Is Inflation Transitory?

Submitted by XBoxBoy on July 6, 2021 - 10:34am
Inflation falls back to under 2% before end of year.
0% (0 votes)
2-3% inflation in the coming years, nothing to be worried about
14% (3 votes)
3-4% inflation but drops after a year or two
23% (5 votes)
4-5% inflation that lasts longer than the fed thinks.
27% (6 votes)
5-6% inflation and the fed is well behind the curve
27% (6 votes)
6%+ Here come the 70's all over again.
9% (2 votes)
Total votes: 22
Submitted by sdrealtor on July 15, 2021 - 11:22am.

deadzone wrote:
sdrealtor wrote:
deadzone wrote:
sdrealtor wrote:
A 1 br place in La Costa is $2k. A lot more in Carmel Valley

But who would rent that long term at that price? What is your definition of long term? May as well buy the place but 1/1 condos are about the worst/riskiest investment to make at all time market highs.

To the contrary they are like government backed bonds. They are the cheapest thing for a person who just wants to live alone and they stay for years. My clients own some in La Costa. They have never had a tenant stay less than 3 years. There are lots of older folks, working away at the median income with stable jobs who just want a nice safe place to live by themselves.

I assume your clients purchased those 1/1 after the housing crash so of course they are doing good.

Around 2015. Paid cash. Bought for retirement income. Property has appreciated but the rent gains is what really benefits them

You say of course they are doing well as if it was obvious. If it was obvious why didn't you?

Also interested on the south of border investments and how you justify that risk?

Submitted by an on July 15, 2021 - 11:21am.

deadzone wrote:
an wrote:
If I win a $5m lottery today, I'd spend about 80% of it in SD RE right now.

Obviously a lot of people share your sentiment which is why the market is going ape-shit right now. That's what super low interest rates and expectation for endless Fed support will do. As long as everyone thinks prices will go up in perpetuity, there is no perceived risk. For now at least, the Fed has taken risk out of the equation since they have been and continue to buy everything (including mortgage backed securities).


I don't buy investment properties with expectation that it will always go up in perpetuity. The reasons why I would buy today is the same reasons I bought between 2008-2018.

Submitted by deadzone on July 15, 2021 - 12:06pm.

sdrealtor wrote:

You say of course they are doing well as if it was obvious. If it was obvious why didn't you?

I say of course they are doing well because with the benefit of hindsight we know RE appreciated big time in recent years. If I had a time machine I would go back and make all kinds of different investment decisions. Wouldn't necessarily be real estate. Perhaps stocks and crypto. That is a stupid comment.

If they had owned that property during the crash/recession not as likely they would have had stable, long term tenants.

Submitted by deadzone on July 15, 2021 - 12:05pm.

an wrote:
deadzone wrote:
an wrote:
If I win a $5m lottery today, I'd spend about 80% of it in SD RE right now.

Obviously a lot of people share your sentiment which is why the market is going ape-shit right now. That's what super low interest rates and expectation for endless Fed support will do. As long as everyone thinks prices will go up in perpetuity, there is no perceived risk. For now at least, the Fed has taken risk out of the equation since they have been and continue to buy everything (including mortgage backed securities).


I don't buy investment properties with expectation that it will always go up in perpetuity. The reasons why I would buy today is the same reasons I bought between 2008-2018.

Yes but today you've reaped the benefits of monumental RE price boom from 2008-2018. Not realistic to expect similar gains from current pricing. Even more so since current pricing is even more distorted due to Covid phenomena which is not likely to continue.

Submitted by sdrealtor on July 15, 2021 - 1:29pm.

deadzone wrote:
sdrealtor wrote:

You say of course they are doing well as if it was obvious. If it was obvious why didn't you?

I say of course they are doing well because with the benefit of hindsight we know RE appreciated big time in recent years. If I had a time machine I would go back and make all kinds of different investment decisions. Wouldn't necessarily be real estate. Perhaps stocks and crypto. That is a stupid comment.

If they had owned that property during the crash/recession not as likely they would have had stable, long term tenants.

It was obvious back then to those with eyes open. Thats why they and guys like coronita and an were buying units like this also. Those units have always been great rentals in the La Costa complex. Never an issue to rent. Many have tenants over a decade

Submitted by sdrealtor on July 15, 2021 - 12:36pm.

deadzone wrote:
an wrote:
deadzone wrote:
an wrote:
If I win a $5m lottery today, I'd spend about 80% of it in SD RE right now.

