6 ms·

Everything has been fundamentally detached from reality, from stocks to housing. Houses can sit empty without tenants for years but they’ll only go up. Compani

by spaceman_2020 4y ago

Everything has been fundamentally detached from reality, from stocks to housing. Houses can sit empty without tenants for years but they’ll only go up. Companies can be unprofitable for literal decades but they’ll keep finding funding and buyers. Commercial properties can bleed tenant but the prices will only be up. In a world of shrinking growth , stalling productivity, and dying demographics, the market behaves like infinite growth is baked in. It’s very clear to any observer that the markets don’t follow any rationality anymore.

fumar 4y ago
Does this mark an end for our society's principles? Are we do for a dark age? Are we in it or will there be an enlightenment or renaissance?
- spaceman_2020 4y ago
  I don’t know, but it’s increasingly frustrating as an average person. Apartments around me keep appreciating in value every year, rents keep going up astronomically even when the houses stay empty. My income went up, but housing in my area went up nearly 2x. I’m being priced out of areas I’ve lived in forever. I feel like a social contract has been violated. Everything, from products to housing seems to be targeted at the “luxury” and “premium” segment. It’s like a omnipresent giant middle finger to anyone but the wealthy.
  - crooked-v 4y ago
    Housing prices keep going up in the US because, fundamentally, there's not enough housing and hasn't been enough housing built for decades [1]. In most big cities, this is a self-inflicted problem caused by bad zoning and by planning and permitting processes that can take years and add huge amounts to home prices. (This is a big part of the reason there's so much "luxury" housing; adding a superficial high-end gloss is one of the few ways to disguise the additional bureaucratic markup.) Unfortunately, a huge number of people like to blame this entirely on evil developers and evil corporations and think that merely adding more regulation on those will make the problem magically go away. [1]: https://www.cnn.com/2023/03/08/homes/housing-shortage/index.html https://www.cnn.com/2023/03/08/homes/housing-shortage/index....
    - deleted 4y ago
      [deleted]
    - bink 4y ago
      Housing prices are rising dramatically even where populations are declining and land is abundant. It's not as simple as saying there's a housing shortage due to zoning.
      - kevinventullo 4y ago
        Are you sure? Housing prices in my small Midwest hometown have risen by something like 1%/yr on average for the last 30 years.
        bumby 4y ago
        Just curious, what's the population growth been like? If it's been declining, why would we expect housing prices to go up at all?
        twelve40 4y ago
        it's almost never a simple function of population. One example: between 2010 and 2020 population of Latvia dropped by about 10% while the house prices have doubled.
        thfuran 4y ago
        If it used to be that two or three generations of a family lived in a house and now everyone wants their own, housing demand could increase while population drops. If marriage rates or number of children per household decrease, housing demand per capita probably increases.
        traverseda 4y ago
        General inflation?
        kevinventullo 4y ago
        Right, population has been steady or even slightly declining, and there has been plenty of housing development, so it’s not a surprise that existing housing prices haven’t gone up. But even that directly contradicts the OP’s first sentence.
  - OoOOo 4y ago
    Absolutely agree with this assessment.
  - contingencies 4y ago
    You have pretty much articulated the feeling of anyone under 50 in Australia.
- akiselev 4y ago
  If anyone honestly feels this way, I invite them to read The Republic for Which It Stands [1] by Richard White which is about the post-Civil War era and the Gilded Age. Everything from the political division to the growing income inequality looked a lot like today - worse even! - and the author specifically points out the similarities throughout the book. This has all happened before, and it will all happen again. [1] https://www.amazon.com/Republic-Which-Stands-Reconstruction-1865-1896/dp/0199735816 https://www.amazon.com/Republic-Which-Stands-Reconstruction-...
