4 ms·

Those quotes describe a taut rubber band that could easily be released in the next 1-2 years. > With families building up savings during pandemic and increasin

Those quotes describe a taut rubber band that could easily be released in the next 1-2 years. > With families building up savings during pandemic and increasingly working from home, demand for property is on the rise... Return to office, taking deferred vacations, etc. winds down the savings. > labour shortages, global supply chain bottlenecks won't last forever. So there's downside demand-side risk and upside supply-side risks, with identical underlying causal triggering conditions (end of pandemic). Oh, and how long can central banks hold off on rate increases? The risk of a violent crash has less to do with the probability of a rapid post-pandemic renormalization and more to do with the tight causal links between the risks of upside supply and downside demand. Less like "crash will definitely happen" and more like "X_1, ..., X_n all have unknown but likely highly correlated probabilities, so if one happens they all happen and if you get X_1, ..., X_n all at once there'll definitely be a crash" I think.

nostrademons 5y ago
The last 20 years has taught me to be suspicious of renormalization arguments. History marches on; people have memories, but history itself seems to be a big Markov process where the future depends only on the present and the forces that drive it, not the past. I could believe an argument based on causal links of supply & demand, but I'm skeptical that they'll operate in the direction you suggest. To my eye: remote work was a spring that's been ready to burst since about 2014 but needed the pandemic to catalyze it; we're not going back to offices; home offices are going to become very desirable; savings (in the form of financial assets, at least) are increasing because of inflation; and supply chain bottlenecks are not normalizing anytime soon.
- throwawaygh 5y ago
  > The last 20 years has taught me to be suspicious of renormalization arguments. 2021-2008 = 13 < 20.
  - nostrademons 5y ago
    I'm actually thinking of late-90s up through today: There were a lot geopolitical papers written then about the unipolar world and how we'd reached the end of history and liberal democracy had won. To the extent that people imagined threats to U.S. dominance, they usually envisioned state actors like Russia or China. Few people predicted the rise of international terrorism, widespread state failures, mass migrations, and internal destabilization of states. There were a fair number of commentators who said that the Internet was a fad and we'd go back to calling up businesses when we got tired of webpages. The dot-com boom was a bona-fide bubble - it burst, severely - and yet it also wasn't. I predicted the Amazon would go out of business in 2001 when their stock was down 90% in a year; it now owns retail, and is worth 50x that. People wondered how the hell a website for throwing virtual sheep at one another was worth $15B in 2007. It's now worth $942B, and blamed for taking down governments. We just had a page at the top of HN about someone's 2011 prediction that Bitcoin would fail. It did, for all the reasons they listed, and yet is still worth 20,000x what it was going for then. It's also had some 60-70% declines in that process. The general lesson I take from these is that life is a whole lot more random and absurd than a lot of people think it is. A lot of people who lose everything in bubbles are right about the direction of the trend (oftentimes on a subconscious level), but wrong about magnitude and timing. I see a lot of people asking whether today's housing situation is like 2008, and to my eye the fundamental forces are nothing alike. But 2005-2008 might have been the bubble before the trend, which sets up the causal forces leading to a genuine housing shortage now.
    - throwawaygh 5y ago
      I think the dot-com example is a good analogy for the current housing market. Prices in certain regions will just. keep. going. up. Maybe with dips here or there. But there's also a lot of speculation happening in down-market junk.
    - chillacy 5y ago
      These are good insights, I get the sense maybe that you may be tracking your predictions or at least are revisiting them more than most people. The common behavior is to forget just how uncertain the past was. Or summarized: first things seem impossible, then they seem obvious.
mywittyname 5y ago
Think about how many years over-building went on before the collapse in 2008. There's a good chance that, in the coming years, labor and materials prices will fall such that builders will start construction on too many homes. But that's a while away. material prices are falling, but they are still elevated. And houses take a while to build -- four months minimum, nine+ more typical. So even if overbuilding started today, there's still a good year or so before that stuff comes on the market. In these situations, I'm a big believer in contrarian outcomes. Because if a large number of people think some event will occur, then they act in a way which gives them the best outcome should that event occur. The popular trend right now is to speculate a housing collapse. Thus, I think most people are going to put off buying at "elevated" prices for a few years, until it becomes crystal clear that they were wrong. My prediction: House prices will be like the stock market circa 2016. Everyone will be predicting a collapse "any time now" while prices soar at a crazy pace and continue to do so for a decade.
- throwawaygh 5y ago
  > The popular trend right now is to speculate a housing collapse. Price action is sentiment. Words are hot air. People are NOT speculating on a housing collapse. Exactly the opposite.
  - mywittyname 5y ago
    I disagree. Prices demonstrate the attitudes of people who are buying houses. I'm concerned with the attitudes of people who are not buying houses. Why aren't they buying houses? Because they think the are going to fall in the near future. Why do I think that? Because this is a popular sentiment expressed by normal people on social media. Yes, it's wholly unscientific of me to use Reddit and Facebook as a barometer of society, but I'm not a professional economist, just another rando on the internet making bad predictions.
    - throwawaygh 5y ago
      > I'm concerned with the attitudes of people who are not buying houses. That's fair. > Why aren't they buying houses? I think a lot of people are buying. > Because they think the are going to fall in the near future. One major reason people with massive hoards of cash aren't buy is uncertainty around WFH. "Where to buy? Depends. Let's see how this whole return to office thing goes..." > Yes, it's wholly unscientific of me to use Reddit and Facebook as a barometer of society, but I'm not a professional economist, just another rando on the internet making bad predictions. Aren't we all :)
jjoonathan 5y ago
Yep, that's the short term bear case. The long term bear case is: demographic pyramid inversion, interest rates bottoming out, and asset owners becoming a minority of the electorate.
- nostrademons 5y ago
  The long term really-bear case is: asset owners becoming a minority of the electorate, revolution, war, and then everybody dying and most of the housing stock being destroyed. I'd rather be an asset owner than a revolutionary in that case, though, because it's always easier to play defense than offense. The vast majority of non-billionaires can sit tight and not be explicitly targeted, but starving revolutionaries have to fight for survival. Assets can be rebuilt, but death is permanent.
- dzhiurgis 5y ago
  > asset owners becoming a minority of the electorate. I wouldn't hold my breath on that one - something like 95% of governors are also property investors.
vmception 5y ago
The only reason the bubble burst was due to overleverage. Houses were only sold en masse due to a prescribed flowchart: borrower couldnt pay, bank takes house, bank doesnt want actual houses so bank sells house, bank already earned enough on interest to sell house at a loss, bank can also take losses and list property for lower to sell faster, bank found out it couldn't take losses. This isnt happening right now. The overleverage isnt in real estate. Everyone is looking in the wrong direction just because price go up.
- oblio 5y ago
  Where is the overleverage, though?
- stonecraftwolf 5y ago
  Where is the overleveraging now?
- Guest42 5y ago
  My theory for a possible price correction is that those buying places with the intent of becoming landlords will be unable to find tenants that can make the house purchase profitable.
  - dzhiurgis 5y ago
    Or now there's 6 people living in 3 bedroom home because rent is so so sooo high...

