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Will real estate ever be normal again?

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Re: Will real estate ever be normal again?

#231

Post by clavicat »

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…

If the permabubble option is so predictable, though, it should be easy to account for. Just empty your bank account and send all your funds to a stock brokerage and go all in on TQQQ (triple-leverage NASDAQ-100 ETF). Your gains should predictably outpace inflation and even real-estate appreciation so long as the Fed doesn’t prick the bubble by hiking interest rates like they did with the dot-com bubble.

This is why I think inflation is not as big a deal as it historically once was. It’s never been easier to convert cash to inflation-sensitive assets and back again. We could very well transition to a world where cash simply becomes a short-term medium of exchange and loses all purpose as a store of value. All your wealth could kept in hard assets until the very moment you need to spend it.

Re: Will real estate ever be normal again?

#232

Post by xur17 »

willis936 wrote: post #211
bumby wrote: post #209

Earlier quoted context omitted.

Recognizing it is one thing, but thinking it’s a good “investment” is another. Often funding/chasing status is a fools errand IMO. Part of the problem is that homes being the largest asset that a person owns because they’re chasing the status of that American Dream. Can you think of any other illiquid asset that people would suggest piling a majority of your net worth into?

There is no other asset I can own that alleviates the financial burden of burning nearly half of my take-home pay in perpetuity to fund some rich landlord's beach vacations.

But it doesn't remove that financial burden entirely (or even close to entirely). You're still paying:

* opportunity cost

* property taxes

* interest

Re: Will real estate ever be normal again?

#233

Post by 01100011 »

ab_testing wrote: post #145
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…

Canada already did #2. Average home prices in almost all metro areas are around 10x yearly income. There is no blood on the streets and it is still considered a destination country.

My Canadian friend mentioned this but then followed it up by saying no one in Canada cares what the Bank of Canada does and all eyes are on the US. Could that be one reason there wasn't a significant effect?

Also, there's quite a bit of cash in savings accounts now, and rates are still low by historical standards. We'll see what happens when mortgages are above 5% again.

Re: Will real estate ever be normal again?

#234

Post by 01100011 »

kelnos wrote: post #175
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…

Is there no middle ground? Like... raise interest rates a little, but not too much, and keep printing money, but slow down on how fast?

The big risk now is that the fed waited too long. They could have already raised rates when the economy started doing better before delta hit. They would have had more ammo this time around, and the supply side driven inflation we're seeing might have been tamer.

Re: Will real estate ever be normal again?

#235

Post by arcticbull »

pjmorris wrote: post #187
arcticbull wrote: post #133

Earlier quoted context omitted.

> 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…

On the chart shown at your link, Fed-owned assets go from ~.8T to 2.5T (blue line, assuming the MBS (red line) are part of that.) and then grow as QE takes effect and the Fed buys all manner of things. That .8T was all US Treasuries, no longer true of the expanded balance sheet. If you look at the updated chart ( https://fred.stlouisfed.org/series/WSHOSHO ), whatever you make of it, it doesn't look like much in the w…

The bailouts were via Treasury. [1] QE was via the Fed. I believe, and correct me if I'm wrong, back in 2008 the Fed could only pick up bonds and maybe mortgage backed securities?

You can see the Fed unwinding its balance sheet here [2], up until 2020, and in the link you provided.

[1] https://projects.propublica.org/bailout/

[2] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

Re: Will real estate ever be normal again?

#236

Post by bumby »

willis936 wrote: post #211
bumby wrote: post #209

Earlier quoted context omitted.

Recognizing it is one thing, but thinking it’s a good “investment” is another. Often funding/chasing status is a fools errand IMO. Part of the problem is that homes being the largest asset that a person owns because they’re chasing the status of that American Dream. Can you think of any other illiquid asset that people would suggest piling a majority of your net worth into?

There is no other asset I can own that alleviates the financial burden of burning nearly half of my take-home pay in perpetuity to fund some rich landlord's beach vacations.

If you’re spending that large of a percentage on housing you’re already running against most prudent financial advice and probably shouldn’t be thinking of housing as an investment asset

Re: Will real estate ever be normal again?

#237

Post by Notanothertoo »

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…

Not equity building, lack of control, and sometimes the "incentives" are off. For example a landlord wants the cheapest possible appliances. A renter wants features, quality and efficiency.. Also having no agency in the layout or functionality of the home is going to lead us all into misery. I don't understand how people think this is remotely OK.

Re: Will real estate ever be normal again?

#238

Post by ItsMonkk »

toss1 wrote: post #102
mikem170 wrote: post #82

Earlier quoted context omitted.

I agree. I believe zoning is a big impediment. People wouldn't be priced out of their communities if there was more supply of housing at varying prices. Instead current regulations restrict the supply of housing and seem to prioritizing uniformity and property values.

Right, so destroy the village to save it. >>People wouldn't be priced out of their communities if there was more supply of housing Many of the communities you find attractive would not exist at that level of attractiveness if the supply were massively increased by abandoning zoning. People live in communities and make their sets of zoning regs to design, build, and maintain the quality of life that makes that communi…

I have absolutely no problem with people voting for zoning policies that decrease the supply of housing. I have a major problem with incentive structures that are setup such that the people that own houses in that environment become wealthy through no effort of their own.

George figured this out 100 years ago[0]. Implement the Land Value Tax. Go ahead and restrict supply, that's your right. But it's going to cost you in taxes.

[0]: https://astralcodexten.substack.com/p/your-book-review-progr...

Re: Will real estate ever be normal again?

#239

Post by AtlasBarfed »

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…

It's a bubble. Let the prices crash.

Re: Will real estate ever be normal again?

#240

Post by 01100011 »

alexose wrote: post #74

I know this may be sacrilege to some, but: Consider moving to a less desirable place if you can. I got priced out of my hometown of Seattle. So I moved to a small town in rural Oregon and I couldn't be happier. The combination of spending comparatively little on housing + a tech salary is hard to beat. I have my own shop! It feels like freedom, even if it comes at the cost of being near my extended family.

It's really great for a lot of folks but not without its drawbacks. Some people need access to 'tier-2' or higher cities for things like specialized medical care or educational assistance.

I think some people moving away from the urbs are going to get a shock when they see what incentives will arise because of global warming. Rising energy costs may force you back to a city in the next decade or two.

That said, I'm jealous. I can't wait to leave the Bay Area in another year or two.

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