  - etothepii 4y ago
    So say we all!
rcme 4y ago
Is the market acting like infinite growth is baked in, or is inflation simply out of control? And I’m not talking about CPI over the last three years. Stocks have been insane over the last decade. Real estate has been insane over the last decade. Neither of which is measured by CPI. So yea… the market is pricing things like the Fed will keep printing money to prop up assets it explicitly ignores in its inflation calculation.
- DSingularity 4y ago
  It certainly feels like money is going to lose its value eventually. Everyone is becoming wealthy by just clicking buy. When people start using that money, what will happen? Markups from exceed demand — inflation.
  - XorNot 4y ago
    Inflation of what though? Real estate is the only asset on the planet we can't just manufacture more of. iPhones, cars, clothes...all of that is disposable and near infinitely reproducible. A person can't eat more then a very limited amount of food per day, regardless of their wealth. So what's going to inflate?
    - goawaythrwaway 4y ago
      Why, the misery of poor folks, of course - as measured against a representative bundle of various non-value-producing traumas (i.e. Rich People Problems, in the common parlance.) You see, when the "We" you reference in your second sentence - who I will actually refer to as "They" going forward (I hope this is not too presumptuous, if it is please notify me as quickly as you can after your 1st or 2nd eight-hour shift and I will update this) - Anyhow, the issue arises when They are no longer sufficiently motivated to infinitely reproduce these iPhones, cars, clothes, etc. for everyone to consume and dispose of. It should go without saying that this state of affairs is massively destabilizing for both We and They. As the parent to your comment astutely observes, when "everyone is becoming wealthy by just clicking buy" (note: I will likewise be using the term "everyone" in the usual sense, as shorthand for "everyone I care about or know too well to assume financial standing directly maps to moral standing") then there is simply too much money sloshing around for it to continue flowing within the Banks as intended. It then, to borrow a phrase from esteemed economist Dr. Bonzo, begins trickling down to ever lower segments of the population. Obviously, this is Very Bad; and indeed, if this trickle-down continues it may eventually reach populations far below C-level. That brings us to our current crisis. In the above context, you may think of the money-printer-go-brr approach of 2020 onward as a sort of Hundred Year Flood. What's worse, this flood was already largely concentrated in the lowest-lying areas it was ever intended to reach. Although We had the foresight to levy protective taxes on these areas, even these levees became overtaxed in the deluge and the usual trickle turned into a torrent. Suddenly, even the poor could afford to purchase some of the things they produced. Needless to say, this caused a dramatic decrease in the Productive Misery supply at exactly the moment when We demanded it most. Enter inflation. Looking back on this disaster, one thing is clear: Though I'd always considered the phrase far too pessimistic to be true, a rising tide really does lift all boats. In fact, these days the yacht gets stuck in traffic so often, I wonder if a third one is even worth it.
rvba 4y ago
Markets dont follow logic because central banks pump incredible amounts of dollars via money creation. Quantitative easing, 0% interest, massive inflation - are all just facets of the same problem - that central banks dont work for the common people. Market looks irrational, but it is rational - money is "free" - so zombie companies can exist. Inflation just ruins the low and middle class, but who cares - it is convenient for governments. Market was artificially pumped by quantitive easing. Also money is not free for normal people, banks earn interest and that interest comes back as inflafion. Licence to create money out of thin air is like license to steal.
- paulddraper 4y ago
  > Licence to create money out of thin air is like license to steal. Is the purchasing power of your savings account shrinking 6% a year from inflation, or it is shrinking 6% a year from bank robbers? Same effect either way.
