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Will real estate ever be normal again?

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Re: Will real estate ever be normal again?

#171

Post by blip54321 »

listenallyall wrote: post #147
blip54321 wrote: post #121

Earlier quoted context omitted.

There's a world of difference between high interest rates (which are good and healthy) and rising interest rates (which implode the economy). You gotta look at the derivative. Rising interest rates are really, really bad. Anyone who relies on revolving business debt, credit card debt, or other non-fixed-rate debt goes bankrupt. I kinda wish I entered the economy when we still had 12% interest rates. Each time a reces…

> Anyone who relies on revolving business debt, credit card debt, or other non-fixed-rate debt goes bankrupt. This is hyperbole. Rising interest rates aren't fun, but they aren't cataclysmic. Rates have gone up and down for decades. Further, if you signal that you're taking the option to raise rates off the table, risk tolerance and asset prices will explode (some would say this has already happened due to Fed signal…

I hope you're right.

The extent to which you might be right or wrong depends to some extent on how much debt there is in the system (or how leveraged/wound up the economy is).

A debt-based economy is much more vulnerable. Last time we raised interest rates rapidly, in the eighties, household debt was less than half of what it is today, adjusted for GDP.

Re: Will real estate ever be normal again?

#172

Post by iammisc »

KaiserPro wrote: post #26
thefounder wrote: post #8

Earlier quoted context omitted.

Why don't you move to a cheaper place/smaller city? I don't understand why there are some many homeless people in big cities (i.e NYC). If people would just move to cheaper areas/cities the whole issue of housing would be fixed.

Because there are no jobs there. Yes remote might fix that, eventually. But I strongly doubt that, especially as humans are social animals.[1] However The UK is a more extreme version of this. People move to london because it has the most concentration of high paying jobs, and as a side effect culture (what that is I leave up to you. I don't just mean music, cinema and posh people shit.) Now, I could move back to bum…

The unsheltered homeless are not working in most cities...

Re: Will real estate ever be normal again?

#173

Post by drdec »

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…

Inflation can be good for young people. If you really think there will be significant inflation, go buy a house, borrow more than you are comfortable with it necessary. Inflation will make the debt easier to deal with in time.

Re: Will real estate ever be normal again?

#174

Post by hogFeast »

listenallyall wrote: post #147
blip54321 wrote: post #121

Earlier quoted context omitted.

There's a world of difference between high interest rates (which are good and healthy) and rising interest rates (which implode the economy). You gotta look at the derivative. Rising interest rates are really, really bad. Anyone who relies on revolving business debt, credit card debt, or other non-fixed-rate debt goes bankrupt. I kinda wish I entered the economy when we still had 12% interest rates. Each time a reces…

> Anyone who relies on revolving business debt, credit card debt, or other non-fixed-rate debt goes bankrupt. This is hyperbole. Rising interest rates aren't fun, but they aren't cataclysmic. Rates have gone up and down for decades. Further, if you signal that you're taking the option to raise rates off the table, risk tolerance and asset prices will explode (some would say this has already happened due to Fed signal…

To explain more about the logic used by the guy you replied to...

...the problem is people think: interest rates go up, economy slows down, we can never raise interest rates. This logic takes on a life of its own.

The US economy was in this position in the late 60s: the Fed was under pressure to accommodate govt financing, they raised rates in 1959 and were blamed for causing a recession that influenced the outcome of the 1960 election, in 1967 they attempted to raise rates briefly but did so at the wrong time...eventual result (combined with some unfortunate timing with oil price changes) is rates never rise, inflation does, serious problems.

When the discussion moves to this point, and we have been moving this way for years, I think it is a sign that something has gone quite wrong. And that expectations around interest rates and Fed behaviour are actually adding volatility and uncertainty, not reducing it.

You are quite correct though. Rising interest rates are not bad. It is just the price of money. Falling interest rates can be just as bad too, but the problems are usually subtle (i.e. financial repression, which is what is happening now, no-one will realise what has happened until they try to retire in 20/30 years and realise they can't). Public policy has moved to this risky stage where people blame everything on politicians...the result is, unfortunately, inevitable.

Re: Will real estate ever be normal again?

#175

Post by kelnos »

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?

Re: Will real estate ever be normal again?

#176

Post by wayoutthere »

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…

Because I can buy a house today and lock in my housing for the next 30 years at today’s price..

Besides, when you live in a place, you don’t want it falling to shit. A landlord is never going to care about your quality of life the way you do.

Re: Will real estate ever be normal again?

#177

Post by drdec »

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?

Social security has been buying government bonds for a lot earlier than 2008.

Re: Will real estate ever be normal again?

#178

Post by rayiner »

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…

Behold, and tremble! https://www-bankrate-com.cdn.ampproject.org/i/s/www.bankrate...

Re: Will real estate ever be normal again?

#179

Post by bumby »

aeternum wrote: post #75
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…

As Adam Smith said, the true price of everything is in human labor. Inflation generally raises the cost/price of new labor at the expense of historic labor. Demand for labor is still high, the price will likely continue to increase. Housing is also not a great comparison metric because it was so perturbed by 2008. New unit starts dropped precipitously and still have not fully recovered: https://fred.stlouisfed.org/se…

Is there any measures of what percent of those pre-2008 builds were speculative investments vs. occupant-owners? It reminds me of the scene in The Big Short when he knew the system was on a precipice of disaster when the a stripper was telling him about the multiple homes she owns.

It seems to me many bubbles are the result of speculation with easy credit and I’m not sure 2008 can be considered a “perturbation” instead of a correction.

Re: Will real estate ever be normal again?

#180

Post by kelnos »

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.

10x isn't terrible, though, is it? Assuming 20% down on a mortgage, if you're frugal, you can save for a down payment in 4 or 5 years or so. Not ideal, of course, but not impossible. In some places in the US folks could save for a decade or more and still not be able to afford a down payment.
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