7 ms·

Housing market correction? Nah, that's never going to happen

by kache_ 6y ago

wonderwonder 6y ago
Housing prices will drop, rich individuals and companies flush with profits from the federally propped up stock market will swoop in and buy them at a discount. Stocks will drop as cash leaves it for housing, negatively affecting retirement accounts and lower net worth individuals. The new landlords will rent them out, housing prices will rise again. The current system works perfectly for what it was designed to do. The cycle repeats endlessly funneling money from the lower class upwards.
bluedevil2k 6y ago
Stock market correction? Nope, keeps going up. Defies logic.
- snarf21 6y ago
  Well, the Fed is currently propping up the market with trillions of purchases, not just of treasuries but even things like corporate bonds.
  - deleted 6y ago
    [deleted]
  - whatshisface 6y ago
    Am I wrong in thinking this is directly handing value from holders of dollars to holders of corporate debt and equity?
    - omgwtfbyobbq 6y ago
      I think that's an accurate statement. The transfer would be the delta between what the Fed buys that debt/equity for and what it sells it for later. At the same time, it could also be accurate to assert that without some organization propping up the economy, short term losses, and possibly long term harm, would greatly exceed whatever the delta ends up being on the Fed's purchases/sales.
    - jfengel 6y ago
      Well, yes and no. Thus far, dollars have not decreased substantially in value, except in the equity market. Consumer prices have been steady for many years[1], with a small (under 2%) annual increase. What's happening instead is that money is funneled almost directly from Federal Reserve accounts into equities markets, making only a brief appearance in the hands of consumers. There, it mostly seems to prevent deflation -- which keeps people buying stuff and avoids massive unemployment (and causing even more deflation). At some point the market will correct, and the outflow will go... somewhere. A lot of that money will simply vanish, leaving us with massive debts owed by the government to the banks and large bond buyers. That will be a whole different kind of crash. [1] https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri...
- axaxs 6y ago
  Good point. At this point I wouldn't be surprised if the fed started renting empty units.
- deadalus 6y ago
  * People don't have work, they are using the stock market like a casino. * Big Tech use skyrockets taking the market higher. * Fed pumping trillions inflates asset prices.
- _jal 6y ago
  Don't worry, patriot. The five year plan accounts for it. Once the Fed owns the entire market, capitalism shall overcome!
- doopy-loopy2 6y ago
  Cash is trash. That's why.
rolobio 6y ago
Its long overdue, and I hope it happens (even though I am a home owner). It seems to me all the stimulus money ends up in the realty market. It looks great for home owners (but money printing isn't good for anyone). It really hurts the people just getting started in the economy.
- revnode 6y ago
  > It really hurts the people just getting started in the economy. Yes! A dollar is a good just like any other. If there is more of it, it is worth less. If you print more money, the dollars that people hold and have are worth less. That said, the US has gotten away with printing dollars for a very long time with very little inflation in basic consumer goods. It seems to mostly end up in real estate, stocks, etc. where most are happy to see prices shoot up. Except, of course, those who are just getting started and can't afford to get in on the inflated prices.
  - rolobio 6y ago
    Also, because most of the currencies in the world are backed by dollars, we are inflating everyone else's currencies. So the US is able to offload it's inflation on the rest of the world. I doubt the world will take that much longer.
    - wonderwonder 6y ago
      Issue is there is not really an alternative. What can they use except dollars? The euro? The yuan? I doubt they are going to go back to the gold standard.
axaxs 6y ago
It happens, but rarely. We should really ease pressure by putting in laws to keep prices lower. In three cities I've lived, every 'good deal' is snatched in cash by landlords or flippers. Why not regulate the amount or at least the velocity of how many homes a person can own? My current landlord has 16 houses, that's ridiculous.
- swiley 6y ago
  Or ease the pressure by encouraging more and denser development, especially of less profitable low income housing.
- CabSauce 6y ago
  Wouldn't that drive rental prices up? I don't think high housing prices will be solved on the demand side.
  - WealthVsSurvive 6y ago
    Yes, but only because the landlords would sell or default, which would drive the homes back into the bank's hands. The banks would then let most of the homes rot rather than sell them, so they can milk the build&mortgage finance&insurance teat and leave the citizen taxpayer on the hook for overpriced housing & through literal artificial scarcity. This is exactly what occurred during the last housing bust, and it's genuinely sickening that it isn't discussed more in the media: more perverse incentives. We need to go after these people hard because they are collapsing our civilization. There need to be punitive actions that correct the market and drive it back to something that actually produces people living in homes for a low price and development moving in a resilient, frankly boring manner. This in turn produces a populace with