  - vkou 4y ago
    If I'm sitting on a mountain of corn/a pile of gold/a warehouse full of NVIDIA GTX 3080 cards, and someone else starts growing corn/digging up gold/selling 4080 cards, my savings' purchasing power is going to drop, but it would be disingenuous of me to complain that I'm being robbed.
    - paulddraper 4y ago
      There you are producing something, which is a worthy endeavor. I think a closer analogy would be spreading a corn disease.
- kristianbrigman 4y ago
  This is because money is trying to be two things at once - a medium of exchange, and a stable asset - and those are often in conflict. If I just want to trade my bushel of corn for your chicken, money makes it easier - I exchange my corn for some money, and then I exchange that money for your chicken. I don’t care whether the money is ‘one fricasee’ or ‘ten million gorzebos’ as long as we both agree that’s the number attached to it. You can use something that is a real asset for this, but it actually doesn’t have to have any intrinsic value to be usable for this, as long as everyone agrees to use it. However, there’s a time element - I can sell my corn, and then keep the money for a while, retaining the power to buy the chicken later. That turns it into a potential asset. During that time, the numbers attached to different items could go up or down - the time element makes arbitrage possible. Even for ‘useless’ assets. Too much money held as assets can reduce its effectiveness as a medium of exchange - but improving the effectiveness as a medium of exchange can reduce its stability/value as an asset. Also probably why there is a lot of contention over gold standards etc. - the gold standard improves its value as an asset, while potentially limiting its value as a medium of exchange - so it’s going to depend on which one you prioritize whether you will favor it or not.
Eumenes 4y ago
Why would an empty house not go up in value? If anything, if its unused, it'll likely require less upkeep/repairs.
- bluedino 4y ago
  Abandonded houses are often stripped of copper, etc and have squatters, vandals, problems from not being maintained or lived in...
  - Eumenes 4y ago
    Abandoned? You know people own two homes and live in them seasonally w/o them being vandalized? Source: have a summer cabin that's never been rack sacked by vandals.
    - esafak 4y ago
      ransacked. Dictionary says it's from Norse: rann (house) + soekja (seek).
      - wlonkly 4y ago
        As perfected by the (Norse) Vikings!
  - BearOso 4y ago
    These are usually gated areas where it's mostly huge model homes and they since few live there, outsiders would be be obvious.
- spaceman_2020 4y ago
  It simply means that housing is being bought up by people who don't need their investments to return any cash flow. Which is great if you're a wealthy oil tycoon from UAE or a Chinese billionaire. But not so great if you work in the city and want to buy a house for your family.
- 98codes 4y ago
FredPret 4y ago
> don’t follow any rationality anymore Anymore? When have markets ever been rational? Markets only line up with reality over the long term. You can point to any instant, and even any decade in time, and point major inaccuracies in the public's collective financial thinking. > Houses can sit empty without tenants for years but they’ll only go up. Do you have stats for how much of a problem this is? The problem seems to be vacancy rates that are too low, not too high. > Companies can be unprofitable for literal decades but they’ll keep finding funding and buyers. This was a ZIRP (zero-interest rate policy) phenomenon and even then, was very limited in scope. Uber raised billions on a dumb business plan, yes, but that investment is tiny compared to the total amount invested in that period. > In a world of shrinking growth , stalling productivity, and dying demographics, Opinions should be based on facts, not over-excitement. Growth has been booming in real terms for centuries now. Many countries are in demographic decline, but overall we still have lots of net population growth for a long time. Productivity is not stalling, and is in fact skyrocketing all over the world. https://ourworldindata.org/grapher/labor-productivity-per-hour-PennWorldTable?tab=chart https://ourworldindata.org/grapher/labor-productivity-per-ho... > the market behaves like infinite growth is baked in. Lots of people blindly pump their money into index funds every month. While this raises PE ratios to near-historic highs (not all-time highs mind you) it is by no means "infinite". I find lots of great businesses with stock that sells for far more reasonable prices, given that they are off of the major indices. Blind doomsterism doesn't help anyone.
