Intrinsic Value

[Big ole Boy]

Reading from an older Webster Dictionary the first sentence states that the word intrinsic is:

... not dependent on external circumstances.

So,

the 1004 form has a place in the cost approach for external forces.

With inflated borrowers balance sheets and increasing negative cash flows I submit that this is an external pressure being placed on real property, creating artificial and upward pressure on prices.

Ever really "think" and ask yourself why "External obsolescence" is on 1004 form?

Yet, its the big "no no" box that no one will put anything is there for residential.

Hardly ever see it... just thinking.

 

[Big ole Boy]

What if:

No financing existed in the real estate world and everything was CASH.

Or, to a lesser degree, available financing was much more limited.

Then,

Real property values would be far less, but intrinsic value would remain the same.

Examples where intrinsic value is deminished:


1) False or deliberate distortion by the financial system. - a worm which papers

over true risk and real ownership of property rights.

2) When society no longer attaches real assumptions to the physical land and

rationale for value becomes conviluted and distorted beyond repair under the

current form of government/ownership

 

[moe cohen]

David
I agree with you re the financing. That is one of the important elements of the equation of supply and demand. Note that in countries around the globe mortgage money is substantially more limited than in the USA yet real estate prices are generally higher.

Moe

 

[Big ole Boy]

Moe,

I have always figured that external obsolescence existed, but is never accounted for.

In many instances, EO is negligible.

But today, I think it is significant.

ANd is affecting the underlying worth of our currency world wide.

I would really enjoy learning from others - as I have a very limited understanding of this area.

However, my suspicions are not so much with the correct formula,

but, the effects I am witnessing.

 

[moe cohen]

David
Sell real estate and buy the Yuan RMB. I dont have a file with photos to support my suggestion but this is my investment tip of the day.

Moe

 

[Big ole Boy]

Moe, (yuan, RMB) - what are these?

Not sure what you are saying but let me say this:

The Deeper Algorithim:

Intrinsic value and external obsolescence in real property is peripheral to US

currency strength.

Inflated borrowers balance sheets (residential lending), negative cash flows

(residential property) are just symptoms of a wider tangential effect of an

economic system which has lost its rudder.

When the 'worker class' (myself) can see the dimming investment horizons being

choked by 'sanguine debt' exuberance - external obsolescence becomes a trivial

matter.



William Buffet said just a day or so ago that the de·riv·a·tives markets are

an over-priced Wall Street pricing scheme aimed at the less frugal investors.

The dollar strength is well on its way to a giant correction.

What is going to happen?

As we raise rates to keep foreign bond holders happy,

property values will continue to increase in these insane markets like California,

but in other areas you will drastic decreases as the two wage earner household is

outsourced oversees.

Intrinsic value of the land may never be something that is ever affected, but these

forces are external and will have an affect on demand for real estate.

In some way external obsolescence and intrinsic value are inextracably tied

together - someone else can argue formulae.


Buffet now has trouble parking Berkshires money

Thats because all the spaces are occupied with too much debt.