Housing crash deniers ???
Most Popular Reply
Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesThe market may correct, but I firmly believe there won't be a crash. The reason is simple, equity.
Before 2008 people with no income could get liars loans and buy much more real estate than they could afford. We heard stories of cleaning ladies buying multiple million dollar homes. When home prices starting falling, the whole thing collapses like a house of cards because nobody had any equity. They couldn't sell and get out. We had cascading foreclosures creating a downward spiral.
Recently, prices have been surging. Given the laws passed after the Great Recession, appraisals and lending is highly restricted. Appraisals have not been keeping up with prices and lenders won't lend above appraised value. We sold a house in 2021 and in one day had 20 offers. Several of them had acceleration clauses stating they would pay more than anyone else up to $X. Both of them waived any financing contingency because they KNEW the house wouldn't appraise for what they were offering. They had to make up the difference with cash. Those people have a ton of equity in their homes. If they had to sell, they might take a haircut, but they aren't going to get foreclosed.
There is no house of cards here to come tumbling down.
2904 Replies
- Member since 2022 · 49 posts · 46 votes4y
Quote from @Carlos Ptriawan:
Quote from @Alex Hochberger:
A few wall street adages:Quote from @Carlos Ptriawan:
Quote from @Alex Hochberger:
Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.
That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.
Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.
While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed.
Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.
In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.Saying 1:
Bulls make money.
Bears make money.
Hogs get slaughtered.
Trying to time Ibonds exactly and teh housing market exactly is being a hog.
The I bond saving has 9% interest rate, there's no need even to time it. The window to purchase is every 6 months if I remember.
And if inflation comes under control, you'll lose that pretty quickly - the fixed rate of the bond is currently 0.00%
Presumably the November 1st rate set will work well, no guarantee what happens in May.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes4y
Quote from @Michael Wooldridge:
Quote from @James Hamling:
Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
housing is overvalued by every metric right now. For me to buy something right now, I would need to have a return of capital <18 months. There are also AAA bonds that are yielding close to 9 percent now that are liquid. Cash flow is better with a lower rate…you have more room for error with a low rate. If you are buying with a 7 percent rate right now, property dependent, you will not be in a better spot a year from now had you parked that cash in tbills or AAA credit. The deals will be much better next year.One thing that I learned over time is... "overvalued" is very very relative and subjective. You talk to someone from Alabama and they will say Bay Area homes are ridiculously overvalued, while someone from Taiwan will say what the hell why Bay Area housing is so affordable.
I am actually more interested, based on data, which factor drives price up and down. In Stock I know it's all about liquidity, not those PE ratio/inflation BUlls*t :-) :-) so after researching real estate so far, it seems..........liquidity is the highest factor affecting home price, rather than valuation itself.
I'm extremely amazed by how supply growth reduced so much in this month of September (that it was killing the previous record of average supply declines).September data is out? You could see a 4 month drop July to August but where are you seeing sept?
Twin Cities just came out 10/12. A "catastrophic" (yes, I am being sarcastic) 4.8% median price increase. I expected a slight pull-back actually, of -3/4%, not an incline. And expected volume to drop off a bit more then what it did. This is Y.O.Y. data so it's vs the bananas '21' market that was record shattering. It appears from the data the market is saying $325k is "the new normal" for what an "average" home should be priced. In 2019 it was "A New Record" when they hit $280k, many were shocked then and decided to sit the sideline "waiting for prices to come back down".
So that 1,000% makes sense to me. Simple truth wages and job growth is strong. Everybody is focused on inflation but real wages has gone up a lot and I'm in the tech and talent market - with all the boomers retiring that trend is going to continue. So when you start talking about homes that are below the median i.e. Twin Cities it's not surrpising to me. It's one of the reasons why I don't think Florida will drop too much because as much as it's gone up it's not too crazy above the median.
Now what is above the median? The west coast hence the big drop. Anyway job markets are going to remain strong and the bottom end of the market below 500k will be fine, up to $1.2 million some shifts and it's likely between 1.75 million and 5 million we see the most shifts. Time will tell of course but I know where wages and talent is at and it's better than people realize despite all the factors going on.
This may help answer those median price levels Link Here
- Member since 2019 · 7k+ posts · 4k+ votes4y
So that 1,000% makes sense to me. Simple truth wages and job growth is strong. Everybody is focused on inflation but real wages has gone up a lot and I'm in the tech and talent market - with all the boomers retiring that trend is going to continue. So when you start talking about homes that are below the median i.e. Twin Cities it's not surrpising to me. It's one of the reasons why I don't think Florida will drop too much because as much as it's gone up it's not too crazy above the median.
Now what is above the median? The west coast hence the big drop. Anyway job markets are going to remain strong and the bottom end of the market below 500k will be fine, up to $1.2 million some shifts and it's likely between 1.75 million and 5 million we see the most shifts. Time will tell of course but I know where wages and talent is at and it's better than people realize despite all the factors going on.
Michael so it's quite possible that the job market and housing market is even stronger than what the Fed predicted. Which makes implication the 8% CPI will be here for a long time then. Today's CPI of 8.2% is not surprising but also means if the future condition is continuing like today, to reach inflation of 2% we may need 5-6 years to achieve that point.
