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Will real estate ever be normal again?

nytimes.com

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Re: Will real estate ever be normal again?

#131

Post by throwaway9870 »

uejfiweun wrote: post #52
RappingBoomer wrote: post #49

Earlier quoted context omitted.

the problem is that if inflation continues, then interest rates will go up, whether the fed wants them to or not...once rates go up, money will flow from asset investment to bonds etc...and that will crash asset prices...checkmate...one way or another, asset prices WILL crash

How exactly does this work? I thought that the fed controlled interest rates. Under what circumstances could the interest rate rise independently of the fed?

When the exchange rates go crazy because nobody wants dollars. That being said, the USD is the key currency of the world so we have been able to avoid that issue. If the US causes the world to look away from the USD, it is game over for the US lifestyle. Screwing the rest of the world by printing USD is a bit like the Norway oil fund - it is an amazing source of wealth that will not last forever and should be spent wisely. The US is doing anything but that.

Re: Will real estate ever be normal again?

#132

Post by vlunkr »

paulcole wrote: post #127
mesh wrote: post #117

Earlier quoted context omitted.

It seems pretty simple, I can spend money to rent a place, and after 30 years (rent), have nothing to show for the money I put in, or I can buy a house (mortgage), spend money for 30 years, and then have an asset I own. Not to mention the freedom to do whatever you want to your home / house without having to ask for permission, or being in a position of putting money into an asset that you don't own.

I think people who parrot this line try to ignore the total cost of their mortgage being quite different from the purchase price of their home, property taxes, repairs, etc. As a lifelong renter, I’ve done quite well by keeping my rent low (my preference is studio/1-bedrooms in relatively dense urban areas) and putting extra money into the market. 30 years from when I started renting, I’ll have quite a lot to show fo…

Well studio/1-bedroom isn't really an option for families, and rates go up quickly after that point.

Re: Will real estate ever be normal again?

#133

Post by arcticbull »

A4ET8a8uTh0 wrote: post #129
Spooky23 wrote: post #105

Earlier quoted context omitted.

The die was cast for option 2 30 years ago. Once policy flipped to “we will provide capital to prevent bad things”. Half the economy is based on real estate… people building buildings to avoid taxation (if you have $) and borrowing against equity (joe homeowner). You cannot break equity values without breaking the economy. The people who are getting screwed are the same people who have been getting screwed since the…

In retrospect, it rings true. I think I had my eyes opened during 2008 crisis and FED was effectively buying everything thrown at it. I remember thinking how can government own its own bonds?

> I think I had my eyes opened during 2008 crisis and FED was effectively buying everything thrown at it.

They definitely did not. [1]

The bailouts were largely loans, ones that were repaid to the US government for a pretty substantial profit, not less. And assets the Fed took on were literally that, assets, which the Fed was profitably unwinding before COVID hit.

[1] https://en.wikipedia.org/wiki/Federal_Reserve_responses_to_t...

Re: Will real estate ever be normal again?

#134

Post by A4ET8a8uTh0 »

paulcole wrote: post #127
mesh wrote: post #117

Earlier quoted context omitted.

It seems pretty simple, I can spend money to rent a place, and after 30 years (rent), have nothing to show for the money I put in, or I can buy a house (mortgage), spend money for 30 years, and then have an asset I own. Not to mention the freedom to do whatever you want to your home / house without having to ask for permission, or being in a position of putting money into an asset that you don't own.

I think people who parrot this line try to ignore the total cost of their mortgage being quite different from the purchase price of their home, property taxes, repairs, etc. As a lifelong renter, I’ve done quite well by keeping my rent low (my preference is studio/1-bedrooms in relatively dense urban areas) and putting extra money into the market. 30 years from when I started renting, I’ll have quite a lot to show fo…

It can be both, but in US real estate historically was seen as a good way to park money. I will venture to say that you are an outlier. I remember renting with my SO. The jumps in rent were getting onerous to the point, when it became cheaper for us to actually buy a place.

But again, each situation varies. Before living with my now wife just like you I lived in a small apartment, because that was all I really needed at the time ( and it was very budget friendly ).

Re: Will real estate ever be normal again?