more free time, a requirement for training & education, something that will have to be done with increasing frequency as time goes on. This drives wages up naturally, as more people can choose to work less or not work. This shrinks sustenance & panic borrowing, which is another reason FIRE likes keeping us on their hook. This stops much property crime, which shrinks the need for police forces, jails, & the circus of pornographically perverse incentives that surround our criminal justice system. In no uncertain terms let me say this: if we tanked the price of housing, tanked the rental market, and got humans into houses instead of some wealth-dreaming deluded landlord or scummy bank that wants to reap what they never sow, we could easily transition into the future we desire. The loss people fear with this action isn't actually a fear of the loss of wealth, it is the fear of losing the ease-of-mind and projected future peace associated with ownership of the asset. We would do well to begin considering how to provide that for one another without harming one another.
jeffreyrogers 6y ago
It's funny, I've been hearing since at least 2011 that a stock market correction is going to happen any time now. For the past few years I've heard the same thing about housing. But there is so much money out there looking for a return, and so few good places to allocate it, that it is hard to see what the catalyst could be for causing a correction. Obviously things can't go on this way forever though.
- im3w1l 6y ago
  > it is hard to see what the catalyst could be for causing a correction. If inflation comes and it becomes necessary to raise interest rates, that would cause a correction.
- UncleOxidant 6y ago
  But there was a rather large correction in both home and stock prices in 2008. That's not so long ago.
  - jeffreyrogers 6y ago
    Sure and the catalyst for that was people couldn't afford their mortgages, but current property and stock values are pumped up by an excess monetary supply caused by quantitative easing and a lack of real innovation which would offer actual good investments. Since there is so much cash floating around and no good places to put it, when people have to exit the market new money floods in, keeping asset prices up. In January PE firms had 1.5T cash ready to invest. I'm sure that will get deployed as bankruptcies start to happen.
- mdorazio 6y ago
  To be fair, the correction was happening in March, and then the government stepped in and basically signaled it would write as many blank checks as needed to prop it back up. 100% agree that there's a stupid amount of money looking for returns with very few places to get them, though.
- colinjoy 6y ago
  2011 - 9.6 trillion. 2019 - 15.4 trillion. 2020 - 18.3 trillion and growing... (M2 dollar volume)
nugget 6y ago
It would seem obvious that housing prices should drop in the near term (and I hope they do), but I can't totally square that with falling mortgage rates and rising asset inflation. If the Fed rate stays at 0% then I've been told to expect 30-year fixed mortgage rates should eventually drop to between 1.5-2%. Rates that low increase buying power and could be a powerful form of stimulus for the housing market. Beyond that, rental real estate is not immune to the current inflationary multiple expansion seen in financial assets. The lower the yield on something like $SPY falls, the more attractive the yield/rent from real estate becomes by comparison.
- UncleOxidant 6y ago
  30 year is already down to like 2.8%. More stimulus to the housing market means prices go up as well. Incomes are the limit here. If mortgages to to 1.5% prices will go up as well, but incomes aren't rising nearly as fast.
cmrdporcupine 6y ago
The housing market is delusional in the US but it's even crazier here in Canada. We never had the 2008 correction that the US had, and things just continued to climb. In southern Ontario housing prices are so out of wack of what earning potential is that it just boggles the mind. I thought the COVID crisis would blow this all up, but it hasn't. In fact rural land values keep climbing because of wealthy Torontonians now seeking to have cottages and the like outside of the city. I don't even know what to say about it at this point. Admittedly the economic situation isn't as dire here because the gov't has spent freely to help keep people afloat, but it just seems so irrational to me that housing prices continue to go up at almost 10% a year when the economic fundamentals are so messed up.
- bradleyankrom 6y ago
  Isn’t a lot of that related to foreign investments? Or was that mostly limited to Vancouver?
  - adventured 6y ago
    No, it wasn't mostly foreign investments, although that added fuel to the fire. You can see the Canada housing bubble represented in that Canadian households are among the most indebted on the planet (it's heavy with mortgage debt). Here's a chart showing the prominent split with the US, where they go different directions after 2007-2008 (Canada's bubble and debt accumulation kept going and the US began deleveraging and improving its household fiscal condition and debt to equity ratio in housing): https://i.imgur.com/gCAsd5Y.png https://i.imgur.com/gCAsd5Y.png
    - doopy-loopy2 6y ago
      What are the implications (if any) of this?
    - gentleman11 6y ago
      Canadians end up owning a decent amount of wealth by the time they retire compared to many nations. That debt isn’t like credit card debt. Median wealth per household is about 200k vs 77k in the USA. Edit: used per-household stats instead