- Member since 2019 · 7k+ posts · 4k+ votes4y
The easiest way to make money in investment in the long term is to start investing during the first year of the very first long bullish cycle in positive economic growth.
In 2008 there's still negative growth, in 2009 we have positive economic growth. - Member since 2022 · 485 posts · 216 votes4y
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Lost me here. When you say September higher than JUly your data seems to indicates it not at least for the Bay Area. Are you meaning official sept data? Or the October data next month? I expect it to flat line / stagnate so agreed there.
As to outsmarting the fed not following that either. To me I think a lot of people decided to put their homes up end of spring/beginning of summer. Most people Make a decision like that and it takes time. Regardless of when they made decision they go up in June/July probably at ungodly high asking prices and as market turns they realize they won’t get top dollar. They never wanted/had to move but just wanted top dollar. When they couldn’t get it they yanked it off market.
Not seeing that as outsmarting the fed but just responding to market realities. People won’t sell if they are going to lose money. Unless they had to. In 08 people were upside down, with ballooning payments, it made sense to walk away in some scenarios. NOw? It just doesn’t.
Which means your pool of sellers is people moving for work (less likely these days for number of reasons, divorce (not a huge driver), and the 2-3% unemployed folks (since the other 2% have been unemployed). NOt exactly a big pool of people.
This is not complicated. It has nothing to do with bay area. We know there's a seasonality factor in housing inventory. If we truly believe there's a crash, an inventory in September 2022 SHOULD/MUST be higher than July/August 2022, but it is not. Starting in August/September, there's even reduced home for sale, maybe that house is already converted to rental property.
As the effect of that action, the price is re-adjusted and moved back to top the top 5% median. I checked Zillow sold listing in many markets and price-wise, it's stabilized. There's no longer downturn like in the April-May timeframe. This is pretty fascinating as the market could go against Fed policy.
Relatively, market is "up" between April-May-June compare to August-September. I thought before, it would be the other way around.I never said it was complicated. I was just confused as you said the following:
"IF September is higher than July data for sure we will have a larger downturn. With this kind of liquidity, we may see a flat line or slight adjustment."
your data posted showed September down from August and obviously from July since we had a massive swing July to august. So not realy clear on the IF aspect.
Obviously inventory dropped a ton in August we knew that at a national level. I wanted to see the trend down continued (even if not as steep). From your data it looks like it did. Which goes back to one comment James and I have been harping on - people won't sell they will wait.
West coast will absolutely see a larger % down because they are FAR more impacted by rates. My last mortgage swung ~$310 bucks from 5% to 6.125. I could care less about overall dollar shifts that small. In the bay area it's a far more painful swing. So in the east and southeast people who have to move will just write the numbers off. IN the West, I bet you have a lot of stagnation in the market with people on 3-4% rates just sitting tight for a very long time - on a 1.5 million dollar loan you are talking about $4,000 a month. That will make anybody pause. - Member since 2019 · 7k+ posts · 4k+ votes4y
Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Lost me here. When you say September higher than JUly your data seems to indicates it not at least for the Bay Area. Are you meaning official sept data? Or the October data next month? I expect it to flat line / stagnate so agreed there.
As to outsmarting the fed not following that either. To me I think a lot of people decided to put their homes up end of spring/beginning of summer. Most people Make a decision like that and it takes time. Regardless of when they made decision they go up in June/July probably at ungodly high asking prices and as market turns they realize they won’t get top dollar. They never wanted/had to move but just wanted top dollar. When they couldn’t get it they yanked it off market.
Not seeing that as outsmarting the fed but just responding to market realities. People won’t sell if they are going to lose money. Unless they had to. In 08 people were upside down, with ballooning payments, it made sense to walk away in some scenarios. NOw? It just doesn’t.
Which means your pool of sellers is people moving for work (less likely these days for number of reasons, divorce (not a huge driver), and the 2-3% unemployed folks (since the other 2% have been unemployed). NOt exactly a big pool of people.
This is not complicated. It has nothing to do with bay area. We know there's a seasonality factor in housing inventory. If we truly believe there's a crash, an inventory in September 2022 SHOULD/MUST be higher than July/August 2022, but it is not. Starting in August/September, there's even reduced home for sale, maybe that house is already converted to rental property.
As the effect of that action, the price is re-adjusted and moved back to top the top 5% median. I checked Zillow sold listing in many markets and price-wise, it's stabilized. There's no longer downturn like in the April-May timeframe. This is pretty fascinating as the market could go against Fed policy.
Relatively, market is "up" between April-May-June compare to August-September. I thought before, it would be the other way around.I never said it was complicated. I was just confused as you said the following:
"IF September is higher than July data for sure we will have a larger downturn. With this kind of liquidity, we may see a flat line or slight adjustment."
your data posted showed September down from August and obviously from July since we had a massive swing July to august. So not realy clear on the IF aspect.
