....WHERE'S THE BEEF?

Question

If your a Jurassic slap-a$# like me, you fondly remember the most awesome Granny, calling out the all hype and 0 substance BS burger joint with the iconic phrase "WHERE'S THE BEEF?".

And as I HEAR all the various roar of media galore, I am left with the exact same feeling when looking for this "Crash/Collapse" in Real Estate I have kept hearing about for more then 2 years now; "WHERE'S THE BEEF?".

I have heard countless stories how Real Estate goes through a cycle of "bust" ever so-many years...... "WHERE'S THE BEEF?".

I was told covid moratoriums were the nail in the coffin, mass foreclosures where out there, hanging int he ether, just waiting for the moratoriums to come off and it was going to be an avalanche, a tsunami of foreclosures unlike anything we have ever seen....... "WHERE"S THE BEEF?"

I was told Landlords were going to go bankrupt in-mass, that hundreds of thousands if not millions would be done in by loss of rent revenues, and it would be a fire-sale of properties at pennies on the dollar....... "WHERE"S THE BEEF?"

And then, more recently, how that dark shadow of inflation-doom had descended from Mordore, and the watchful "eye" had dropped a death-blow of rate increases, that this WAS it, the end, a collapse unlike any other, '08'-2.0 but on steroids, a certainty of impending "crash"......... "WHERE"S THE BEEF?"

I am told that in '77', many said everything was going to end, as the Vietnam calamity came to it's conclusion. Then there was gas shortages, the S&L scandal, Enron, Dot.Com bubble, challenger explodes, GARBAGE PAIL KIDS, I mean really pick your calamity, chaos and fear center over the last 40's years and the worst of the worst is a 10yr "blip" from '08'. "WHERE"S THE BEEF?", where is this "cycle" of real estate crash? Where is real estate market taking some free-fall following ____ fearful calamitous event? ONE, I can find ONE event and one only over my entire lifetime that actually did smack the R.E. market down and that took the largest financial event in world history since the Great Depression to do it.

So "WHERE"S THE BEEF?"; why is there this constant media "roar" of calamity and results that history simply does not experience or show? Why is the media so disconnected from reality and facts? Why do so many question Real Estate as an investment and wealth vehicle, when the evidence is so dang clear?

In all the media "hype" of disaster impending I simply ask "WHERE"S THE BEEF?". Show me the beef, show me the SUBSTANCE, the meat of it, because it's all bun wrapped around this tiny nugget of "beef" in pretty much every instance I have found. Great razmataz to sell views and advertising for-sure, looks jazzy, sounds jazzy, but second you go past that bun of BS, yeah, "WHERE"S THE BEEF?".

https://fred.stlouisfed.org/se...

James Hamling · Answer

@J. Mitchell Bernier this is getting a bit cross-posts going but, myself I had forecasted a CONSOLIDATION event occurring over this Q4 and into Q1 '23'. In the consolidation that is a median price step back of 7-15%, with micro-market specific deviations in direction and degree to the specific unique factors within those specific micro-markets. For example LA is having a "come-to-Jesus" moment over the homeless issue, and parts of Chicago with the rampant crime, and on other side of that coin there is parts in TX and FL that have a unique force factor in play pressing greater than average appreciation.

Although by the #'s, it appears the R.E. market is even more resilient then even I had forecast, with the pent-up demand at greater strength and levels then anticipated.

Confirmation Bias is the "cancer" in todays information age that I believe has facilitated this delusion of a "crash". One can find supporting "information" for literally any opinion, including FLAT EARTH, yeah, think about that, FLAT EARTH has thousands of "supporting" information for it, all thanks to the net. I hope we can all agree how ridiculous and blatantly false such a moronic thing as flat earth is, yet people buy into it because they have not personally gone to orbit to see differently, and "look at all this info".     The R.E. "crash" has been much the same. All sane, coherent COMPLETE information has CLEARLY stated to NO crash.

We have a media and information problem in this country, not sure the cure but it is a problem. I like freedom of information but when people are weaponizing it for profit, regardless of impact, regardless of truth, we have an issue. It's like a toddler running around with an AR-15 the way it is now. If people were responsible with it all would be fine, but there not, there greedy and self serving, happy to commit mass harm for personal profit. It is NOT what "free speech" was ever designed or meant for.

Scott Mac · Answer

I think Phoenix is mooing right now.

J. Mitchell Bernier · Answer

I agree that anyone who thinks we are heading for a crash, 20% or more loss in home value, is just fearful from what happened before.

However, 5-10% is certainly on the table over the next 6-12 months. Last time I said this was 3 months ago and I was saying 12-18 months. Here are my reasons.

Step 1: Affordability is not going to get better anytime soon. Rates will stay above 6% for most if not all of 2023 and they should. Yes, I know many on here remember paying 11% or 18% for their first mortgage back in the day, but you were paying these prices. People buy on what the bank says they can pay monthly, so if rates remain high and wage growth slows, which it should, affordability will remain an issue. But wait that will just create more renters???

Step 2: Yes there will be more renters, but there will be more supply of rentals. We have all followed the construction industry abandoning the starter home and just not building that inventory, but they have been building apartments. Since January of 2021 building permits for 5+ units has been over 500K in every month but, 1. so that is 21 months of over 500K in permits. In the 5 years prior to the pandemic, January 2015-January of 2020, that only happened 7 times. So only 7 months out of 60 previously. So for all these newly created renters that can't afford to buy, there will be inventory.

Step 3: So now homeowners who are wanting to sell or have to sell due to life change, are going to face the reality that there are less buyers who can afford their home and there are less people who are willing to pay rent for your home when they can get a brand new apt with all the amenities. So what do you do? You lower your price. Will you put it on fire sale, absolutely not, but you will lower it by 5-10% from peak.

Now here is the counter argument, well they will just hang on to that extra house and keep the 3% mortgage even without renting it, because they will not give that up. How many people do you know can afford two mortgages? Heck how many of us could afford their rentals without rental income? 3 months, 6 months, 9 months? So again NO crash, but a slight drop. New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Units in Buildings with 5 Units or More (PERMIT5) | FRED | St. Louis Fed (stlouisfed.org)

Brian Bohrer · Answer

I love this!  I was just staring at that same graph last week thinking about how bad the alleged  "Crash" could really be.  Great stuff!

....WHERE'S THE BEEF?

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