- cycomanic 4y ago
  > > Houses can sit empty without tenants for years but they’ll only go up. > Do you have stats for how much of a problem this is? The problem seems to be vacancy rates that are too low, not too high. No stats on my part, but I have some anecdotal evidence from Australia a couple of years ago. I definitely knew of several apartment complexes which were significantly empty, but advertised rents did not go down. The reasoning behind this was that banks used the previous rent for assessing value (which people used as capital for buying the next property). Because everyone essentially invested based on property price increases not rental income, it made more sense to leave the apartment empty and use the higher capital (based on a previous evaluation) to use for buying the next apartment, than to renting it out and not being able to buy the next property. L
sharkweek 4y ago
I live in Seattle. There was a house on my street that had been torn down in maybe 2013-2014, that the owner of the lot sat on for a bit (it was one guy). He spent the next five-ish years slowly building a big, new house. I’d laugh at how long it was taking him on a week-by-week basis while taking my dog on a walk. There it is, the house that will take almost half a decade to complete. Well he finally does, and he sells the thing for close to two million dollars. I then go look at comps during the same time period. Because of his snail’s pace, he ended up probably making an additional 600-700k (or about 100k+ per year) because of how long it took him to build. Jokes on me I guess!
- deleted 4y ago
  [deleted]
- cudgy 4y ago
  He still likely lost money. What if this guy did this process 5 times over the 5 years (build/sell) instead of sitting on a single property, taking his time?
Xeoncross 4y ago
The market is acting very rationally. If you print trillions of dollars out of thin air every year, there is more money and more demand. So everything else goes up in price. Everything still costs the same relative to the amount of US dollars that exist. Wages just aren't keeping up with printing press.
- bryanlarsen 4y ago
  Money printing (aka QE) stopped 13 months ago and money shredding (aka QT) started 10 months ago.
  - Xeoncross 4y ago
    Check the charts again, the new lending vehicles to banks just wiped out half the QT that we had gained last year. Set the chart to a 1yr scale: https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL You'll see our QT was already paltry to begin with compared with the total balance sheet, now we're close to our ATH again. Prices are the result of years of strong printing (since 2008) ballooning our cash vs asset ratio compared with what it was in the 90's or 00's. It takes time for the economy to react, but we certainly had a bull run decade since the printing started. In 2018 they started the same slow sell off of assets, but then quickly surpassed it during the 2020 lockdown printing.
deleted 4y ago
[deleted]
cuteboy19 4y ago
A zero interest rate phenomenon
wesapien 4y ago
If China didn't control the outflow of Yuan, then real estate everywhere would be much higher than it is because they will just park their wealth there far away from the hands of the CCP.
cudgy 4y ago
“Houses can sit empty without tenants for years but they’ll only go up. Companies can be unprofitable for literal decades but they’ll keep finding funding and buyers. Commercial properties can bleed tenant but the prices will only be up.” This is not sustainable over the long haul and is basically asset holders holding out for better days (e.g. waiting for the Fed to lower interest rates to recreate the frenzy). In the meantime, cash flows and operating profits are going to get hammered until those with the shallowest pockets can no longer keep up the charade, and the fire sales begin.