Obviously inventory dropped a ton in August we knew that at a national level. I wanted to see the trend down continued (even if not as steep). From your data it looks like it did. Which goes back to one comment James and I have been harping on - people won't sell they will wait.
West coast will absolutely see a larger % down because they are FAR more impacted by rates. My last mortgage swung ~$310 bucks from 5% to 6.125. I could care less about overall dollar shifts that small. In the bay area it's a far more painful swing. So in the east and southeast people who have to move will just write the numbers off. IN the West, I bet you have a lot of stagnation in the market with people on 3-4% rates just sitting tight for a very long time - on a 1.5 million dollar loan you are talking about $4,000 a month. That will make anybody pause.the IF aspect simply means for a crash to happen, inventory should just keep increasing, but it's not, it's in fact following seasonality with an even much more reduced rate. So this is similar to what James and the article in Seekingalpha said, either the house is no longer put on the market, or it has been converted to rental.
Even in west coast/bay area, I checked for a few days, and the latest sold reading it's moving back to the upper "5%" again, so the price in the bay area august-september is relatively higher than an april-may-june time frame.This is very fascinating.
We will see if the early trend changes continue.
- Member since 2022 · 49 posts · 46 votes4y
Quote from @Carlos Ptriawan:
This is perhaps because you don't work for an investment firm. All these investment firms make money by predicting and timing the market. There's nothing wrong with that. 90% they make huge amount of money, 10% lost.
Have you looked at the actual track record of the investment firms?
- Real Estate Consultant · Indianapolis, IN · Member since 2014 · 322 posts · 238 votes4y
I don't see a crash. Especially in the Indianapolis market. New construction could take a hit. They have already went from going active once the drywall was up to now they are going live with listing once the foundation is poured. They are getting scared. We have already seen prices start to level off a bit- not drop just not overinflating. But, the numbers are very clear. We are almost exactly where we were last year in terms of active and sold listings in our area. Some newbie investors got spooked and decided to take a time out. I don't blame those who are using financing due to the higher interest rates but they need to "marry the house and date the rate". The experienced investors I work with know not to stop and are still taking killer deals down (flips and rentals). We went from about an average of 14 days on market to around 17 days on market. Not a drastic shift if you ask me...
- Member since 2019 · 7k+ posts · 4k+ votes4y
Quote from @Alex Hochberger:
Quote from @Carlos Ptriawan:
This is perhaps because you don't work for an investment firm. All these investment firms make money by predicting and timing the market. There's nothing wrong with that. 90% they make huge amount of money, 10% lost.
Have you looked at the actual track record of the investment firms?
I tracked hedge fund,VC,investment bank, tech firm....they all work the same, predicting/guessing the market, placing the bet and hope one or two becomes fabulous investment. It's just part of the game.
The only thing that they do is predict the prediction game, most of the time, they make money.Only fools that do not know how to do basic math are so afraid of predicting :) LOL but it's all calculated predicting anyhow
One of the most misleading comment in biggerpocket I read is when they say "ooooh but appreciation is random, it's like casino hahaha" LOL
- Member since 2022 · 485 posts · 216 votes4y
Quote from @Carlos Ptriawan:
So that 1,000% makes sense to me. Simple truth wages and job growth is strong. Everybody is focused on inflation but real wages has gone up a lot and I'm in the tech and talent market - with all the boomers retiring that trend is going to continue. So when you start talking about homes that are below the median i.e. Twin Cities it's not surrpising to me. It's one of the reasons why I don't think Florida will drop too much because as much as it's gone up it's not too crazy above the median.
Now what is above the median? The west coast hence the big drop. Anyway job markets are going to remain strong and the bottom end of the market below 500k will be fine, up to $1.2 million some shifts and it's likely between 1.75 million and 5 million we see the most shifts. Time will tell of course but I know where wages and talent is at and it's better than people realize despite all the factors going on.
Michael so it's quite possible that the job market and housing market is even stronger than what the Fed predicted. Which makes implication the 8% CPI will be here for a long time then. Today's CPI of 8.2% is not surprising but also means if the future condition is continuing like today, to reach inflation of 2% we may need 5-6 years to achieve that point.
Here's the thing the Fed knows the job market is tight. IN fact you can read it in their call out in the meeting notes yesterday that inflation is being caused by supply chain issues, not limited to materials but also labor. So I don't think there is any big surprise. As it relates to wages there is one mathmatical problem that the Fed can't outrun:
Since 1980 we have had less kids than ever before and even usually less than 2 per couple which creates a quicker downturn. Baby boomers are retiring and as markets shift again just like COVID they will continue to retire. So even if they hurt the job market the actual supply is low. Last month we had one of the highest labor participation % rates of working age people ever. So even if they hit jobs with people continuing to retire how does that shift?
Now as to inflation 8.2% is what it was yes over 12 month span. The monthly comparison was down to 6.4%. And each month it will drop because year over year it gets harder to shift. We are already on a downward trend from the high. But it will likely take until next year this time to start to see about 3% even at the current pace. So 5 years? don't see it. Trajectory wise that only happens if it's contining to go up because as time goes on it is harder to maintain that pace. We are seeing trajectory down. Which means end of 2023 / beginning of 2024 fed can start changing rates. And we all know they will start signaling sometime around summer to q3 2023.