Obviously a lot of people share your sentiment which is why the market is going ape-shit right now. That's what super low interest rates and expectation for endless Fed support will do. As long as everyone thinks prices will go up in perpetuity, there is no perceived risk. For now at least, the Fed has taken risk out of the equation since they have been and continue to buy everything (including mortgage backed securities).


I don't buy investment properties with expectation that it will always go up in perpetuity. The reasons why I would buy today is the same reasons I bought between 2008-2018.

Yes but today you've reaped the benefits of monumental RE price boom from 2008-2018. Not realistic to expect similar gains from current pricing. Even more so since current pricing is even more distorted due to Covid phenomena which is not likely to continue.

You were saying the same thing back going back to beginninng of the recorvery and through it. You always have an answer why its a bad idea

Submitted by gzz on July 15, 2021 - 12:41pm.

DZ: 2400 is if anything an underestimate. It’s not a little 1 bed in a apartment complex, it’s a big 1-bed in a high amenity condo complex with pool on an ocean block. The average list for an OB 1 bed is 2100 and that includes listings without parking spots.

As for “long term,” I would be quite happy if my long term tenants left. I’m a softee and have never raised their rents, both are about 15% under market.

Hard to aay on the house rental as it’s a unique property, 5/3 on a large non-shared lot near the beach, 3+ parking spots non-tandum, but with deferred issues that I don’t fix because it is a tear-down. I potentially could get 5500/mo for it, but it would be either a wealthy complainer who wants premium everything or a group of five 20-something party dudes plus their multiple dogs and rotating house guests. I know this for a fact because these were most of my potential renters when I first listed it!

Submitted by an on July 15, 2021 - 12:55pm.

deadzone wrote:
Yes but today you've reaped the benefits of monumental RE price boom from 2008-2018. Not realistic to expect similar gains from current pricing. Even more so since current pricing is even more distorted due to Covid phenomena which is not likely to continue.

When I bought in 2008-2018, I wasn't expecting a monumental RE price boom. It wasn't part of the calculation/reason why I bought. It's still not part of the calculation/reason why I am buying today. Price appreciation is the cherry on top but not the cake.

Also, how can you be sure we won't see even faster price increase?

Submitted by deadzone on July 15, 2021 - 3:14pm.

an wrote:
deadzone wrote:
Yes but today you've reaped the benefits of monumental RE price boom from 2008-2018. Not realistic to expect similar gains from current pricing. Even more so since current pricing is even more distorted due to Covid phenomena which is not likely to continue.

When I bought in 2008-2018, I wasn't expecting a monumental RE price boom. It wasn't part of the calculation/reason why I bought. It's still not part of the calculation/reason why I am buying today. Price appreciation is the cherry on top but not the cake.

Also, how can you be sure we won't see even faster price increase?

Yes, just wanted to make sure you understood that these price gains were one hell of a cherry on top. Nobody predicted this, particularly the pandemic related RE craze. even if sdr claims to have been nostradamus.

We are in unprecedented times. Common sense and basic math say price gains and bubbles in financial markets cannot go parabolic forever. They always crash or have some major correction at some point. But the Fed has kept this up pretty consistently since 2009, using this massive asset purchase program (QE) that has never been done before in the history of the U.S. The only comparable example where this has been done before is Japan and that is a much smaller scale.

The main thing you have going for you even when purchasing at today's massively inflated prices is you know the Fed has your back. They REALLY want home prices to be high, stay high and go higher. Why else would they continue to print money to buy mortgage securities? This made sense in 2009 with the collapse of the mortgage markets, but why didn't they ever stop and why are they still doing it in 2021???

Submitted by The-Shoveler on July 15, 2021 - 3:19pm.

IMO the FED and PTB are trying to copy China in this regard.

What's it been 35 years or more LOL.

But maybe I am wrong.

Submitted by sdrealtor on July 15, 2021 - 4:22pm.

No one predicted this. Im the first to admit I didn't see this coming

Submitted by Coronita on July 15, 2021 - 4:47pm.

an wrote:
deadzone wrote:
an wrote:
If I win a $5m lottery today, I'd spend about 80% of it in SD RE right now.

Obviously a lot of people share your sentiment which is why the market is going ape-shit right now. That's what super low interest rates and expectation for endless Fed support will do. As long as everyone thinks prices will go up in perpetuity, there is no perceived risk. For now at least, the Fed has taken risk out of the equation since they have been and continue to buy everything (including mortgage backed securities).


