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Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. Maybe look into interest protected bo

Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. Maybe look into interest protected bonds? https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl... Personally I have been just spending what I make assuming saving is moot right now (besides 401k and espp)

tppiotrowski 4y ago
I think rising interest rates should depress the value of housing. With a higher interest rate you can't afford as much principal so you start bidding on cheaper houses.
- crate_barre 4y ago
  The monthly payment of 28%-38% of gross monthly pay is harder to get to with the rising interest rate and rising home prices. You’d be looking at over 50% of your net take home pay per month (yes, over half your months paycheck, especially in high cost of living areas). They are fucking pricing everyone out other than investors or existing home owners that can tap into home equity. And rent is nearing 1900 nationwide. How is that even reality? If people just started killing landlords and investors I personally wouldn’t give a fuck (I’m kidding, not advocating this, but that’s how bad actors these animals are).
  - bezospen15 4y ago
    Can't keep at this pace for much longer. We'll know more in 12 months, stay liquid for now
- lijogdfljk 4y ago
  I had this debate last night. Where i'm undecided is if this works when a housing market is propped up by cash. Eg both houses and land purchases (something i'm trying to do) are quite a difficult market due to cash offers being consistently present. Ie a new family won't have 500k in cash and their loan offer isn't as good as a cash offer. It happened to me several times when i was buying my home ~6 years ago, 250k cash offers, 300k cash offers, etc. And ironically it just happened to me 2 weeks ago on a land offer. A 310k land offer (loan) beaten out by a higher value and pure cash offer. So my question is if prices will really dip that much when seemingly so much of the house and land market are propped up by cash rich buyers. Hypothetically they don't care about high interest rates right? Perhaps high interest rates will mean the cash rich people can offer less due to less competition, but if cash rich people are also competing against other cash rich people then.. i'm not so sure. Thoughts?
  - bezospen15 4y ago
    That's only one piece of the puzzle. Economic hardship means investments stale or fail. All those real estate investors have fire sales, people lose jobs because of economic downturn and foreclosure, etc. It's all a domino effect, cash buyers are just another input to consider
  - beowulfey 4y ago
    Does anyone know the numbers on whether the high cash offers are from corporate investors vs. exceptionally rich individuals? Given the sheer number of cash offers I'm inclined to think it's the former, but I honestly have no idea. But yes, you're absolutely right that cash buyers should have way fewer concerns about interest rates.
    - closeparen 4y ago
      I would guess they are from otherwise-normal families whose current houses have appreciated in the same way. This makes them exceptionally rich in a sense, but also not, since homeowners are a majority in most metro areas and all homes are worth close to that much.
  - ItsMonkk 4y ago
    Well, what happened in 2008? Stocks down 50%, housing down 30%. Buying housing was a better investment than stocks. But as both were down, simply holding cash was better. But that's only because the wealthy were hedging against a hyper-inflation scenario, and that scenario didn't occur. In fact you can see this hedging as a reason for the inflation in the first place. Even things like target date funds that need to have 10%(or some other number) bonds have this same issue. When the interest rate rises, the value of bonds gets wiped out. But target date funds need to have a set percentage, so all of these indexes rush INTO bonds at this moment. The more stocks are up in this moment, the more these passive investments are selling stocks and buying bonds. You can imagine that as stocks go up, the more stocks go up, wealthy money managers buy more and more homes in the exact same way they buy bonds. When they see that we might be about to hit an inflection point with stocks anticipated to go down, they should be selling stocks and buying whatever does better. In 2008, housing did better, so they'll probably do it even more with history on their side. Now that houses are up 30%, maybe they look for another investment. There it is, used cars. There it is, lumber, steel, oil. There it is, commodities futures. All with unprecedented demand, not from common folk, but the wealthy. Hedging against a stock market crash causes inflation, and inflation causes interest rate rises, which is a positive feedback loop that causes more hedging, which causes more rate rises until the common folk can not handle it, in which case the economy falls over. At the end of the day we get a recession, massive job loss, and the Fed resets the interest rate back to zero and they start selling their assets and re-buying stocks. Cycle starts again anew.
icelancer 4y ago
I-Bonds are getting a lot of attention lately, and with good reason. Still underexplored, and there's a cap on them ($10k/person with limited workarounds), but well worth checking out for everyone reading this.
- MrFoof 4y ago
  Moreover, if you think the current 7.12% yield is great, if you look at the recently released CPI numbers it may be adjusted to 9.62% in May.
ceejayoz 4y ago
> Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. I fear we're gonna move to an Australian-style real estate market. Never-ending boom, impossibly high prices for first-time buyers. People have predicted its collapse for 40 years or so, to no avail.
- 01100011 4y ago
  It may not pop. Supply issues are real. Certainly it will deflate in the near term as mortgage rates rise further and the economy slows, but it doesn't seem likely to crash(and as a cash heavy renter I would love it to crash). Some markets will likely see a bear market. Real estate is local. Location matters. The future is very uncertain right now. I could see a scenario where China moves on Taiwan and we suddenly have 5+ million people looking for asylum. I guess it's one way to get TSMC to setup a plant here.
- chii 4y ago
  > People have predicted its collapse for 40 years or so, to no avail. you can only tell a bubble after it pops.
- HWR_14 4y ago
  > People have predicted its collapse for 40 years or so, to no avail. Weird timeframe to claim nothing happened. They collapsed twice since then: 35 years ago and 13 years ago.
  - ceejayoz 4y ago
    Not in Australia. https://en.wikipedia.org/wiki/Australian_property_market https://en.wikipedia.org/wiki/Australian_property_market https://en.wikipedia.org/wiki/Australian_property_bubble https://en.wikipedia.org/wiki/Australian_property_bubble

tppiotrowski 4y ago

I think rising interest rates should depress the value of housing. With a higher interest rate you can't afford as much principal so you start bidding on cheaper houses.