- Member since 2022 · 49 posts · 46 votes4y
Quote from @Carlos Ptriawan:
Quote from @Alex Hochberger:
Quote from @Carlos Ptriawan:
This is perhaps because you don't work for an investment firm. All these investment firms make money by predicting and timing the market. There's nothing wrong with that. 90% they make huge amount of money, 10% lost.
Have you looked at the actual track record of the investment firms?
I tracked hedge fund,VC,investment bank, tech firm....they all work the same, predicting/guessing the market, placing the bet and hope one or two becomes fabulous investment. It's just part of the game.
The only thing that they do is predict the prediction game, most of the time, they make money.Only fools that do not know how to do basic math are so afraid of predicting :) LOL but it's all calculated predicting anyhow
One of the most misleading comment in biggerpocket I read is when they say "ooooh but appreciation is random, it's like casino hahaha" LOL
Okay, I work in VC, tech focused. I've worked extensively with the PE guys. A bunch of friends from B-School work in IBanking.
They don't make massive bets. They are more aggressive than mutual funds, but they aren't 100% all in.
Look at what the family office guys are doing. They remain heavily in real estate.
They do NOT make massive moves on predictions like this. Their track record is no where near 90%. Most public VC track records are actually about the same and the S&P 500 for the LPs. If you look at some of the best managed groups, you outperform the market by a few points.
In terms of random / non-random. The price tomorrow of an asset is today's price plus a random walk. The long term value tracks the fundamentals.
So you tweak your portfolio based on your expectations to try to move things a few points. If you go all-in on your predictions, you are gambling. And even if you have an edge with your prediction, you're going to get wiped out the one time you're wrong. Even if your predictions are 90-10, your likelihood of getting them all right drops below 50% after 7 predictions.
So I'm not sure what you're tracking and reading, but you are overstating how much confidence anyone has in their prediction units.
- Member since 2022 · 485 posts · 216 votes4y
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Lost me here. When you say September higher than JUly your data seems to indicates it not at least for the Bay Area. Are you meaning official sept data? Or the October data next month? I expect it to flat line / stagnate so agreed there.
As to outsmarting the fed not following that either. To me I think a lot of people decided to put their homes up end of spring/beginning of summer. Most people Make a decision like that and it takes time. Regardless of when they made decision they go up in June/July probably at ungodly high asking prices and as market turns they realize they won’t get top dollar. They never wanted/had to move but just wanted top dollar. When they couldn’t get it they yanked it off market.
Not seeing that as outsmarting the fed but just responding to market realities. People won’t sell if they are going to lose money. Unless they had to. In 08 people were upside down, with ballooning payments, it made sense to walk away in some scenarios. NOw? It just doesn’t.
Which means your pool of sellers is people moving for work (less likely these days for number of reasons, divorce (not a huge driver), and the 2-3% unemployed folks (since the other 2% have been unemployed). NOt exactly a big pool of people.
This is not complicated. It has nothing to do with bay area. We know there's a seasonality factor in housing inventory. If we truly believe there's a crash, an inventory in September 2022 SHOULD/MUST be higher than July/August 2022, but it is not. Starting in August/September, there's even reduced home for sale, maybe that house is already converted to rental property.
As the effect of that action, the price is re-adjusted and moved back to top the top 5% median. I checked Zillow sold listing in many markets and price-wise, it's stabilized. There's no longer downturn like in the April-May timeframe. This is pretty fascinating as the market could go against Fed policy.
Relatively, market is "up" between April-May-June compare to August-September. I thought before, it would be the other way around.I never said it was complicated. I was just confused as you said the following:
"IF September is higher than July data for sure we will have a larger downturn. With this kind of liquidity, we may see a flat line or slight adjustment."
your data posted showed September down from August and obviously from July since we had a massive swing July to august. So not realy clear on the IF aspect.
Obviously inventory dropped a ton in August we knew that at a national level. I wanted to see the trend down continued (even if not as steep). From your data it looks like it did. Which goes back to one comment James and I have been harping on - people won't sell they will wait.
West coast will absolutely see a larger % down because they are FAR more impacted by rates. My last mortgage swung ~$310 bucks from 5% to 6.125. I could care less about overall dollar shifts that small. In the bay area it's a far more painful swing. So in the east and southeast people who have to move will just write the numbers off. IN the West, I bet you have a lot of stagnation in the market with people on 3-4% rates just sitting tight for a very long time - on a 1.5 million dollar loan you are talking about $4,000 a month. That will make anybody pause.the IF aspect simply means for a crash to happen, inventory should just keep increasing, but it's not, it's in fact following seasonality with an even much more reduced rate. So this is similar to what James and the article in Seekingalpha said, either the house is no longer put on the market, or it has been converted to rental.
Even in west coast/bay area, I checked for a few days, and the latest sold reading it's moving back to the upper "5%" again, so the price in the bay area august-september is relatively higher than an april-may-june time frame.This is very fascinating.
We will see if the early trend changes continue.
