REMINDER: THE ARENA PLATFORM, INC. has no obligation to monitor the Forums. However, THE ARENA PLATFORM, INC. reserves the right to review any materials submitted to or posted on the Forums, and remove, delete, redact or otherwise modify such materials, in its sole discretion and for any reason whatsoever, at any time and from time to time, without notice or further obligation to you. THE ARENA PLATFORM, INC. has no obligation to display or post any materials provided by you. THE ARENA PLATFORM, INC. reserves the right to disclose, at any time and from time to time, any information or materials that we deem necessary or appropriate to satisfy any applicable law, regulation, contract obligation, legal or dispute process or government request. Click on the following hyperlinks to further read the applicable Privacy Policy and Terms of Use.
***Official Real Estate Thread***
- Thread starter One-Off
- Start date
I hate to keep using the term recency bias but this place, and for that matter the wider financial world, is absolutely drenched in it.
Most of the people here are used to an economy that runs on free money and easy leverage because they are products of the past few decades.
They really have trouble thinking outside that box.
None of the economic scenarios in front of us look good, at least in the next few years, for housing.
That said there are some fair arguments the decline in housing won't be that severe.
None of those fair arguments are being presented here.
2008 happened because opportunistic lenders sold mortgages to millions of people who shouldn't have been able to buy them, then packaged those shitty mortgages up as mortgage-backed securitits and sold them as AAA products to investment banks, who bought them on leverage and promptly sold derivatives and swaps based on these lousy MBS products. The whole house of cards caved in and the sh!t hit the fan and the banking industry froze up and the feds did what they had to to keep it from becoming the 2nd Great Depression. QE and QE2 caused problems later on but without them 2008 - 2012 would have been so much worse and we'd likely still be digging ourselves out.
I shat some out in a public restroom at the beach this morning.
Institutional investors have focused most of their resources "cheap" markets where the price to rent ratios are favorable, mainly larger cities in the southeast and midwest. San Antonio, Indianapolis, Birmingham etc. At worst they are paying 1.6% interest and profiting off of the rent. Probably the best inflation play there is, so I don't see them liquidating any time soon. In some cities, such at Atlanta, they've cornered so much of the market that they can easily raise rent without risk. It's criminal.
High price markets is mostly supply driven- very limited supply in highly desirable markets because you are literally talking about a few square miles with a lot of interest. Those markets see a lot of buyers who don't need a corresponding high paying job to cover the mortgage. Plus a whole lot of upper 20% income professionals who want to live there.
Traditional lenders are legally not allowed to exceed 50% DTI for all debts, even if the property is worth far more. Unless you are talking about commercial lending vehicles or some of the new wacky stuff out there, but that is not what most people are using to pull equity from their homes.
If you want to talk about recency bias, I spent most of the financial crisis unemployed, renting rooms from friends, and doing odd jobs to barely squeak by. There was very little liquidity at that point from anyone, so I'm not sure where your "last 2 decades" of easy living assumption comes from.
No, I just tend to tune out the doomsayers who repeat the same tropes for decades and have no skin in the game. It's wired into them and can usually be traced back to financial advice that their parents lived by or some kind of government related financial crisis they or their family lived through.
There are far more people in a financial position to buy now than there were 10-15 years ago. I have a lot of well paid friends that still rent and want to own who could've jumped in, but instead spent the last 3-5 years "waiting for the dip".
Actually they have been presented . . . . Far more constricted supply, institutional investment, less new construction, tighter lending requirements, millennials reaching peak earnings and family building age, etc.
This evades my question. What “fundamentals” are driving surging house prices?
Supply and Demand. Which has been driven by rent increases, millennials and now GenZers coming of age, far less new construction, institutional investment, air bnb, etc
This is hand waving. Let’s examine one factor in the “demand” side - rent increases. Did Millennials decide to use the $100k laying around in their checking accounts to buy instead of rent? If so, how many did this and in which markets?
OK, so no actual arguments, data, numbers, etc. as usual.
Whatever you did during the GFC is irrelevant - we are talking about the overall financial policies of the USA over the past two decades. Longterm QE, low rates, and stimulus.
Doomsayers = whoever is critical of MMT I guess?
You SHOULD listen to people who lived through government created financial crises.
The people in the "great financial position to buy" are there likely because they are part of the current free money low rate bubble. Things will change when they lose their job or are faced with normal interest rates.
People make it work all kinds of ways. Some are high paid individuals or DINKs, some have generous parents, some use low interest loans.
Do you really expect me to have an answer for this
Above the so-called doomsayers were accused of “repeating the same tropes for decades” and “having no skin in the game.” @grapedrink could you please say who the doomsayers on this thread are and what you mean by “repeating the same tropes for decades” and “having no skin in the game.”
I do. The BLS publishes a wage distribution and there are other estimates of household net worth distribution, including the amount of consumer debt and student loan debt and savings. These are the types of data you’d use to say that the fundamentals had improved enough to drive the housing price increases we’ve seen.People make it work all kinds of ways. Some are high paid individuals or DINKs, some have generous parents, some use low interest loans.
Do you really expect me to have an answer for this
I’ve looked at this data and it’s all bad for Millennials and they carry in the neighborhood of 2-3 trillion in student loan debt the size of a mortgage down payment on average. Also, wages have been stagnant for the bottom 3/5ths of earners since the ‘90s. About the only “fundamentals” I sawimproving over the past 2 years were for thhose in the top 20% who are compensated partially or wholly in stock.
Those are normal fundamentals that would drive a 3-5% YoY increase that is slightly above inflation in a normal market.
Which of those fundamentals that you identified supports a 100% increase in 3 years?
LOL, it's pretty clear you're not gonna get real answers here.
I too am curious about this.
What are these "tropes"?
Who has "no skin in the game"?
You and your numbers. Pfft.
wrong . . . . I laid out several arguments. Feel free to go back and read them. I'm not going to waste time pulling up numbers if you can't even acknowledge that. Yes, demographic shifts relative to creation of new housing units is an argument.
People who invest more in preparing for doomsday than preparing for the future they are more likely to end up with, and repeat the same "sky is falling" garbage for decades on end.
For example- my ex BIL was one of the worst I've known. Full on (wannabe) prepper, except he couldn't afford to be one. He spent more time training and preparing for the collapse of society than he did working to support his 4 kids (who were my sister's stepkids, thankfully). All he talked about was his bug-out bag and his militia LARP training. Friggin kook.
Sure, however more often than not it leads to behaviors that are compulsive, lack nuance, and overall perform worse than what most financially savvy individuals are doing. For example, a certain someone you've been giving a hard time in the crypto thread who's parents lost money in a bank account they thought was safe. There was also a story about a Latina maid who refused to use banks and had a long battle with the IRS (that she eventually won, barely) because she had no electronic paper trail to back up her income and tax payments. It's the same line of financial advice that comes from people who say "never use credit cards!" that I laugh at while I fly business class with miles I accumulate from using them.
No, these are highly educated working professionals who have in demand skills, which is why they are paid what they are. In my circle none of them are techies who work for publicly traded companies with outrageous valuations.
Oh really? Considering I just signed closing docs today at 3.9 with 10k in points for a rate I locked yesterday. I think I would know then what you read on the internet about interest rates.