crate_barre 4y ago
The monthly payment of 28%-38% of gross monthly pay is harder to get to with the rising interest rate and rising home prices. You’d be looking at over 50% of your net take home pay per month (yes, over half your months paycheck, especially in high cost of living areas). They are fucking pricing everyone out other than investors or existing home owners that can tap into home equity. And rent is nearing 1900 nationwide. How is that even reality? If people just started killing landlords and investors I personally wouldn’t give a fuck (I’m kidding, not advocating this, but that’s how bad actors these animals are).
- bezospen15 4y ago
  Can't keep at this pace for much longer. We'll know more in 12 months, stay liquid for now
lijogdfljk 4y ago
I had this debate last night. Where i'm undecided is if this works when a housing market is propped up by cash. Eg both houses and land purchases (something i'm trying to do) are quite a difficult market due to cash offers being consistently present. Ie a new family won't have 500k in cash and their loan offer isn't as good as a cash offer. It happened to me several times when i was buying my home ~6 years ago, 250k cash offers, 300k cash offers, etc. And ironically it just happened to me 2 weeks ago on a land offer. A 310k land offer (loan) beaten out by a higher value and pure cash offer. So my question is if prices will really dip that much when seemingly so much of the house and land market are propped up by cash rich buyers. Hypothetically they don't care about high interest rates right? Perhaps high interest rates will mean the cash rich people can offer less due to less competition, but if cash rich people are also competing against other cash rich people then.. i'm not so sure. Thoughts?
- bezospen15 4y ago
  That's only one piece of the puzzle. Economic hardship means investments stale or fail. All those real estate investors have fire sales, people lose jobs because of economic downturn and foreclosure, etc. It's all a domino effect, cash buyers are just another input to consider
- beowulfey 4y ago
  Does anyone know the numbers on whether the high cash offers are from corporate investors vs. exceptionally rich individuals? Given the sheer number of cash offers I'm inclined to think it's the former, but I honestly have no idea. But yes, you're absolutely right that cash buyers should have way fewer concerns about interest rates.
  - closeparen 4y ago
    I would guess they are from otherwise-normal families whose current houses have appreciated in the same way. This makes them exceptionally rich in a sense, but also not, since homeowners are a majority in most metro areas and all homes are worth close to that much.
- ItsMonkk 4y ago
  Well, what happened in 2008? Stocks down 50%, housing down 30%. Buying housing was a better investment than stocks. But as both were down, simply holding cash was better. But that's only because the wealthy were hedging against a hyper-inflation scenario, and that scenario didn't occur. In fact you can see this hedging as a reason for the inflation in the first place. Even things like target date funds that need to have 10%(or some other number) bonds have this same issue. When the interest rate rises, the value of bonds gets wiped out. But target date funds need to have a set percentage, so all of these indexes rush INTO bonds at this moment. The more stocks are up in this moment, the more these passive investments are selling stocks and buying bonds. You can imagine that as stocks go up, the more stocks go up, wealthy money managers buy more and more homes in the exact same way they buy bonds. When they see that we might be about to hit an inflection point with stocks anticipated to go down, they should be selling stocks and buying whatever does better. In 2008, housing did better, so they'll probably do it even more with history on their side. Now that houses are up 30%, maybe they look for another investment. There it is, used cars. There it is, lumber, steel, oil. There it is, commodities futures. All with unprecedented demand, not from common folk, but the wealthy. Hedging against a stock market crash causes inflation, and inflation causes interest rate rises, which is a positive feedback loop that causes more hedging, which causes more rate rises until the common folk can not handle it, in which case the economy falls over. At the end of the day we get a recession, massive job loss, and the Fed resets the interest rate back to zero and they start selling their assets and re-buying stocks. Cycle starts again anew.

icelancer 4y ago

I-Bonds are getting a lot of attention lately, and with good reason. Still underexplored, and there's a cap on them ($10k/person with limited workarounds), but well worth checking out for everyone reading this.

MrFoof 4y ago
Moreover, if you think the current 7.12% yield is great, if you look at the recently released CPI numbers it may be adjusted to 9.62% in May.

ceejayoz 4y ago

> Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. I fear we're gonna move to an Australian-style real estate market. Never-ending boom, impossibly high prices for first-time buyers. People have predicted its collapse for 40 years or so, to no avail.

01100011 4y ago
It may not pop. Supply issues are real. Certainly it will deflate in the near term as mortgage rates rise further and the economy slows, but it doesn't seem likely to crash(and as a cash heavy renter I would love it to crash). Some markets will likely see a bear market. Real estate is local. Location matters. The future is very uncertain right now. I could see a scenario where China moves on Taiwan and we suddenly have 5+ million people looking for asylum. I guess it's one way to get TSMC to setup a plant here.
chii 4y ago
> People have predicted its collapse for 40 years or so, to no avail. you can only tell a bubble after it pops.
HWR_14 4y ago
> People have predicted its collapse for 40 years or so, to no avail. Weird timeframe to claim nothing happened. They collapsed twice since then: 35 years ago and 13 years ago.
- ceejayoz 4y ago
  Not in Australia. https://en.wikipedia.org/wiki/Australian_property_market https://en.wikipedia.org/wiki/Australian_property_market https://en.wikipedia.org/wiki/Australian_property_bubble https://en.wikipedia.org/wiki/Australian_property_bubble