Not totally surprised on the bay area. We will see some more tech lay offs but it's not a lot of tech people (more the marketing folk and support groups). And most of the companies know who they are. So those that are left I think fall into this category where they will sit because of the following:
"West coast will absolutely see a larger % down because they are FAR more impacted by rates. My last mortgage swung ~$310 bucks from 5% to 6.125. I could care less about overall dollar shifts that small. In the bay area it's a far more painful swing. So in the east and southeast people who have to move will just write the numbers off. IN the West, I bet you have a lot of stagnation in the market with people on 3-4% rates just sitting tight for a very long time - on a 1.5 million dollar loan you are talking about $4,000 a month more with rates. That will make anybody pause. "
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4y
Quote from @James Hamling:
Quote from @Alex Hochberger:
A few wall street adages:Quote from @Carlos Ptriawan:
Quote from @Alex Hochberger:
Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.
That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.
Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.
While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed.
Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.
In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.Saying 1:
Bulls make money.
Bears make money.
Hogs get slaughtered.
Trying to time Ibonds exactly and teh housing market exactly is being a hog.
Move your capital to the asset class you think will give you the best return right now. Distribute your capital in a way that gives you the portfolio you desire.
Gaming out scenarios makes sense, but nobody KNOWS what the market is going to do, we're all predicting/guessing.
Saying 2:
Never fight the Fed.
The Fed is open that they are aiming for a housing correction. A correction is a 10% - 19.9% reduction. Nominal prices appear to be down 6% from peak. Inflation is up 8% in that time. That's a 14% correction. Expecting another 15%-30% from here "a crash" is NOT what the Fed is aiming for. That means the Fed will likely reverse course if that is happening.
Could prices drop another 15%? Of course. Could they stay flat? Also of course. Allocate your capital appropriately. But assuming you're going to time a market perfectly is crazy. Assuming you are going to time two markets perfectly is insane.Timing the market is a fools errand. Time IN the market is an investors journey.
If curious of proof, 2008. Thousands upon thousands across the entire globe, in assorted markets from NY too Taipei, Ireland, Tokyo and beyond, of the great masses roughly 8 people timed the market. Hundreds of thousands missing it, 8 nailing it. Your odd's of picking the winning Powerball are greater then of timing the market.
@James Hamling @Alex Hochberger. All I know is I’m glad I didn’t fight the fed earlier this year in equities. I got out at spx 4650 in early January when was widely expected fed was going to do rate hikes… I didn’t catch the peak (impossible to perfectly time it), but it was obvious equities were overpriced and fed guidance of starting to tighten. It’s amazing because I know so many people who did what I did, I don’t think we feel like mega million lottery winners. We just used a basic calculator and didn’t fight the Fed. I’ve started my DCA yesterday and will be fully back in before we take out 4000 again. It’s amazing stocks are down massively from all time highs 20-30 percent with all this inflation! Who could have predicted such a mega millions lotto ticket! Just follow the fed and their guidance and print.
- Member since 2022 · 485 posts · 216 votes4y
Quote from @John Carbone:
Quote from @James Hamling:
Quote from @Alex Hochberger:
A few wall street adages:Quote from @Carlos Ptriawan:
Quote from @Alex Hochberger:
Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.
That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.
Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.
While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed.
Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.
In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.Saying 1:
Bulls make money.
Bears make money.
Hogs get slaughtered.
Trying to time Ibonds exactly and teh housing market exactly is being a hog.
Move your capital to the asset class you think will give you the best return right now. Distribute your capital in a way that gives you the portfolio you desire.
Gaming out scenarios makes sense, but nobody KNOWS what the market is going to do, we're all predicting/guessing.
Saying 2:
Never fight the Fed.
The Fed is open that they are aiming for a housing correction. A correction is a 10% - 19.9% reduction. Nominal prices appear to be down 6% from peak. Inflation is up 8% in that time. That's a 14% correction. Expecting another 15%-30% from here "a crash" is NOT what the Fed is aiming for. That means the Fed will likely reverse course if that is happening.
Could prices drop another 15%? Of course. Could they stay flat? Also of course. Allocate your capital appropriately. But assuming you're going to time a market perfectly is crazy. Assuming you are going to time two markets perfectly is insane.Timing the market is a fools errand. Time IN the market is an investors journey.
If curious of proof, 2008. Thousands upon thousands across the entire globe, in assorted markets from NY too Taipei, Ireland, Tokyo and beyond, of the great masses roughly 8 people timed the market. Hundreds of thousands missing it, 8 nailing it. Your odd's of picking the winning Powerball are greater then of timing the market.
@James Hamling @Alex Hochberger. All I know is I’m glad I didn’t fight the fed earlier this year in equities. I got out at spx 4650 in early January when was widely expected fed was going to do rate hikes… I didn’t catch the peak (impossible to perfectly time it), but it was obvious equities were overpriced and fed guidance of starting to tighten. It’s amazing because I know so many people who did what I did, I don’t think we feel like mega million lottery winners. We just used a basic calculator and didn’t fight the Fed. I’ve started my DCA yesterday and will be fully back in before we take out 4000 again. It’s amazing stocks are down massively from all time highs 20-30 percent with all this inflation! Who could have predicted such a mega millions lotto ticket! Just follow the fed and their guidance and print.