fumar 4y ago

Does this mark an end for our society's principles? Are we do for a dark age? Are we in it or will there be an enlightenment or renaissance?

spaceman_2020 4y ago
I don’t know, but it’s increasingly frustrating as an average person. Apartments around me keep appreciating in value every year, rents keep going up astronomically even when the houses stay empty. My income went up, but housing in my area went up nearly 2x. I’m being priced out of areas I’ve lived in forever. I feel like a social contract has been violated. Everything, from products to housing seems to be targeted at the “luxury” and “premium” segment. It’s like a omnipresent giant middle finger to anyone but the wealthy.
- crooked-v 4y ago
  Housing prices keep going up in the US because, fundamentally, there's not enough housing and hasn't been enough housing built for decades [1]. In most big cities, this is a self-inflicted problem caused by bad zoning and by planning and permitting processes that can take years and add huge amounts to home prices. (This is a big part of the reason there's so much "luxury" housing; adding a superficial high-end gloss is one of the few ways to disguise the additional bureaucratic markup.) Unfortunately, a huge number of people like to blame this entirely on evil developers and evil corporations and think that merely adding more regulation on those will make the problem magically go away. [1]: https://www.cnn.com/2023/03/08/homes/housing-shortage/index.html https://www.cnn.com/2023/03/08/homes/housing-shortage/index....
  - deleted 4y ago
    [deleted]
  - bink 4y ago
    Housing prices are rising dramatically even where populations are declining and land is abundant. It's not as simple as saying there's a housing shortage due to zoning.
    - kevinventullo 4y ago
      Are you sure? Housing prices in my small Midwest hometown have risen by something like 1%/yr on average for the last 30 years.
      - bumby 4y ago
        Just curious, what's the population growth been like? If it's been declining, why would we expect housing prices to go up at all?
        twelve40 4y ago
        it's almost never a simple function of population. One example: between 2010 and 2020 population of Latvia dropped by about 10% while the house prices have doubled.
        thfuran 4y ago
        If it used to be that two or three generations of a family lived in a house and now everyone wants their own, housing demand could increase while population drops. If marriage rates or number of children per household decrease, housing demand per capita probably increases.
        traverseda 4y ago
        General inflation?
        kevinventullo 4y ago
        Right, population has been steady or even slightly declining, and there has been plenty of housing development, so it’s not a surprise that existing housing prices haven’t gone up. But even that directly contradicts the OP’s first sentence.
- OoOOo 4y ago
  Absolutely agree with this assessment.
- contingencies 4y ago
  You have pretty much articulated the feeling of anyone under 50 in Australia.
akiselev 4y ago
If anyone honestly feels this way, I invite them to read The Republic for Which It Stands [1] by Richard White which is about the post-Civil War era and the Gilded Age. Everything from the political division to the growing income inequality looked a lot like today - worse even! - and the author specifically points out the similarities throughout the book. This has all happened before, and it will all happen again. [1] https://www.amazon.com/Republic-Which-Stands-Reconstruction-1865-1896/dp/0199735816 https://www.amazon.com/Republic-Which-Stands-Reconstruction-...
- etothepii 4y ago
  So say we all!

rcme 4y ago

Is the market acting like infinite growth is baked in, or is inflation simply out of control? And I’m not talking about CPI over the last three years. Stocks have been insane over the last decade. Real estate has been insane over the last decade. Neither of which is measured by CPI. So yea… the market is pricing things like the Fed will keep printing money to prop up assets it explicitly ignores in its inflation calculation.

DSingularity 4y ago
It certainly feels like money is going to lose its value eventually. Everyone is becoming wealthy by just clicking buy. When people start using that money, what will happen? Markups from exceed demand — inflation.
- XorNot 4y ago
  Inflation of what though? Real estate is the only asset on the planet we can't just manufacture more of. iPhones, cars, clothes...all of that is disposable and near infinitely reproducible. A person can't eat more then a very limited amount of food per day, regardless of their wealth. So what's going to inflate?
  - goawaythrwaway 4y ago
    Why, the misery of poor folks, of course - as measured against a representative bundle of various non-value-producing traumas (i.e. Rich People Problems, in the common parlance.) You see, when the "We" you reference in your second sentence - who I will actually refer to as "They" going forward (I hope this is not too presumptuous, if it is please notify me as quickly as you can after your 1st or 2nd eight-hour shift and I will update this) - Anyhow, the issue arises when They are no longer sufficiently motivated to infinitely reproduce these iPhones, cars, clothes, etc. for everyone to consume and dispose of. It should go without saying that this state of affairs is massively destabilizing for both We and They. As the parent to your comment astutely observes, when "everyone is becoming wealthy by just clicking buy" (note: I will likewise be using the term "everyone" in the usual sense, as shorthand for "everyone I care about or know too well to assume financial standing directly maps to moral standing") then there is simply too much money sloshing around for it to continue flowing within the Banks as intended. It then, to borrow a phrase from esteemed economist Dr. Bonzo, begins trickling down to ever lower segments of the population. Obviously, this is Very Bad; and indeed, if this trickle-down continues it may eventually reach populations far below C-level. That brings us to our current crisis. In the above context, you may think of the money-printer-go-brr approach of 2020 onward as a sort of Hundred Year Flood. What's worse, this flood was already largely concentrated in the lowest-lying areas it was ever intended to reach. Although We had the foresight to levy protective taxes on these areas, even these levees became overtaxed in the deluge and the usual trickle turned into a torrent. Suddenly, even the poor could afford to purchase some of the things they produced. Needless to say, this caused a dramatic decrease in the Productive Misery supply at exactly the moment when We demanded it most. Enter inflation. Looking back on this disaster, one thing is clear: Though I'd always considered the phrase far too pessimistic to be true, a rising tide really does lift all boats. In fact, these days the yacht gets stuck in traffic so often, I wonder if a third one is even worth it.

