Quote from @Carlos Ptriawan:
Quote from @V.G Jason:
Questions are how long do we stay at this high rate environment(relatively speaking to last 15 years)?
And how quickly, if at all, do we do decelerate it? Those things are going to make hard assets boom.
it all depends on CPI.
And CPI depends primarily on energy,food price, and rent that's being shaped by BP community LOL
So the Fed ultimately relying on us to reduce inflation LOL
Well food is heavily controlled through trade & supply chains, that's a global issue. Ukraine/Russia war are having something to do with that. Some, but not all. CPI will come down, but 2% will take a lot of time or the wars resolve itself and the current administration changes stance on energy. Energy elevation of prices could be almost shot down significantly by April, May 2023 if policies were conducive to it. That aspect alone would get inflation down probably a year ahead of schedule, if not early.
Fed is having to work off the administration's policies, not necessarily us. And there own policies, consumer savings: debt ratio is at the absolute lowest in quite sometime. That's not us, that's fed policy creating that. We don't get into enormous debt, low savings when 16 months ago it was vice versa without there being a huge policy change. Manipulation by the fed causes these actions.
Housing prices--go back to supply chains. There's not enough incentive to create a new build in higher rate environment and tighter supply. Shipping costs, transport costs, labor costs, build costs for a $400k house to sell will probably get you within a 2% margin. That's not going to make a builder build. Demand is there, but the fed's rate hikes are literally the definition of demand destruction. It's cheaper to board up with others or live at home than to pursue individual housing. When that time comes though, you bet these hard assets are going to take another long look up. You can't keep the debt levels this way without printing more money, unless there's a totality within Washington of defeating the debt issue in 15-25 years and that'd take 3-6 terms of presidency, senate, congress, and we can't even get 4 years of a non divisive term. So money will keep being issued to defeat debt, prices will continue to go up on hard assets. We just need to be mindful of regulation. I'm convinced the new norm, once we're in a normal rate environment is 50% or more(depending on location) is the new ratio of allocation for housing. No longer 25-40%. You'll chew up your budget paycheck with 75-80% for rent/mortgage, car payment, insurance, gas before being able to live for the general 70-75% of the US population. Some will back off on cars, it'll take 2-4 years for people to realize that.
Until that time, yes prices are going to come down and harder in some areas. I don't think Miami and Austin do face plants, or even Nashville. But if you're down 15-25%, that's expected. I think generally down 20-30%. It's not going to dip the break even point of rates:price from 2 years back in most markets--I would wager. If you're capable of buying and loaning with this rate and holding for 3-5 years to refi and eating costs OTM for those few years(say 36-60 months of losing $100-200/mo), you're appreciating year 5+ may be astronomical. that's my bet.