Housing market correction? Nah, that's never going to happen

by kache_ 6y ago

Housing market correction? Nah, that's never going to happen

Housing prices will drop, rich individuals and companies flush with profits from the federally propped up stock market will swoop in and buy them at a discount. Stocks will drop as cash leaves it for housing, negatively affecting retirement accounts and lower net worth individuals. The new landlords will rent them out, housing prices will rise again. The current system works perfectly for what it was designed to do. The cycle repeats endlessly funneling money from the lower class upwards.

bluedevil2k 6y ago

Stock market correction? Nope, keeps going up. Defies logic.

snarf21 6y ago
Well, the Fed is currently propping up the market with trillions of purchases, not just of treasuries but even things like corporate bonds.
- deleted 6y ago
  [deleted]
- whatshisface 6y ago
  Am I wrong in thinking this is directly handing value from holders of dollars to holders of corporate debt and equity?
  - omgwtfbyobbq 6y ago
    I think that's an accurate statement. The transfer would be the delta between what the Fed buys that debt/equity for and what it sells it for later. At the same time, it could also be accurate to assert that without some organization propping up the economy, short term losses, and possibly long term harm, would greatly exceed whatever the delta ends up being on the Fed's purchases/sales.
  - jfengel 6y ago
    Well, yes and no. Thus far, dollars have not decreased substantially in value, except in the equity market. Consumer prices have been steady for many years[1], with a small (under 2%) annual increase. What's happening instead is that money is funneled almost directly from Federal Reserve accounts into equities markets, making only a brief appearance in the hands of consumers. There, it mostly seems to prevent deflation -- which keeps people buying stuff and avoids massive unemployment (and causing even more deflation). At some point the market will correct, and the outflow will go... somewhere. A lot of that money will simply vanish, leaving us with massive debts owed by the government to the banks and large bond buyers. That will be a whole different kind of crash. [1] https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri...
axaxs 6y ago
Good point. At this point I wouldn't be surprised if the fed started renting empty units.
deadalus 6y ago
* People don't have work, they are using the stock market like a casino. * Big Tech use skyrockets taking the market higher. * Fed pumping trillions inflates asset prices.
_jal 6y ago
Don't worry, patriot. The five year plan accounts for it. Once the Fed owns the entire market, capitalism shall overcome!
doopy-loopy2 6y ago
Cash is trash. That's why.

rolobio 6y ago

Its long overdue, and I hope it happens (even though I am a home owner). It seems to me all the stimulus money ends up in the realty market. It looks great for home owners (but money printing isn't good for anyone). It really hurts the people just getting started in the economy.

revnode 6y ago
> It really hurts the people just getting started in the economy. Yes! A dollar is a good just like any other. If there is more of it, it is worth less. If you print more money, the dollars that people hold and have are worth less. That said, the US has gotten away with printing dollars for a very long time with very little inflation in basic consumer goods. It seems to mostly end up in real estate, stocks, etc. where most are happy to see prices shoot up. Except, of course, those who are just getting started and can't afford to get in on the inflated prices.
- rolobio 6y ago
  Also, because most of the currencies in the world are backed by dollars, we are inflating everyone else's currencies. So the US is able to offload it's inflation on the rest of the world. I doubt the world will take that much longer.
  - wonderwonder 6y ago
    Issue is there is not really an alternative. What can they use except dollars? The euro? The yuan? I doubt they are going to go back to the gold standard.

axaxs 6y ago

It happens, but rarely. We should really ease pressure by putting in laws to keep prices lower. In three cities I've lived, every 'good deal' is snatched in cash by landlords or flippers. Why not regulate the amount or at least the velocity of how many homes a person can own? My current landlord has 16 houses, that's ridiculous.

swiley 6y ago
Or ease the pressure by encouraging more and denser development, especially of less profitable low income housing.
CabSauce 6y ago
Wouldn't that drive rental prices up? I don't think high housing prices will be solved on the demand side.
- WealthVsSurvive 6y ago
  Yes, but only because the landlords would sell or default, which would drive the homes back into the bank's hands. The banks would then let most of the homes rot rather than sell them, so they can milk the build&mortgage finance&insurance teat and leave the citizen taxpayer on the hook for overpriced housing & through literal artificial scarcity. This is exactly what occurred during the last housing bust, and it's genuinely sickening that it isn't discussed more in the media: more perverse incentives. We need to go after these people hard because they are collapsing our civilization. There need to be punitive actions that correct the market and drive it back to something that actually produces people living in homes for a low price and development moving in a resilient, frankly boring manner. This in turn produces a populace with more free time, a requirement for training & education, something that will have to be done with increasing frequency as time goes on. This drives wages up naturally, as more people can choose to work less or not work. This shrinks sustenance & panic borrowing, which is another reason FIRE likes keeping us on their hook. This stops much property crime, which shrinks the need for police forces, jails, & the circus of pornographically perverse incentives that surround our criminal justice system. In no uncertain terms let me say this: if we tanked the price of housing, tanked the rental market, and got humans into houses instead of some wealth-dreaming deluded landlord or scummy bank that wants to reap what they never sow, we could easily transition into the future we desire. The loss people fear with this action isn't actually a fear of the loss of wealth, it is the fear of losing the ease-of-mind and projected future peace associated with ownership of the asset. We would do well to begin considering how to provide that for one another without harming one another.