I guess thats why I'm surprised. I got my in-laws out of stocks December partially, and January in total for same reason. They are retiring (well retired now) so it was obvious like you said. Me? I left my 401k in but I'm young and want to keep buying because it will bounce and there is no need to time everyting. So I agree you could see where it was going bear market after the longest most profitable bull run ever.
Housing though has never really retracted to the same degree as stocks for the same reason. So I'm just not seeing the big crash you see. And more importantly as Carlos just showed inventory in September continues to trend down....
Rates are up but $300 on a $500k loan is nothing. 4,000 on a 1.5million loan is a lot. So it will be the west coast losing but that isn't the whole national market. - Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4y
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @James Hamling:
Quote from @Alex Hochberger:
A few wall street adages:Quote from @Carlos Ptriawan:
Quote from @Alex Hochberger:
Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.
That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.
Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.
While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed.
Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.
In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.Saying 1:
Bulls make money.
Bears make money.
Hogs get slaughtered.
Trying to time Ibonds exactly and teh housing market exactly is being a hog.
Move your capital to the asset class you think will give you the best return right now. Distribute your capital in a way that gives you the portfolio you desire.
Gaming out scenarios makes sense, but nobody KNOWS what the market is going to do, we're all predicting/guessing.
Saying 2:
Never fight the Fed.
The Fed is open that they are aiming for a housing correction. A correction is a 10% - 19.9% reduction. Nominal prices appear to be down 6% from peak. Inflation is up 8% in that time. That's a 14% correction. Expecting another 15%-30% from here "a crash" is NOT what the Fed is aiming for. That means the Fed will likely reverse course if that is happening.
Could prices drop another 15%? Of course. Could they stay flat? Also of course. Allocate your capital appropriately. But assuming you're going to time a market perfectly is crazy. Assuming you are going to time two markets perfectly is insane.Timing the market is a fools errand. Time IN the market is an investors journey.
If curious of proof, 2008. Thousands upon thousands across the entire globe, in assorted markets from NY too Taipei, Ireland, Tokyo and beyond, of the great masses roughly 8 people timed the market. Hundreds of thousands missing it, 8 nailing it. Your odd's of picking the winning Powerball are greater then of timing the market.
@James Hamling @Alex Hochberger. All I know is I’m glad I didn’t fight the fed earlier this year in equities. I got out at spx 4650 in early January when was widely expected fed was going to do rate hikes… I didn’t catch the peak (impossible to perfectly time it), but it was obvious equities were overpriced and fed guidance of starting to tighten. It’s amazing because I know so many people who did what I did, I don’t think we feel like mega million lottery winners. We just used a basic calculator and didn’t fight the Fed. I’ve started my DCA yesterday and will be fully back in before we take out 4000 again. It’s amazing stocks are down massively from all time highs 20-30 percent with all this inflation! Who could have predicted such a mega millions lotto ticket! Just follow the fed and their guidance and print.
I guess thats why I'm surprised. I got my in-laws out of stocks December partially, and January in total for same reason. They are retiring (well retired now) so it was obvious like you said. Me? I left my 401k in but I'm young and want to keep buying because it will bounce and there is no need to time everyting. So I agree you could see where it was going bear market after the longest most profitable bull run ever.
Housing though has never really retracted to the same degree as stocks for the same reason. So I'm just not seeing the big crash you see. And more importantly as Carlos just showed inventory in September continues to trend down....
Rates are up but $300 on a $500k loan is nothing. 4,000 on a 1.5million loan is a lot. So it will be the west coast losing but that isn't the whole national market.You expect housing to drop up to 15 percent, my minimum is 20, we aren’t far off. My yang illustration was based off of a 15 percent drop. I think 20-30 more in line and that would make my example even more profound. If anything, momentum is to downside and that doesn’t reverse quickly unless fed pivots which seems remote. People who have been buying real estate last few months are the ones GAMBLING
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @John Carbone:
What is your opinion of people who are waiting for this new 'bottom' to buy? Who will then purchase and plan to refi once rates go down again in a couple years, so capitalizing on lower prices and eventually get lower rates as well...? A double win?
That's kinda my plan, and is certainly 'gambling'.....
- Member since 2022 · 25 posts · 5 votes4yWhy is buying real estate gambling? I’m a buy and hold. Who cares what you buy at now? Understanding my portfolio is small.
Quote from @John Carbone:
Quote from @Michael Wooldridge:
Quote from @John Carbone:
Quote from @James Hamling:
Quote from @Alex Hochberger:
A few wall street adages:Quote from @Carlos Ptriawan:
Quote from @Alex Hochberger:
Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.
That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.
Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.
While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed.
Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.
In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.Saying 1:
Bulls make money.
Bears make money.
Hogs get slaughtered.
Trying to time Ibonds exactly and teh housing market exactly is being a hog.
Move your capital to the asset class you think will give you the best return right now. Distribute your capital in a way that gives you the portfolio you desire.