I don't buy investment properties with expectation that it will always go up in perpetuity. The reasons why I would buy today is the same reasons I bought between 2008-2018.

Cashflow baby!

Submitted by gzz on July 15, 2021 - 5:45pm.

DZ and SDR have a rare moment of agreement, and as in the prior time they are wrong.

“Nobody predicted this”

I didn’t exactly phrase it “ I predict” but I said a lot of times here 2014-2019 that while fundamentals point to 5-10% price gains, there was a very good chance of a new bubble and it was prudent to buy in and take advantage. And I think I was speaking what a lot of others were thinking.

From Aug 2019:

“ In terms of psychology and momentum, all the bulls from the past 5-10 years who will be doing refis will suddenly see their already profitable investments become more so as they cut their monthly payments.
Are you opposed to riding the next bubble up on principle? I am a bear at heart, I am net short US equities. But I have shorted enough bubbles the past 15 years to know that another RE bubble is a-brewin’. ”

Submitted by sdrealtor on July 15, 2021 - 9:31pm.

C'mon man! You didn't come close to predicting this. No one did! This ? This was 30%+ gains
Put down the crack pipe

Submitted by deadzone on July 15, 2021 - 9:59pm.

sdrealtor wrote:
C'mon man! You didn't come close to predicting this. No one did! This ? This was 30%+ gains
Put down the crack pipe

But on that point, you have to consider that as Covid (and related policies) roll back, these unnatural RE and asset gains are going to reverse. Between the massive QE, mortgage and rent moratorium, stimulus, PPP loans, unemployment, etc. etc. those are all driving this craziness.

Plus if the "work at home" paradigm is a significant factor, I hate to break it to the entitle millenials but the majority of you are going to get called back to the office this year. The permanent remote work might be okay for a few niche tech and programming jobs but not for the majority of jobs. And I'm still very skeptical about how productive these folks are even in Tech. With all the government handouts, massive stock gains and share buybacks, it's not like most companies even have to be productive or efficient to make money.

Submitted by sdrealtor on July 15, 2021 - 10:23pm.

Don't assume they are going to roll back. They will some places but not all. The pandemic has re shuffled many people's priorities

Submitted by an on July 16, 2021 - 7:56am.

deadzone wrote:

Yes, just wanted to make sure you understood that these price gains were one hell of a cherry on top. Nobody predicted this, particularly the pandemic related RE craze. even if sdr claims to have been nostradamus.
Let me repeat again, appreciation was never the main part of my calculation on whether I should buy a rental or not. Not between 2008-2018 and it's still not today. So, I'm not sure what you're getting at here.

deadzone wrote:
We are in unprecedented times. Common sense and basic math say price gains and bubbles in financial markets cannot go parabolic forever. They always crash or have some major correction at some point. But the Fed has kept this up pretty consistently since 2009, using this massive asset purchase program (QE) that has never been done before in the history of the U.S. The only comparable example where this has been done before is Japan and that is a much smaller scale.

The main thing you have going for you even when purchasing at today's massively inflated prices is you know the Fed has your back. They REALLY want home prices to be high, stay high and go higher. Why else would they continue to print money to buy mortgage securities? This made sense in 2009 with the collapse of the mortgage markets, but why didn't they ever stop and why are they still doing it in 2021???

The Fed have been around for a long time now, so, it's nothing new. Also, let me repeat again since you don't quite get it, appreciation is not part of the main reason why I buy rentals. As long as rents are increasing, that's all that matter. So, it matter less to me if the Fed really want home prices to be high or not. I don't intend to sell, so price appreciation only hurt me from buying more rental if rent doesn't keep up.

Submitted by deadzone on July 16, 2021 - 8:43am.

sdrealtor wrote:
Don't assume they are going to roll back. They will some places but not all. The pandemic has re shuffled many people's priorities

Perhaps but I don't believe the work at home thing will be permanent for most folks. Covid caused a giant 1+ year of people getting paid to sit at home and in most cases do nothing. Not sustainable.

