the idiots were smarter than you. People said only fools would buy large numbers of homes to flip in Las Vegas or Arizona (it is surrounded by desert, scorching hot, etc) and yet the fools are rich and you are still poor. Our society today is built around rewarding risk takers and punishing the cautious. Those who are risk takers will find the entire world will lend them as much cash as they need. Those who are cautious will find their money slowly stolen from them by inflation and taxation. The future is for the bold my fellow nile travelers. Play your cards right and someday you too can be hip deep in the nile.

New viewers: Like a Christopher Nolan film, this blog is designed to be read backwards. For the full weight of the convincing argument please start reading from the earliest post (debt is wealth) to the newest.

These are exciting times for this blogger. My fame has spread to such an extent that I was recently interviewed by a major business magazine which I can't name. So for the sake of this discussion I'll call it Norbes Magazine. I don't know when they're printing the article but this morning the author e-mailed me a copy which I'm including below.

Bubble or No Trouble at all? The Experts Decide.
By Sally O'Tool

All across America real estate investors are pondering the question: is there a housing bubble? To answer this question we interviewed 4 of the nation's leading unbiased real estate experts: David Lereah, economist; Leslie Appleton-Young, economist; Gary Watts, a highly respected real estate observer; and a man who goes by the name "Buck" that runs a popular Internet blog called There Is No Housing Bubble!

(Editor's note: for space reasons I deleted the wonderful, touching, and poetic words of Mr. Lereah, Watts, and Ms. Appleton-Young.)

For a different perspective we contacted the owner of a blog called There Is No Housing Bubble! which has taken the Internet by storm. In its short lifespan it has rocketed up the Alexa charts to become the 12th most visited blog on the Internet. As the website's title indicates, "Buck" doesn't believe there is or ever was a housing bubble.

Norbes: First off, tell us a bit about your background. Are you in the real estate profession? For how long? And why the pseudonym?
Buck: Yes I am an experienced real estate professional, the kind of person smart customers seek out for my wisdom and depth of market knowledge. I've been an agent for almost 2 1/2 years now, all of which has been in the hot Southern California market -- the trenches of the future as I like to call it. Like most people in the industry I got my start as an adult film actor, so the transition to real estate was a natural and smooth one. As for the pseudonym, unfortunately there are a lot of angry renters out there. I've already had 2 attempts on my life since starting the blog (although one of which might have just been a misunderstanding between me and the drive through cashier). So the less these people know about me the safer I am.

Norbes: You've really sacrificed a lot to spread your message of economic opportunity to the masses. What caused you to launch your career as an Internet pundit?
Buck: It is hard for me to tell this story without choking up. Please bear with me. It was the winter of 2005, around Christmas time. I was showing a beautiful and striking example of early 20th century architecture in East Los Angeles to a young couple. He was a mortgage broker and she was an appraiser. They had a young 3 year old daughter. They were an ideal couple to move into this gentrifying, up and coming neighborhood. Being the financially savvy people you'd expect, they were concerned whether they could afford this home. Even with an option loan and making the minimum payment they wouldn't have much left over for other expenses. Buying this house would be a major lifestyle change and they were not sure if they had the courage to make that decision. And then, as often is the case, a young child imparts wisdom to her parents. The little girl said "mommy, I asked Santa to bring me a house for Christmas instead of toys. Do you think Santa can fit a house in his sleigh?" With that the parents looked at each other and told her they were sure Santa could fit a house in his sleigh. They made an offer that afternoon and after the obligatory bidding war they are now starting their new life together in their Christmas present. I remember thinking to myself what good people they were to assure their daughter's future by buying this home. Later that evening I went online and came across some real estate bubble websites. I was angry. What if this couple had read these lies? Would they have still bought that home? I doubted it for the lies were convincing in a nuanced way. I knew I had to take action, to stop the lies, and stand up for all the children whose future is in peril of these demonic bubble blowers.

