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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?

#481

Post by imtringued »

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?

If the demand for labor exceeds the supply of labor inflation goes up which also means interest rates must go up. The Fed exists to moderate inflation down to a 2% inflation goal. When you consider that inflation had been below target for a number of years with no way to increase it, it only makes sense to let it run wild for a bit and then reign it in.

Re: Will real estate ever be normal again?

#482

Post by imtringued »

ZeroGravitas wrote: post #399
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…

There are many middle ways possible, but generally these problems arise because a small, connected group gains significantly and now, while everyone else suffers in minor or delayed ways. Those systems then keep to one extreme until things break, and as you say, blood on the streets. But it's worth bearing in mind that there are solutions that'll work for everyone, just that history shows you don't (usually) get to h…

Land value taxes were suggested centuries ago. We didn't learn anything. The housing problem basically solves itself with land value taxes.

Re: Will real estate ever be normal again?

#483

Post by AniseAbyss »

imtringued wrote: post #472
Robotbeat wrote: post #274

Earlier quoted context omitted.

So, I’m 36, and I promise you don’t want a deep recession. Cheap housing doesn’t matter if you don’t have a job. We dodged a freaking bullet economically with COVID. We recovered quickly. Heck, even in 2008 we did better than the countries that tried fiscal or monetary austerity. And yeah, the real enemy is zoning. It’s fun to blame Blackrock, and they deserve it, but it’s regular homeowners trying to restrict more h…

One of the ironic twists is that EU is doing all the "hardcore" free market austerity stuff (think Greece's imposed austerity or Germany's balanced budget) while the US is doing the Keynesian stuff (tax cuts, stimulus checks, infrastructure projects).

That's not true, the Netherlands has a budget deficit of 60 billion this year saving the economy from COVID. The US gives money directly to citizens while Northern European countries are giving it to businesses.

Re: Will real estate ever be normal again?

#484

Post by arcticbull »

pjmorris wrote: post #436
arcticbull wrote: post #235

Earlier quoted context omitted.

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...

If the Treasury lends out ~700B for ~MBS and is repaid ~700B for MBS, and the Fed buys $1-2T (low end of the repayment you mention) in MBS, who is really doing the bailout?

Treasury made loans with repayment schedules to specific businesses. The Fed purchased certain kinds of assets to hold temporarily on their balance sheet.

They both filled different roles - one was meant to manage inflation and the other to secure the stability and function of the markets. The Fed's dual mandate is to maintain maximum employment and low, predictable inflation rates over medium term. Spotting Ford in a rough patch doesn't fit the mandate.

Re: Will real estate ever be normal again?

#485

Post by imtringued »

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…

The wealthy have not only most of the assets but most of the money. If interest rates are higher they will get paid in a different way.

Re: Will real estate ever be normal again?

#486

Post by imtringued »

AtlasBarfed wrote: post #239
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.

The underlying reason for the bubble isn't gone. If it crashes it will bounce back up. To be fair, China's real estate sector is dying slowly as we speak.

Re: Will real estate ever be normal again?

#487

Post by AniseAbyss »

imtringued wrote: post #474
snidane wrote: post #465

Earlier quoted context omitted.

Even worse than rising interest rates is a society addicted to the fentanyl of zero interest rates. There is a reason major religions regulated debt in general, because that is how societal slavery develops. Of course we, the modern people of technology, 'know better' than our primitive ancient ancestors.

I don't get it. Most religions were against usury and they insisted on debt forgiveness if the debtor can't pay. Charging 0% interest is absolutely fantastic. The only problem is that we don't do the debt forgiveness. We bail out banks and then expect tax payers to shoulder some or all of the losses. It was especially bad with Germany vs Greece. German banks were bailed out and public healthcare was basically elimina…

Debt forgiveness does exist. You can declare bankruptcy.

Re: Will real estate ever be normal again?

#488

Post by arcticbull »

sumedh wrote: post #361
arcticbull wrote: post #122

Earlier quoted context omitted.

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,…

> This chart alone basically debunks the theory the Fed is solely responsible for lower housing affordability. Have you looked at Japan's population, its "dead ass flat" while US population keeps going up. https://datacommons.org/tools/timeline#place=country%2FJPN%2...

Doesn't really matter. What matters is that in Japan supply and demand are equal. You could achieve the same outcome in the US with more supply.

Re: Will real estate ever be normal again?

#489

Post by arcticbull »

tedk-42 wrote: post #463
arcticbull wrote: post #122

Earlier quoted context omitted.

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,…

Please stop. Zoning issues/lack of supply would imply that there are lots of homeless people without a roof over their head. Investors have too much access to property. It's a system of greed that benefits those who entered the market early (typically boomers). Just stop blaming zoning already.

Sorry but it's zoning's fault haha.

> Zoning issues/lack of supply would imply that there are lots of homeless people without a roof over their head.

The price of housing only matters to people who don't already have homes they own. 65% of Americans own homes, so that cuts down your working set dramatically.

There are a lot of homeless people, yes - 0.2% of the population - but lack of affordable housing tends to be roughly equivalent to "perma-renting" as renting has a lower barrier to entry.

To buy a home you have to come up with a lump sum of money to make a down payment. If you can't do that, you're forced to rent or split accommodation or live with your parents. Lack of affordable housing doesn't mean homelessness. There's a lot of elasticity there.

> Investors have too much access to property. It's a system of greed that benefits those who entered the market early (typically boomers).

Investors buy property to rent because home ownership is unaffordable. Blackrock buying up property is a symptom of the market, not a cause. They don't see houses becoming cheaper because they don't see zoning reform on the horizon, so they believe there will be long-standing demand for their rental units.

If housing were to become affordable, due to a large increase in supply, these investors would get bowled over twice - once due to lower real property value and once more due to lack of demand for rental units as folks buy instead.

Even foreigners parking capital abroad, more supply makes that (a) a bad idea and (b) kind of irrelevant. I'm not saying that shouldn't be tackled too, but once again, zoning would solve the problem.

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