Gaming out scenarios makes sense, but nobody KNOWS what the market is going to do, we're all predicting/guessing.
Saying 2:
Never fight the Fed.
The Fed is open that they are aiming for a housing correction. A correction is a 10% - 19.9% reduction. Nominal prices appear to be down 6% from peak. Inflation is up 8% in that time. That's a 14% correction. Expecting another 15%-30% from here "a crash" is NOT what the Fed is aiming for. That means the Fed will likely reverse course if that is happening.
Could prices drop another 15%? Of course. Could they stay flat? Also of course. Allocate your capital appropriately. But assuming you're going to time a market perfectly is crazy. Assuming you are going to time two markets perfectly is insane.Timing the market is a fools errand. Time IN the market is an investors journey.
If curious of proof, 2008. Thousands upon thousands across the entire globe, in assorted markets from NY too Taipei, Ireland, Tokyo and beyond, of the great masses roughly 8 people timed the market. Hundreds of thousands missing it, 8 nailing it. Your odd's of picking the winning Powerball are greater then of timing the market.
@James Hamling @Alex Hochberger. All I know is I’m glad I didn’t fight the fed earlier this year in equities. I got out at spx 4650 in early January when was widely expected fed was going to do rate hikes… I didn’t catch the peak (impossible to perfectly time it), but it was obvious equities were overpriced and fed guidance of starting to tighten. It’s amazing because I know so many people who did what I did, I don’t think we feel like mega million lottery winners. We just used a basic calculator and didn’t fight the Fed. I’ve started my DCA yesterday and will be fully back in before we take out 4000 again. It’s amazing stocks are down massively from all time highs 20-30 percent with all this inflation! Who could have predicted such a mega millions lotto ticket! Just follow the fed and their guidance and print.
I guess thats why I'm surprised. I got my in-laws out of stocks December partially, and January in total for same reason. They are retiring (well retired now) so it was obvious like you said. Me? I left my 401k in but I'm young and want to keep buying because it will bounce and there is no need to time everyting. So I agree you could see where it was going bear market after the longest most profitable bull run ever.
Housing though has never really retracted to the same degree as stocks for the same reason. So I'm just not seeing the big crash you see. And more importantly as Carlos just showed inventory in September continues to trend down....
Rates are up but $300 on a $500k loan is nothing. 4,000 on a 1.5million loan is a lot. So it will be the west coast losing but that isn't the whole national market.You expect housing to drop up to 15 percent, my minimum is 20, we aren’t far off. My yang illustration was based off of a 15 percent drop. I think 20-30 more in line and that would make my example even more profound. If anything, momentum is to downside and that doesn’t reverse quickly unless fed pivots which seems remote. People who have been buying real estate last few months are the ones GAMBLING
as a 32 year old, I cheer when things go south. Better buying opportunities. - 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Edward Kanive:
as a 32 year old, I cheer when things go south. Better buying opportunities.That's my feeling as well. Buy when everyone else is too afraid to....
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4y
Quote from @Bruce Woodruff:
Quote from @John Carbone:
What is your opinion of people who are waiting for this new 'bottom' to buy? Who will then purchase and plan to refi once rates go down again in a couple years, so capitalizing on lower prices and eventually get lower rates as well...? A double win?
That's kinda my plan, and is certainly 'gambling'.....
People buying now are gambling that rents will stay high and prices won’t drop , everyone is theoretically gambling. The idea is, if you make smarter decisions based on the odds, you end up better off. It’s clear with momentum shifting downward, that someone who waits a year will not regret not buying right now. All of the rating agencies are expecting declines, fed wants lower prices….buying now is gambling with odds stacked against you with a lot of downside risk.
- Member since 2022 · 25 posts · 5 votes4y
Quote from @John Carbone:
Quote from @Bruce Woodruff:
Quote from @John Carbone:
What is your opinion of people who are waiting for this new 'bottom' to buy? Who will then purchase and plan to refi once rates go down again in a couple years, so capitalizing on lower prices and eventually get lower rates as well...? A double win?
That's kinda my plan, and is certainly 'gambling'.....
People buying now are gambling that rents will stay high and prices won’t drop , everyone is theoretically gambling. The idea is, if you make smarter decisions based on the odds, you end up better off. It’s clear with momentum shifting downward, that someone who waits a year will not regret not buying right now. All of the rating agencies are expecting declines, fed wants lower prices….buying now is gambling with odds stacked against you with a lot of downside risk.
I only buy what I can pay for if no one is renting them. As a physician if I work 1.5 extra shifts, it covers a months expenses for my rental properties.
Once I have less debt, I’d inflate that more given my properties as a group would never be a total loss.
I just need to eliminate my student debt and maybe my 4000:month home mortgage payment before I feel comfortable with taking on more in a climate like this.
- 4yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
"People buying now are gambling that rents will stay high and prices won’t drop"
That's a straw man. If we buy solid deals with fixed rate debt, how are we gambling? If you're conservative and rents fall... aren't you set up to weather the storm?Aren't the people likely to be most affected people buying primary residences at seven figure price points that they are stretching to afford?