nostrademons 5y ago

The last 20 years has taught me to be suspicious of renormalization arguments. History marches on; people have memories, but history itself seems to be a big Markov process where the future depends only on the present and the forces that drive it, not the past. I could believe an argument based on causal links of supply & demand, but I'm skeptical that they'll operate in the direction you suggest. To my eye: remote work was a spring that's been ready to burst since about 2014 but needed the pandemic to catalyze it; we're not going back to offices; home offices are going to become very desirable; savings (in the form of financial assets, at least) are increasing because of inflation; and supply chain bottlenecks are not normalizing anytime soon.

throwawaygh 5y ago
> The last 20 years has taught me to be suspicious of renormalization arguments. 2021-2008 = 13 < 20.
- nostrademons 5y ago
  I'm actually thinking of late-90s up through today: There were a lot geopolitical papers written then about the unipolar world and how we'd reached the end of history and liberal democracy had won. To the extent that people imagined threats to U.S. dominance, they usually envisioned state actors like Russia or China. Few people predicted the rise of international terrorism, widespread state failures, mass migrations, and internal destabilization of states. There were a fair number of commentators who said that the Internet was a fad and we'd go back to calling up businesses when we got tired of webpages. The dot-com boom was a bona-fide bubble - it burst, severely - and yet it also wasn't. I predicted the Amazon would go out of business in 2001 when their stock was down 90% in a year; it now owns retail, and is worth 50x that. People wondered how the hell a website for throwing virtual sheep at one another was worth $15B in 2007. It's now worth $942B, and blamed for taking down governments. We just had a page at the top of HN about someone's 2011 prediction that Bitcoin would fail. It did, for all the reasons they listed, and yet is still worth 20,000x what it was going for then. It's also had some 60-70% declines in that process. The general lesson I take from these is that life is a whole lot more random and absurd than a lot of people think it is. A lot of people who lose everything in bubbles are right about the direction of the trend (oftentimes on a subconscious level), but wrong about magnitude and timing. I see a lot of people asking whether today's housing situation is like 2008, and to my eye the fundamental forces are nothing alike. But 2005-2008 might have been the bubble before the trend, which sets up the causal forces leading to a genuine housing shortage now.
  - throwawaygh 5y ago
    I think the dot-com example is a good analogy for the current housing market. Prices in certain regions will just. keep. going. up. Maybe with dips here or there. But there's also a lot of speculation happening in down-market junk.
  - chillacy 5y ago
    These are good insights, I get the sense maybe that you may be tracking your predictions or at least are revisiting them more than most people. The common behavior is to forget just how uncertain the past was. Or summarized: first things seem impossible, then they seem obvious.