rvba 4y ago

Markets dont follow logic because central banks pump incredible amounts of dollars via money creation. Quantitative easing, 0% interest, massive inflation - are all just facets of the same problem - that central banks dont work for the common people. Market looks irrational, but it is rational - money is "free" - so zombie companies can exist. Inflation just ruins the low and middle class, but who cares - it is convenient for governments. Market was artificially pumped by quantitive easing. Also money is not free for normal people, banks earn interest and that interest comes back as inflafion. Licence to create money out of thin air is like license to steal.

paulddraper 4y ago
> Licence to create money out of thin air is like license to steal. Is the purchasing power of your savings account shrinking 6% a year from inflation, or it is shrinking 6% a year from bank robbers? Same effect either way.
- vkou 4y ago
  If I'm sitting on a mountain of corn/a pile of gold/a warehouse full of NVIDIA GTX 3080 cards, and someone else starts growing corn/digging up gold/selling 4080 cards, my savings' purchasing power is going to drop, but it would be disingenuous of me to complain that I'm being robbed.
  - paulddraper 4y ago
    There you are producing something, which is a worthy endeavor. I think a closer analogy would be spreading a corn disease.
kristianbrigman 4y ago
This is because money is trying to be two things at once - a medium of exchange, and a stable asset - and those are often in conflict. If I just want to trade my bushel of corn for your chicken, money makes it easier - I exchange my corn for some money, and then I exchange that money for your chicken. I don’t care whether the money is ‘one fricasee’ or ‘ten million gorzebos’ as long as we both agree that’s the number attached to it. You can use something that is a real asset for this, but it actually doesn’t have to have any intrinsic value to be usable for this, as long as everyone agrees to use it. However, there’s a time element - I can sell my corn, and then keep the money for a while, retaining the power to buy the chicken later. That turns it into a potential asset. During that time, the numbers attached to different items could go up or down - the time element makes arbitrage possible. Even for ‘useless’ assets. Too much money held as assets can reduce its effectiveness as a medium of exchange - but improving the effectiveness as a medium of exchange can reduce its stability/value as an asset. Also probably why there is a lot of contention over gold standards etc. - the gold standard improves its value as an asset, while potentially limiting its value as a medium of exchange - so it’s going to depend on which one you prioritize whether you will favor it or not.

Eumenes 4y ago

Why would an empty house not go up in value? If anything, if its unused, it'll likely require less upkeep/repairs.

bluedino 4y ago
Abandonded houses are often stripped of copper, etc and have squatters, vandals, problems from not being maintained or lived in...
- Eumenes 4y ago
  Abandoned? You know people own two homes and live in them seasonally w/o them being vandalized? Source: have a summer cabin that's never been rack sacked by vandals.
  - esafak 4y ago
    ransacked. Dictionary says it's from Norse: rann (house) + soekja (seek).
    - wlonkly 4y ago
      As perfected by the (Norse) Vikings!
- BearOso 4y ago
  These are usually gated areas where it's mostly huge model homes and they since few live there, outsiders would be be obvious.
spaceman_2020 4y ago
It simply means that housing is being bought up by people who don't need their investments to return any cash flow. Which is great if you're a wealthy oil tycoon from UAE or a Chinese billionaire. But not so great if you work in the city and want to buy a house for your family.
98codes 4y ago