Submitted by deadzone on July 16, 2021 - 8:48am.

an wrote:
deadzone wrote:

Yes, just wanted to make sure you understood that these price gains were one hell of a cherry on top. Nobody predicted this, particularly the pandemic related RE craze. even if sdr claims to have been nostradamus.
Let me repeat again, appreciation was never the main part of my calculation on whether I should buy a rental or not. Not between 2008-2018 and it's still not today. So, I'm not sure what you're getting at here.

deadzone wrote:
We are in unprecedented times. Common sense and basic math say price gains and bubbles in financial markets cannot go parabolic forever. They always crash or have some major correction at some point. But the Fed has kept this up pretty consistently since 2009, using this massive asset purchase program (QE) that has never been done before in the history of the U.S. The only comparable example where this has been done before is Japan and that is a much smaller scale.

The main thing you have going for you even when purchasing at today's massively inflated prices is you know the Fed has your back. They REALLY want home prices to be high, stay high and go higher. Why else would they continue to print money to buy mortgage securities? This made sense in 2009 with the collapse of the mortgage markets, but why didn't they ever stop and why are they still doing it in 2021???

The Fed have been around for a long time now, so, it's nothing new. Also, let me repeat again since you don't quite get it, appreciation is not part of the main reason why I buy rentals. As long as rents are increasing, that's all that matter. So, it matter less to me if the Fed really want home prices to be high or not. I don't intend to sell, so price appreciation only hurt me from buying more rental if rent doesn't keep up.

Understood. But, you are wrong about Fed. This IS something new. The QE program (i.e. Fed artificially inflating markets by purchasing treasuries and MBS) has only been happening since 2009, and is on hyper overdrive during pandemic. This is the primary driver for the economy and asset prices and is unprecedented in history.

So you are relying on continued Rent increases to justify RE purchase at today's prices. Rent has ballooned in the last few years, is that realistic to think it will continue to appreciate? Perhaps but again only due to Fed induced inflation in my opinion.

Submitted by an on July 16, 2021 - 9:11am.

deadzone wrote:
Understood. But, you are wrong about Fed. This IS something new. The QE program (i.e. Fed artificially inflating markets by purchasing treasuries and MBS) has only been happening since 2009, and is on hyper overdrive during pandemic. This is the primary driver for the economy and asset prices and is unprecedented in history.

So you are relying on continued Rent increases to justify RE purchase at today's prices. Rent has ballooned in the last few years, is that realistic to think it will continue to appreciate? Perhaps but again only due to Fed induced inflation in my opinion.


QE might be new but Fed manipulation isn't new. That's what they're there for. So, QE is just one weapon w/in their arsenal.

As for relying on continued rent increase, rent has been increasing for decades. What make you think it'll be different this time? Also, I'm not relying on continued rent increase. I'm relying on good renters paying rent. Rent increase is cherry on top too. I don't make decision on buying rentals based on some assumption about rent increase. I buy rentals based on the current market rent. So, unless I have data to persuade me that rent will decline over the medium to long term, I don't use rent projection as part of my calculation.

Submitted by sdrealtor on July 16, 2021 - 9:38am.

deadzone wrote:
sdrealtor wrote:
Don't assume they are going to roll back. They will some places but not all. The pandemic has re shuffled many people's priorities

Perhaps but I don't believe the work at home thing will be permanent for most folks. Covid caused a giant 1+ year of people getting paid to sit at home and in most cases do nothing. Not sustainable.

Your glass is always half empty

Submitted by deadzone on July 16, 2021 - 10:49am.

sdrealtor wrote:
deadzone wrote:
sdrealtor wrote:
Don't assume they are going to roll back. They will some places but not all. The pandemic has re shuffled many people's priorities

Perhaps but I don't believe the work at home thing will be permanent for most folks. Covid caused a giant 1+ year of people getting paid to sit at home and in most cases do nothing. Not sustainable.

Your glass is always half empty

What is half empty about that comment? I personally don't like that American's have been getting paid to sit on their asses for over a year doing almost nothing. But whether or not I like it doesn't change the fact that it happened. Perhaps you have never held a real job so cannot relate but I don't believe most folks are equipped to work at home and freelance all the time like a realtor.

Submitted by scaredyclassic on July 16, 2021 - 10:52am.

Have you guys heard of David Graeter's book BULLSHIT JOBS, which argues that most jobs are just unnecessary unproductive useless bullshit that could disappear without any problem. He's a pretty smart economist, so...maybe people are embracing the message?

Submitted by The-Shoveler on July 16, 2021 - 10:57am.

I like hitchhikers guide to the galaxy moral story about the phone sanitizers LOL.
You never know.