mywittyname 5y ago

Think about how many years over-building went on before the collapse in 2008. There's a good chance that, in the coming years, labor and materials prices will fall such that builders will start construction on too many homes. But that's a while away. material prices are falling, but they are still elevated. And houses take a while to build -- four months minimum, nine+ more typical. So even if overbuilding started today, there's still a good year or so before that stuff comes on the market. In these situations, I'm a big believer in contrarian outcomes. Because if a large number of people think some event will occur, then they act in a way which gives them the best outcome should that event occur. The popular trend right now is to speculate a housing collapse. Thus, I think most people are going to put off buying at "elevated" prices for a few years, until it becomes crystal clear that they were wrong. My prediction: House prices will be like the stock market circa 2016. Everyone will be predicting a collapse "any time now" while prices soar at a crazy pace and continue to do so for a decade.

throwawaygh 5y ago
> The popular trend right now is to speculate a housing collapse. Price action is sentiment. Words are hot air. People are NOT speculating on a housing collapse. Exactly the opposite.
- mywittyname 5y ago
  I disagree. Prices demonstrate the attitudes of people who are buying houses. I'm concerned with the attitudes of people who are not buying houses. Why aren't they buying houses? Because they think the are going to fall in the near future. Why do I think that? Because this is a popular sentiment expressed by normal people on social media. Yes, it's wholly unscientific of me to use Reddit and Facebook as a barometer of society, but I'm not a professional economist, just another rando on the internet making bad predictions.
  - throwawaygh 5y ago
    > I'm concerned with the attitudes of people who are not buying houses. That's fair. > Why aren't they buying houses? I think a lot of people are buying. > Because they think the are going to fall in the near future. One major reason people with massive hoards of cash aren't buy is uncertainty around WFH. "Where to buy? Depends. Let's see how this whole return to office thing goes..." > Yes, it's wholly unscientific of me to use Reddit and Facebook as a barometer of society, but I'm not a professional economist, just another rando on the internet making bad predictions. Aren't we all :)

jjoonathan 5y ago

Yep, that's the short term bear case. The long term bear case is: demographic pyramid inversion, interest rates bottoming out, and asset owners becoming a minority of the electorate.

nostrademons 5y ago
The long term really-bear case is: asset owners becoming a minority of the electorate, revolution, war, and then everybody dying and most of the housing stock being destroyed. I'd rather be an asset owner than a revolutionary in that case, though, because it's always easier to play defense than offense. The vast majority of non-billionaires can sit tight and not be explicitly targeted, but starving revolutionaries have to fight for survival. Assets can be rebuilt, but death is permanent.
dzhiurgis 5y ago
> asset owners becoming a minority of the electorate. I wouldn't hold my breath on that one - something like 95% of governors are also property investors.

vmception 5y ago

The only reason the bubble burst was due to overleverage. Houses were only sold en masse due to a prescribed flowchart: borrower couldnt pay, bank takes house, bank doesnt want actual houses so bank sells house, bank already earned enough on interest to sell house at a loss, bank can also take losses and list property for lower to sell faster, bank found out it couldn't take losses. This isnt happening right now. The overleverage isnt in real estate. Everyone is looking in the wrong direction just because price go up.

oblio 5y ago
Where is the overleverage, though?
stonecraftwolf 5y ago
Where is the overleveraging now?
Guest42 5y ago
My theory for a possible price correction is that those buying places with the intent of becoming landlords will be unable to find tenants that can make the house purchase profitable.
- dzhiurgis 5y ago
  Or now there's 6 people living in 3 bedroom home because rent is so so sooo high...