- Member since 2022 · 485 posts · 216 votes4y
Quote from @John Carbone:
Quote from @Bruce Woodruff:
Quote from @John Carbone:
What is your opinion of people who are waiting for this new 'bottom' to buy? Who will then purchase and plan to refi once rates go down again in a couple years, so capitalizing on lower prices and eventually get lower rates as well...? A double win?
That's kinda my plan, and is certainly 'gambling'.....
People buying now are gambling that rents will stay high and prices won’t drop , everyone is theoretically gambling. The idea is, if you make smarter decisions based on the odds, you end up better off. It’s clear with momentum shifting downward, that someone who waits a year will not regret not buying right now. All of the rating agencies are expecting declines, fed wants lower prices….buying now is gambling with odds stacked against you with a lot of downside risk.
Ok odds. Let's talk though the odds. Historically rent has never dropped nationally in 80 years. So why would you be betting rents drop? Lets go extreme and say it drops 5%. Who does that really hurt? People buying right now have to be putting 25% down. you are still getting cash flow you just might not get back to your capital as quickly. I think your idea of "pain" is what's off.
Separately, as to our differences. I'm planning for 15% in a worst case scenario. I believe at most my newest purchase could be hit by 10% but thanks to some other market shifts (since I bought) it looks like even that won't happen. but in all your scenarios the big piece you haven't really admitted yet is that you are trying to time the market. Even if you get your reductions you are missing likely 18 months of cash flow - or in my case close to $65k. Why would I want to give that up planning for a maybe on the downtrend? And can you find the right house etc..? All for what maybe saving $25k on the purchase price? Hell I'll even have $10k of that knocked off from the principal pay down. It's just not worth it if the right property comes along.
And what you are planning for is perfect timing. Some of us are saying I'm sitting on cash I want to make money now because I'll have even more cash in 18 months.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4y
Quote from @Nicholas L.:
"People buying now are gambling that rents will stay high and prices won’t drop"
That's a straw man. If we buy solid deals with fixed rate debt, how are we gambling? If you're conservative and rents fall... aren't you set up to weather the storm?Aren't the people likely to be most affected people buying primary residences at seven figure price points that they are stretching to afford?
Fixed rate debt at 7 percent with housing prices yet to reflect this yet? Sure some deals are out there but it’s few and far between. Prior to this year a monkey could have bought a house and made a profit. I know we all think we are great and make great deals, but we all rode a massive fed induced wave. And yeah, residential purchases paying 45 percent of income are for sure in a worse spot. They better hope husband or wife doesn’t lose a job. Oh wait, fed wants jobs to be lost, hope it’s not your neighbor that’s unlucky.
@mike if you are getting 33 percent cash on cash then you are fine 99 percent of people aren’t getting that return. Look at James ying example.
- 4yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
Agree on everything in your latest post. It's the folks NOT on BP who are going to be hurt if we have a recession + a major decrease in house prices.
And, there's a difference between saying "I don't think prices will come down much" and "My strategy counts on prices not decreasing and I will be bankrupt if they do."
I'm in the "I don't know what's going to happen" camp.
- Member since 2022 · 485 posts · 216 votes4y
Quote from @John Carbone:
Quote from @Nicholas L.:
"People buying now are gambling that rents will stay high and prices won’t drop"
That's a straw man. If we buy solid deals with fixed rate debt, how are we gambling? If you're conservative and rents fall... aren't you set up to weather the storm?Aren't the people likely to be most affected people buying primary residences at seven figure price points that they are stretching to afford?
Fixed rate debt at 7 percent with housing prices yet to reflect this yet? Sure some deals are out there but it’s few and far between. Prior to this year a monkey could have bought a house and made a profit. I know we all think we are great and make great deals, but we all rode a massive fed induced wave. And yeah, residential purchases paying 45 percent of income are for sure in a worse spot. They better hope husband or wife doesn’t lose a job. Oh wait, fed wants jobs to be lost, hope it’s not your neighbor that’s unlucky.
@mike if you are getting 33 percent cash on cash then you are fine 99 percent of people aren’t getting that return. Look at James ying example.
So yes my example is probably a home run (not the grand slam you want). But frankly if something insane happened and my profits got cut in half. Let's say to $33k in that 18 month period. I'm not hurting. I guess thats the point I'm making only people hurting would be people who had absolutely no cash flow. Those investors also tended to be more focused on appreciation so my assumption is they could ride a 5% adjustment in rents which would still be historically under heard of.
Also from what I seen as soon as rates jumped above that ~5.125% ratio you had lenders requiring more down. so I don't think anybody is going to experience pain (unless people willingly paid the insane points on 20% and I think that will be few).
Also you are right we more or less agree. I think the difference is I don't want to wait because I'm making money. in theory I could, take your approach, save my money and make more later but that's only in theory god knows what 18 months will bring. So if it adds to my wealth now that's a win and if it hits like you say well I get less "profit" But the key thing it is profit.
Now if we are arguing about flippers I'd be in your court. i think flippers are likely to get caught right now.