Submitted by deadzone on July 16, 2021 - 11:03am.

scaredyclassic wrote:
Have you guys heard of David Graeter's book BULLSHIT JOBS, which argues that most jobs are just unnecessary unproductive useless bullshit that could disappear without any problem. He's a pretty smart economist, so...maybe people are embracing the message?

Yes I think there is a lot of truth to that. But if anything what work at home might be uncovering is the reality that half of the people in the office aren't even needed. This would argue that there should be mass layoffs if companies were actually worried about profit and productivity. But with all the government aid during pandemic they were encouraged to keep the "stiffs" on the payroll. So once all the Pandemic policies go away (if they ever do), and companies actually need to be efficient, there should be less jobs available.

Submitted by deadzone on July 16, 2021 - 11:22am.

an wrote:
So, QE is just one weapon w/in their arsenal.

Well it is a mighty powerful weapon. QE was first utilized as an unprecedented and extreme measure in 2009 in response to the frozen debt markets and the cratering economy. Now all these years later they never stopped doing it. Makes you realize that in reality the economy never recovered and it is 100% reliant on Fed support. There is no other logical reason why they would continue this if not for that reality.

Look what happened when Powell first came in. He started "tapering" fed purchases in 2018 and when the stock market started dropping towards the end of the year, he immediately pulled a 180 and said no we aren't going to taper. This just in response to 10% drop in the stock market. This is all the proof you need to see what the Fed's real mandate is.

Submitted by gzz on July 16, 2021 - 11:25am.

C'mon man! You didn't come close to predicting this. No one did! This ? This was 30%+ gains

I literally said less than 2 years ago "another RE bubble is a-brewin’”

I also put my $ into it. When I purchased property #3 in 2016 it took me from about 155% of my net worth in SD RE to about 200%. That's as wildly bullish as my conservative disposition permits.

My view the whole time was that SD RE (1) was highly undervalued for a variety of reasons, the largest of which was that the interest rate decline was permanent (2) the biggest reason increases were not even larger was conservative appraisals based on outdated comps (3) there was a very good chance steady large returns would cause a new irrational speculative bubble.

Submitted by an on July 16, 2021 - 11:44am.

deadzone wrote:
Makes you realize that in reality the economy never recovered and it is 100% reliant on Fed support.

How many years have to past before the current reality become a reality for you? The Fed is not going away and they will not stand back and do nothing.

Submitted by gzz on July 16, 2021 - 11:51am.

The first thread I started here back in 2012 was called "Dear people considered about rising rates"

https://www.piggington.com/dear_people_c...

Then there was this:

https://www.piggington.com/price_spike_c...

And talking about the 2016 condo buy I said:

"Ultimately I think I may not hold it that long as I think we will have another bubble and I will sell it then."

The only time I wasn't hyperbullish was the first couple months of covid.

Submitted by deadzone on July 16, 2021 - 12:49pm.

an wrote:
deadzone wrote:
Makes you realize that in reality the economy never recovered and it is 100% reliant on Fed support.

How many years have to past before the current reality become a reality for you? The Fed is not going away and they will not stand back and do nothing.

It has become a reality for me that Fed will stop at nothing to "try" to prop up markets, and up till now that has been successful. I don't have confidence they will be able to keep this charade up forever. But that is the clear case for going all in on RE today, that the Fed support (and ultimate inflation) will never stop. I'm not arguing that this is not going to happen.

Submitted by sdrealtor on July 16, 2021 - 1:19pm.

deadzone wrote:
sdrealtor wrote:
deadzone wrote:
sdrealtor wrote:
Don't assume they are going to roll back. They will some places but not all. The pandemic has re shuffled many people's priorities

Perhaps but I don't believe the work at home thing will be permanent for most folks. Covid caused a giant 1+ year of people getting paid to sit at home and in most cases do nothing. Not sustainable.

Your glass is always half empty

What is half empty about that comment? I personally don't like that American's have been getting paid to sit on their asses for over a year doing almost nothing. But whether or not I like it doesn't change the fact that it happened. Perhaps you have never held a real job so cannot relate but I don't believe most folks are equipped to work at home and freelance all the time like a realtor.

Spent 15 years in corporate America including a stint in the World Trade Center. Lots of people were productive.