jeffreyrogers 6y ago

It's funny, I've been hearing since at least 2011 that a stock market correction is going to happen any time now. For the past few years I've heard the same thing about housing. But there is so much money out there looking for a return, and so few good places to allocate it, that it is hard to see what the catalyst could be for causing a correction. Obviously things can't go on this way forever though.

im3w1l 6y ago
> it is hard to see what the catalyst could be for causing a correction. If inflation comes and it becomes necessary to raise interest rates, that would cause a correction.
UncleOxidant 6y ago
But there was a rather large correction in both home and stock prices in 2008. That's not so long ago.
- jeffreyrogers 6y ago
  Sure and the catalyst for that was people couldn't afford their mortgages, but current property and stock values are pumped up by an excess monetary supply caused by quantitative easing and a lack of real innovation which would offer actual good investments. Since there is so much cash floating around and no good places to put it, when people have to exit the market new money floods in, keeping asset prices up. In January PE firms had 1.5T cash ready to invest. I'm sure that will get deployed as bankruptcies start to happen.
mdorazio 6y ago
To be fair, the correction was happening in March, and then the government stepped in and basically signaled it would write as many blank checks as needed to prop it back up. 100% agree that there's a stupid amount of money looking for returns with very few places to get them, though.
colinjoy 6y ago
2011 - 9.6 trillion. 2019 - 15.4 trillion. 2020 - 18.3 trillion and growing... (M2 dollar volume)

nugget 6y ago

It would seem obvious that housing prices should drop in the near term (and I hope they do), but I can't totally square that with falling mortgage rates and rising asset inflation. If the Fed rate stays at 0% then I've been told to expect 30-year fixed mortgage rates should eventually drop to between 1.5-2%. Rates that low increase buying power and could be a powerful form of stimulus for the housing market. Beyond that, rental real estate is not immune to the current inflationary multiple expansion seen in financial assets. The lower the yield on something like $SPY falls, the more attractive the yield/rent from real estate becomes by comparison.

UncleOxidant 6y ago
30 year is already down to like 2.8%. More stimulus to the housing market means prices go up as well. Incomes are the limit here. If mortgages to to 1.5% prices will go up as well, but incomes aren't rising nearly as fast.

cmrdporcupine 6y ago

The housing market is delusional in the US but it's even crazier here in Canada. We never had the 2008 correction that the US had, and things just continued to climb. In southern Ontario housing prices are so out of wack of what earning potential is that it just boggles the mind. I thought the COVID crisis would blow this all up, but it hasn't. In fact rural land values keep climbing because of wealthy Torontonians now seeking to have cottages and the like outside of the city. I don't even know what to say about it at this point. Admittedly the economic situation isn't as dire here because the gov't has spent freely to help keep people afloat, but it just seems so irrational to me that housing prices continue to go up at almost 10% a year when the economic fundamentals are so messed up.

bradleyankrom 6y ago
Isn’t a lot of that related to foreign investments? Or was that mostly limited to Vancouver?
- adventured 6y ago
  No, it wasn't mostly foreign investments, although that added fuel to the fire. You can see the Canada housing bubble represented in that Canadian households are among the most indebted on the planet (it's heavy with mortgage debt). Here's a chart showing the prominent split with the US, where they go different directions after 2007-2008 (Canada's bubble and debt accumulation kept going and the US began deleveraging and improving its household fiscal condition and debt to equity ratio in housing): https://i.imgur.com/gCAsd5Y.png https://i.imgur.com/gCAsd5Y.png
  - doopy-loopy2 6y ago
    What are the implications (if any) of this?
  - gentleman11 6y ago
    Canadians end up owning a decent amount of wealth by the time they retire compared to many nations. That debt isn’t like credit card debt. Median wealth per household is about 200k vs 77k in the USA. Edit: used per-household stats instead