Political uncertainty, cash shortage, sudden shortage of tenants
@Jay Hinrichs once asked what is going to drive the next round of RE correction since there is no sub-prime this time...
I would say this time, it is the political uncertainty, sudden shortage of cash, and sudden disappearance of tenants....
Today feels like the start of it.....
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#2 All Forums Contributor
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@Diane G. ???? There is TONS of cash out there and I mean TONS as in Wheel barrels ...
to me its all regional.. as in regional jobs..
Check out today's stock market , Jay
@Diane G. I would not gauge the real-estate market on a day or two of the stock market gains or losses
Where do tenants go? Unless some massive famine or war wipes people out.
And it'll be a long time before all this cash works its way out of the system. It's not going anywhere. I'm more curious why it hasn't resulted in more inflation and higher borrowing costs
Lol. The stock market? It's been on an absolute rocketship ever since Trump was elected.
We have short memories or something. When Trump was elected I think the Dow was at 18,000? Today it's well above 21,000.
The start market could have a few WEEKS straight of days like today and it would still be higher than it was when Trump came in
Where is the shortage of tenants and shortage of cash now versus yesterday or last year?
In a lot of markets rents even continued to rise during the last housing crash because there was demand from those that were not able to qualify for a home loan or had lost their home to foreclosure. Everyone needs a place to live and if they can't buy they have to rent.
Regarding political uncertainty there is always going to be political uncertainty, although the media seems to hype it up more sometimes versus other times.
I was talking about cash in the system, as cash in the bank... All the cash went into RE or Stock in the past few years, leaving little cash in the bank... That is going to be the problem....
Where are the tenants going to go? Surely they aren't buying houses.
Originally posted by @Diane G.:
I was talking about cash in the system, as cash in the bank... All the cash went into RE or Stock in the past few years, leaving little cash in the bank... That is going to be the problem....
When I buy RE and "put my money in RE", that's someone else receiving that money and putting it.... in the bank.
The reason banks are offering 0% is they don't want your money. They have enough. They are almost 'begging' people to borrow (government rules on how they can lend and to who is the only thing keeping them from lending to more people). It's insane that you can borrow money in the LOW 4s! For commercial properties. It's the reason I'm in hyper buy mode. Never in my life will I ever see money so easy to borrow at such low prices. I don't want to look back and think "Why didn't I take advantage???"
I realized the tremendous value in properties right after 2008 but guess what? I couldn't take advantage of them because no one was lending. I got deals done by being creative and husleting. So now money is easier to get (and cheaper) and asset prices reflect that extra cash chasing them.
This is the best time to be a buy and hold landlord, more people are renting then ever before. Economy doesn't matter, what matters is where did you invest?, hopefully in areas that have long term outlooks with blue collar sustaining jobs(Tampa for example, and Austin etc. Oil, tourism,)
Actually banks DO want your money. Most are looking for deposits. The reason they are offering 0% on demand deposits is because overall rates are very low and the spread, or margin, they are making on loans is compressing their earnings. So they want deposits to meet reserve requirements necessary to make the volume of loans they need to meet earnings expectations.
If the Chinese stop buying, then that would be a story. If 10M+ undocumented were to leave, as had been promised, that would be a story. Talk doesn't make things happen, action does. Until there is persistent momentum to change the current trajectory, I don't see much changing. I don't see action on the legislative economic front. No action == status quo, which isn't so bad.
The market has built in expectations of a Repatriation Holiday and massive tax cuts. If those don't happen in the next few months, then expect a stock market correction.
@ chris martin - "expect" a market correction? Aren't we already in one?
Check out XIV, down 25% already.. Lol
Originally posted by @Diane G.:
@ chris martin - "expect" a market correction? Aren't we already in one?
Check out XIV, down 25% already.. Lol
LOL! You're joking, right? We are within 3% of all time highs in the DOW, S&P, and NASDAQ. Massive tax cuts and massive infrastructure spending are on the horizon. What could possibly go wrong? LOL!
@ Chris Martin - XIV is down 25%... Lol
@Diane G. Maybe, maybe not. One day doesn't equal correction.
Chris Martin
China is trying to limit investments in real estate and other businesses overseas right now .. but hard to say how this will actually affect anything
https://www.cnbc.com/2017/08/18/china-to-limit-overseas-investments-in-real-estate-sports.html
Originally posted by @Diane G.:
@ Chris Martin - XIV is down 25%... Lol
Still up over 200% YTD, tho. Volatility is not necessarily an indicator of impending doom. This market has been rather lethargic lately.
@Joseph M. I have heard that line before. Step 1 is to get people in charge from buying overseas. They have been at step 1 for a while. Time will tell if US real estate purchases are impacted.
Diane, sorry to hear about your derivative trade gone bad, but trading in the VIX has nothing to do with your own topic. The Bannon announcement could have been a driver.
Just a little constructive feedback... From some of your prior posts/topics, it seems like about every event triggers a post like this one. I think if you get facts on the macroeconomic data right and put that into your posts, you will create a better discussion. Regarding "Today feels like the start of it..." Macroeconomic trends tend to span more than days or weeks. Honestly, I was very concerned at the start of 2017 about the negative economic effect if a sizable chunk of the 11M undocumented were to be deported or self-deport. That . So, for instance can you present a case of how "sudden disappearance of tenants" will happen? Please don't reply that one of your tenants left. I am looking for macroeconomic facts, not one instance or microeconomic data points.
@ Chris Martin - no, I am not in XIV, I am trading between VXX and XIV, so August so far I made $51k...Lol
I was not using one day to draw a conclusion... I track market daily and as a result, sense a change of trend, and hence the posting
@ Chris Martin - in sudden disappearance of tenants comment, I watch two of the supposedly largest C class PM in Phoenix, I check their website every week to see the movement of properties that listed on their website for rent....
Let me tell you this - things are stagnant the last 2 month
So no, I was not exactly a moody little woman making emotional comments based on one thing.... lol
Originally posted by @Diane G.:
@ Chris Martin - no, I am not in XIV, I am trading between VXX and XIV, so August so far I made $51k...Lol
I was not using one day to draw a conclusion... I track market daily and as a result, sense a change of trend, and hence the posting
Nice long-term chart on VXX, ain't it? lol How about some UVXY or TVIX (nom-nom) derivatives? Better hold on to that cash, while you still have it.
@Diane G. Most pros are trying to account for political instability in securities pricing. They are also ready to move very quickly on the latest news.
Last week when the rumor that Steven Mnuchin and perhaps one or two other Jewish high ranking government official might resign immediately it did get a little stressful for a while.
I personally doubt that Mr. Mnuchin would ever quit in the middle of a week. Now on a Friday after the close, maybe. Of course, there could always be a leak that he or others will be quitting soon.
Will that cause a correction? No. Could it cost some of us a lot of money. Yes.
Well. I am not here to discuss my trading strategy... Lol
And it is my assessment that things are doing downhill from here, so I am keeping my powder dry....
Those of you believe there is more up form here, happy buying ...