Submitted by sdrealtor on July 16, 2021 - 1:24pm.

gzz wrote:

C'mon man! You didn't come close to predicting this. No one did! This ? This was 30%+ gains

I literally said less than 2 years ago "another RE bubble is a-brewin’”

I also put my $ into it. When I purchased property #3 in 2016 it took me from about 155% of my net worth in SD RE to about 200%. That's as wildly bullish as my conservative disposition permits.

My view the whole time was that SD RE (1) was highly undervalued for a variety of reasons, the largest of which was that the interest rate decline was permanent (2) the biggest reason increases were not even larger was conservative appraisals based on outdated comps (3) there was a very good chance steady large returns would cause a new irrational speculative bubble.

That's not even in the same universe of what happened and there is a good case this is not a bubble so there's that as well. A few months ago you didn't believe me when I said prices were up over 30%. No one came close to predicting what happened. No one

Submitted by gzz on July 16, 2021 - 1:39pm.

That's not even in the same universe of what happened

Submitted by deadzone on July 16, 2021 - 2:39pm.

sdrealtor wrote:

Spent 15 years in corporate America including a stint in the World Trade Center. Lots of people were productive.

I'm talking about the lack of productivity specifically throughout pandemic and with people "working" from home, getting paid to do virtually nothing.

Submitted by sdrealtor on July 16, 2021 - 2:48pm.

I should have separated the comments. I knew what you meant

Submitted by sdrealtor on July 16, 2021 - 3:12pm.

gzz wrote:

That's not even in the same universe of what happened

Just to be clear I expected rising prices as did many also. Nobody expected a 30- 40% y-o-y price gain which is around what we are looking at. And again calling for a bubble isnt correct either as the metrics do not bear out this being one

https://www.piggington.com/valuation_update

Not a bubble

Submitted by an on July 16, 2021 - 5:44pm.

If we're in a bubble, then when will the bubble pop?

Submitted by The-Shoveler on July 17, 2021 - 9:52am.

IMO Either it's a bubble or the start of some serious inflation.
pick your poison.

As said earlier IMO TPTB cannot afford another major economic downturn and will do almost anything to avoid it.
They're trying to emulate China in this regard (no major downturn in over 35 years).
Just my opinion.

Submitted by sdrealtor on July 17, 2021 - 11:54am.

I dont think either. Passage of time. Prices roughly level off for 3 to 5 years, say +/- 10% and they will be completely normalized. Time heals all wounds

Submitted by gzz on July 17, 2021 - 2:28pm.

How about we're at a point where valuations make perfect sense, but we're likely headed for a bubble?

That's not quite my "base case" but I think it's awfully likely.

Why is it so hard to believe? Fake online coins and NFTs are now worth, technically speaking, $1 trillion+. Unprofitable tech stocks are trading for 30x sales. Uber loses billions and billions every year, but people can't wait to shovel their money into it, as well as its even more risky and unprofitable Chinese clone.

We had one RE bubble, and conditions now strike me as reasonably close 2003-2004.

Now that I think about it, SD and Phoenix being the two top markets is very 2004y.

I'm not even sure we're using the term the same way. Is a massive bull market that eventually has crazy valuations only a bubble when certain valuation ratios exceed certain arbitrary constants?

What's one of the final ingredients missing the round that was present in 2004-2006?

Answer: less wealthy and unsophisticated first time buyers coming in without downpayments. And here we go:

https://www.directmortgageloans.com/news...

The 180% of median income in high cost areas is a nice touch!

The chance of some version of this passing is high IMO. The parties hate each other, but here you have a bank-friendly Dem, once known as the Senator from MBNA, proposing something the GOP in general supports: subsidizing homeownership and banks and the very GOP FIRE economy. Now the GOP would prefer it go to REITs, PE partnerships, shadowy Cayman Island organizations, and S-Corps of All-Sorts, sure, but those groups are already pretty loaded up and wouldn't mind offloading a bit, now would they?

SD Median Household income is about 90k. 180% of that is $162,000. Basically every middle to upper middle class renter who isn't able to save money too well gets free 20k for their down payment!

Submitted by gzz on July 17, 2021 - 3:25pm.

Thinking about the new BidenBux plan, why wouldn't it keep us running 15%+ or perhaps ++++++ for another year or more?

Last time we had free money for buying a house was during the bust, and it was only 7500 or 9500 as I recall.

Yet, despite being smaller than what Biden proposes, it caused a giant bear market rally, and when it ended we had the second part of the double-bottom, 2009 and 2011.