Norbes: You seem to have a lot of animosity towards the housing bubble advocates. Why?
Buck: Several reasons. One, because they try to use fear to cause people to make an irrational decision when the fact is: if they don't buy now they'll be priced out forever. Second, real estate is a proven winner. As all of your experts pointed out, they ain't making any more land but they sure are making a lot of babies. And using Darwin's laws of supply and demand, prices of land will always go up. I defy anyone to show me someone who purchased a home in California and over a 30 year time span lost money on the transaction. They can't because it has never happened. In fact, over any 30 year time span you'll see the home owner made a small fortune. However these bubble headed liars claim it is different this time. That somehow the future will be different this time. Beware of anyone who claims "it is different this time." Thirdly, there is a new paradigm in this country. We are moving along well known economic laws, from an industrial economy, to a service economy, to a real estate economy. We are in the beginning stages of this new economy and new times call for new thinking.

Norbes: You are a big proponent of using your home's equity to leverage the purchase of other homes. Is that risky?
Buck: Let me tell you the story of a man named Charles. Charles lived in the early 20th century and devised a new financial strategy. He would use current revenues to pay current obligations and count on the appreciation of revenues to pay future obligations. This scheme was so successful that millions of dollars poured into his investment fund and eventually this technique become so popular that the US government uses it to pay for our nation's retirement plan (social security). Do you think the US government would use risky accounting methods to assure its citizens of their retirement money? I don't think so. So what I want to do is show people how they can use this time tested financial technique for their own profit. But first they must change their thinking. They are not buying a home, instead they are gaining control of a revenue stream. That stream of money can be managed to produce more and more wealth. It is the engine of your prosperity and all it needs for you to do is to be brave enough to turn the key. Will you turn your key?

Norbes: How do you respond to critics who say home prices have gotten out of sync with incomes?
Buck: With a four letter word. Just kidding. Seriously, these critics are looking at the problem with outdated ideas. It is different this time and requires different thinking. People who own homes have 2 revenue streams to work with. 1) their regular job income. This is a paltry and declining sum in today's world. 2) their home's appreciation. In most California markets the home owner is making another $30-100K a year in their home's appreciation. Once you factor that income stream in today's homes are extremely affordable. And as prices rise, the appreciation rises in real terms (although in percentage terms it might stay very flat). Therefore homes become MORE affordable as they become more expensive due to this secondary revenue stream. Bubble advocates never factor in this second income into their affordability figures. With that factored in everyone can afford a home, from the CEO all the way down to a farm worker and everyone in between.

Norbes: Do you believe it is a good time to buy?
Buck: Now is a great time to buy. In fact, it is the best time to buy. I have over 100 highly coveted properties that I can show this afternoon. I know most real estate agents have similar portfolios too. You can be like a kid in a candy story and cherry pick the finest homes made by the skilled artisans of Mexico that this nation has to offer and get them while they are still at ground floor prices. Believe me when I say you won't see prices like this in 5 years. You'll get down on your knees and beg to buy a home at these prices.

And there you have it. Four experts, four opinions, and one consensus -- now is a great time to buy a home.

As you can tell the response to this blog has been overwhelming. I feel I need to take a little time and answer a few of the many emails that have poured in.

G.F. from California asks:
Hi Mr. Bubble,

Prices have gone up so much in the last 5 years. I'm worried about buying at the peak and overpaying for a house. The house I'm considering is a fixer upper in North Oakland. It is 1100 sq. ft. and needs a new roof. The asking price is $675,000. What should I do?