#135

Post by clairity »

uejfiweun wrote: post #45

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

> "1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets."

no, blood and unrest is an unlikely end result of this scenario, though vested interests would really like us to think that. the more likely outcome is a redistribution of wealth toward the lower 99% (concomitantly with a shrunken pie), since the wealthy and powerful have the most, and the most inflated, assets in the first place. that's what they're protecting as if our lives depended on it. that's what the infrastructure+extra spending bills are about, not us little folks. this is why the deflation approach is so threateningly disfavored, because it would flatten the wealth curve.

Re: Will real estate ever be normal again?

#136

Post by _3u10 »

throwvirtever wrote: post #107
uejfiweun wrote: post #45

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

I don't quite understand the obsession with homeownership. If a large enough percentage of people rented from property management companies, there would be more impetus to have strong tenant's rights laws to protect residents, and people would have more flexibility to move around. Moreover everyone would have an interest in increasing supply to keep their own rent down, pushing prices down toward cost-of-materials an…

It makes financing anything else a breeze.

It makes you more money than you earn. Imagine if when you paid rent you got a cheque for twice what you paid in rent. I’m $12,000 in “rent” on my current place and it’s returned $123K, I moved in in May didn’t start paying rent til July.

When you’re done with it you can rent it and have someone else buy it for you.

The market might return slightly higher but with leverage (mortgages) the returns are unbeatable.

In Canada selling your primary residence is exempt from cap gains.

When you combine all of these factors with modern zoning and rent control laws you basically can’t lose money.

If you buy presale by the time the unit is built it rents for more than the mortgage.

Re: Will real estate ever be normal again?

#137

Post by spaetzleesser »

Maybe the “normal” state of the world is some form of feudalism where most people own nothing? I often wonder if the 20th century with a rising middle class was just an aberration and things will go back to “normal”. The rising inequality seems to be a first indicator.

Re: Will real estate ever be normal again?

#138

Post by noahtallen »

arcticbull wrote: post #122
uejfiweun wrote: post #45

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

This is only part of the problem - and a small part of the problem at that. The real problem as always is zoning. Houses cost roughly the same on a $/sqft basis, adjusted for inflation, as they did in the 1970s. They're more expensive now because outside of town they're twice as big on average [1] - in part due to zoning rules. In town, zoning rules preclude densification necessary for supply to meet demand [2]. And,…

Part of the problem with the first item you mentioned is that developers don’t really want to build cheap housing (I guess this is an assumption, but it makes sense financially.) They can make way more money catering to the people who can “afford” to build a $500k home, and people who want a very custom design and lots of space. On the renting end, “luxury” apartments will make more money than really basic cheap units. So most of the new housing stock doesn’t help address the problem for people new to housing. Even if you want to build out a very basic, small house, you have to have cash to DIY without a bank, or find some way to finance a builder (increasing the significant labor cost) without having existing equity. So the part of the market that does want cheap, basic housing doesn’t even have a way to influence those units. There is loads of demand for them (young people without money make up a huge portion of the population), but no developers willing to meet that demand when they can just make expensive units. And not enough developers so that some need to chase the cheap market.

And in cities, the lot cost is very prohibitive too, before even getting into building a very basic house.

Re: Will real estate ever be normal again?

#139

Post by vorpalhex »

clairity wrote: post #135
uejfiweun wrote: post #45

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

> "1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets." no, blood and unrest is an unlikely end result of this scenario, though vested interests would really like us to think that. the more likely outcome is a redistribution of wealth toward the lower 99% (concomitantly wit…

Most of those 99% have retirements of some form or another, and have their wealth trapped in their house.

Re: Will real estate ever be normal again?

#140

Post by A4ET8a8uTh0 »

arcticbull wrote: post #133
A4ET8a8uTh0 wrote: post #129

Earlier quoted context omitted.

In retrospect, it rings true. I think I had my eyes opened during 2008 crisis and FED was effectively buying everything thrown at it. I remember thinking how can government own its own bonds?

> I think I had my eyes opened during 2008 crisis and FED was effectively buying everything thrown at it. They definitely did not. [1] The bailouts were largely loans, ones that were repaid to the US government for a pretty substantial profit, not less. And assets the Fed took on were literally that, assets, which the Fed was profitably unwinding before COVID hit. [1] https://en.wikipedia.org/wiki/Federal_Reserve_res…

Ok. Buy was not an accurate verb here, but just because it was profitable it does not mean FED did not throw money at it. My main point stands.
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