Now make it 20k not 7.5K, and in a white-hot ultra-low-inventory market, what's the likely result?

https://archive.org/details/arcade_bubbles

Submitted by sdrealtor on July 17, 2021 - 5:25pm.

There is a technical definition for a bubble. I believe two standard deviations above fair value. Maybe Rich will pop in.

Submitted by gzz on July 17, 2021 - 10:46pm.

As I noted, whatever you decide is the definition of “fair value” is arbitrary.

To the extent you mean two SD above the historic mean of some valuation ratio, the choice of ratio is again going to be arbitrary. And any simple one like price/rent is going to be problematic. Rich’s mortgage payment chart is an improvement, but still leaves out a ton of indisputably relevant factors, such as expected income growth, cost of new construction, changing tax treatment of RE by both the state and federal government, and insurance costs.

In reality, bubble simply does not have some generally accepted definition that can be applied, rather it is like many concepts where you just know it when you see it, especially in hindsight.

John Locke refuted Aristotle’s definition of man as a “rational animal” by noting that a brilliant talking parrot is still a parrot but a severely mentally disabled man is a still a man. Locke’s better definition is a man is just something that physically looks like a man. So too with bubbles.

Submitted by scaredyclassic on July 18, 2021 - 12:39pm.

Climate change panic buying? The humans are getting a little freaked out and are trying to calm themselves by spending money?

Submitted by deadzone on July 18, 2021 - 1:55pm.

sdrealtor wrote:
I dont think either. Passage of time. Prices roughly level off for 3 to 5 years, say +/- 10% and they will be completely normalized. Time heals all wounds

No way. Bubbles this big don't just "normalize". When has that ever happened before? Of course what you are predicting is exactly what the Fed are trying to convince everyone (even themselves?) will happen. That is basically the MMT, that governments can print and deficit spend way beyond traditional bounds and not have to worry about consequences.

Submitted by sdrealtor on July 18, 2021 - 4:31pm.

I need to dig up some threads from 5-10 years ago. You were singing the same tune

Submitted by XBoxBoy on July 18, 2021 - 6:38pm.

deadzone wrote:
[
No way. Bubbles this big don't just "normalize". When has that ever happened before?

We might end up disagree about this, but I think that the late seventies early eighties were a bubble about the size of what we currently are in. (there are a couple charts in https://www.piggington.com/interest_rate... that illustrate this)

But that "bubble" didn't pop per se. Instead it mostly got eaten up by inflation. I think this result is entirely possible this time as well.

Submitted by deadzone on July 19, 2021 - 10:05am.

XBoxBoy wrote:
deadzone wrote:
[
No way. Bubbles this big don't just "normalize". When has that ever happened before?

We might end up disagree about this, but I think that the late seventies early eighties were a bubble about the size of what we currently are in. (there are a couple charts in https://www.piggington.com/interest_rate... that illustrate this)

But that "bubble" didn't pop per se. Instead it mostly got eaten up by inflation. I think this result is entirely possible this time as well.

I'm not talking about just housing here, I'm talking about the everything bubble. Stock market is easiest thing to see. Look at long term chart of S&P, the recent price appreciation is insane if you compare this to any other time in history. Particularly since 2009. This all makes sense if you just look at Fed balance sheet since 2009, nearly all of this is caused by Fed QE. There was no such thing as QE prior to 2009.

Now as it relates to housing. Yes there is debate whether we are in a housing bubble based on various metrics as Rich pointed out. Certainly the conditions now are very different than 2005. However, given we are clearly in an "everything bubble" and housing is part of everything, you will never convince me we are not also in a housing bubble.

Submitted by deadzone on July 19, 2021 - 10:05am.

sdrealtor wrote:
I need to dig up some threads from 5-10 years ago. You were singing the same tune

Probably, doesn't mean I was wrong then. I never predicted when this bubble was going to pop. This bubble has been going on for a while, Fed started QE in 2009 and never stopped. That is the bubble. But since Pandemic they went into super hyper overdrive and so did the bubble.

Submitted by sdrealtor on July 19, 2021 - 10:31am.

deadzone wrote:
sdrealtor wrote:
I need to dig up some threads from 5-10 years ago. You were singing the same tune

Probably, doesn't mean I was wrong then.

Keep repeating after yourself. Doesnt mean I was wrong. Doesnt mean I was wrong. Doesnt mean I was wrong.

Timing is everything! Dont forget what they say about a broken clock