Good question. First of all, remember, you can not over pay for a house. In fact, as I proved previously, the more you pay for the house the more money you'll earn in the long run. I know some deluded renters are screaming at their monitors right now "that's the stupidest thing I ever heard!" Here's the proof. Let's say you buy that house for 675K and we'll be very very conservative and assume only 10% yearly appreciation instead of the industry standard 20%. After 10 years you'll have a little over 1 million in equity (even if you negatively amortize a few hundred thousand you're still sitting on a mountain of cash). Now, let's say you aggressively bid 750K on this Oakland charmer. After 10 years at ONLY 10% appreciation on the higher price you'll have over 1.2 million in profit. That's right, you made an extra $200,000 by "overpaying" for that house. As the math above proves you can not make a mistake of overpaying for a home. In fact the only mistake would be passing on that cute Oakland home.


John A. from Missouri asks:
I never heard the phrase "housing bubble" until after September 11th, 2001. Who is behind all these lies?

That is a very perceptive observation my friend. I too never heard a single person mention the housing bubble before the terrorists struck at our country on that fateful day. Ask yourself this: does Osama Bin Laden want home prices to plummet? Of course he does. He would love for home prices to collapse and ruin the American economy. And if Hitler were alive today do you think he'd want Americans to make a lot of money in real estate? Or do you think he'd hope for falling home prices to bring our economy to a halt and make us more vulnerable to invasion? I think we all can agree that he'd want to destroy our economy. Do you really want to be on the side of the terrorists and the Nazis? Do you really want to help them win their war against our country and obliterate our entire way of life? Ask yourself why do the lying "housing bubble" proponents want you to sell your home and rent "before it is too late?" Do they really want to save complete strangers lots of money? Or do they have some other motivation? Some sinister motivation to wreck havoc on the new paradigm of our real estate based economy.



Alan G. from Washington DC writes:
Housing price bubbles presuppose an ability of market participants to trade properties as they speculate about the future. But upon sale of a house, homeowners must move and live elsewhere. This necessity, as well as large transaction costs, are significant impediments to speculative trading and an important restraint on the development of price bubbles.

Some homeowners drawn by large capital gains do sell and rent. And certainly in recent years some homebuyers fearful of losing a purchase have bid through sellers’ offering prices. But these market participants have probably contributed only modestly to overall house price speculation.

More likely participants in speculative trading are investors in single residence rental and second home properties. But even though in recent years their share of purchases of single family homes has been growing, in 2003 their mortgage originations were still less than 11 percent of total home mortgage originations. Overall, while local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity.


Ummmm....I'm confused, are you saying there is a housing bubble or there isn't one? Whoever you are I hope you are never in a position of power because you talk out of both sides of your mouth.


D. Lereah from Virginia asks:
The story of little Timmy Jones has left a hole in my heart. What can I do to help Patrick and Timmy?

You can do what every patriotic American does, buy a home and convince everyone you know to do the same. If everyone owned 1 or more homes there would be no renters and no little Timmies would ever risk being born into the hell I described. In fact, if we all became home owners America would guarantee its place as the wealthiest nation on earth. However if we listen to the bubble heads and their easily popped lies, we're a nation headed into poverty and deprivation. We'd become a nation of Patrick and Timmies and that thought is too frightening to contemplate.


Anonymous from California writes:
I be a realuhtor in san jose. I sell milliun dolor homes to janiters waitors and morgage brokers. I urn my 6% comision. I maid 1 milliun dolors last yeer selling homes. I urn my money. Tell people the trooth about homes allways going up in price. Its a fact. I no. I'm a realuhtor.

Wise words from someone who knows his industry. Who better to listen to than a highly trained real estate professional who knows the market and your home's value? What sort of training do most of these "housing bubble" maniacs have? They are not trained real estate professionals. Rather they are bitter amateurs who are projecting their hopes and fears onto other people. They don't understand why changing demographics, immigration, environmental, and other socio-economic factors have caused real estate to reach a permanently high plateau. People in the industry and educated home owners know the truth. They don't need some outsider trying to confuse them with so-called facts. But I give you my pledge that as long as I have fingers to type I'll proudly proclaim "there is no housing bubble!"

Smart people know the truth. Don't you want to be as smart as Einstein?