FredPret 4y ago

> don’t follow any rationality anymore Anymore? When have markets ever been rational? Markets only line up with reality over the long term. You can point to any instant, and even any decade in time, and point major inaccuracies in the public's collective financial thinking. > Houses can sit empty without tenants for years but they’ll only go up. Do you have stats for how much of a problem this is? The problem seems to be vacancy rates that are too low, not too high. > Companies can be unprofitable for literal decades but they’ll keep finding funding and buyers. This was a ZIRP (zero-interest rate policy) phenomenon and even then, was very limited in scope. Uber raised billions on a dumb business plan, yes, but that investment is tiny compared to the total amount invested in that period. > In a world of shrinking growth , stalling productivity, and dying demographics, Opinions should be based on facts, not over-excitement. Growth has been booming in real terms for centuries now. Many countries are in demographic decline, but overall we still have lots of net population growth for a long time. Productivity is not stalling, and is in fact skyrocketing all over the world. https://ourworldindata.org/grapher/labor-productivity-per-hour-PennWorldTable?tab=chart https://ourworldindata.org/grapher/labor-productivity-per-ho... > the market behaves like infinite growth is baked in. Lots of people blindly pump their money into index funds every month. While this raises PE ratios to near-historic highs (not all-time highs mind you) it is by no means "infinite". I find lots of great businesses with stock that sells for far more reasonable prices, given that they are off of the major indices. Blind doomsterism doesn't help anyone.

cycomanic 4y ago
> > Houses can sit empty without tenants for years but they’ll only go up. > Do you have stats for how much of a problem this is? The problem seems to be vacancy rates that are too low, not too high. No stats on my part, but I have some anecdotal evidence from Australia a couple of years ago. I definitely knew of several apartment complexes which were significantly empty, but advertised rents did not go down. The reasoning behind this was that banks used the previous rent for assessing value (which people used as capital for buying the next property). Because everyone essentially invested based on property price increases not rental income, it made more sense to leave the apartment empty and use the higher capital (based on a previous evaluation) to use for buying the next apartment, than to renting it out and not being able to buy the next property. L

sharkweek 4y ago

I live in Seattle. There was a house on my street that had been torn down in maybe 2013-2014, that the owner of the lot sat on for a bit (it was one guy). He spent the next five-ish years slowly building a big, new house. I’d laugh at how long it was taking him on a week-by-week basis while taking my dog on a walk. There it is, the house that will take almost half a decade to complete. Well he finally does, and he sells the thing for close to two million dollars. I then go look at comps during the same time period. Because of his snail’s pace, he ended up probably making an additional 600-700k (or about 100k+ per year) because of how long it took him to build. Jokes on me I guess!

deleted 4y ago
[deleted]
cudgy 4y ago
He still likely lost money. What if this guy did this process 5 times over the 5 years (build/sell) instead of sitting on a single property, taking his time?

Xeoncross 4y ago

The market is acting very rationally. If you print trillions of dollars out of thin air every year, there is more money and more demand. So everything else goes up in price. Everything still costs the same relative to the amount of US dollars that exist. Wages just aren't keeping up with printing press.

bryanlarsen 4y ago
Money printing (aka QE) stopped 13 months ago and money shredding (aka QT) started 10 months ago.
- Xeoncross 4y ago
  Check the charts again, the new lending vehicles to banks just wiped out half the QT that we had gained last year. Set the chart to a 1yr scale: https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL You'll see our QT was already paltry to begin with compared with the total balance sheet, now we're close to our ATH again. Prices are the result of years of strong printing (since 2008) ballooning our cash vs asset ratio compared with what it was in the 90's or 00's. It takes time for the economy to react, but we certainly had a bull run decade since the printing started. In 2018 they started the same slow sell off of assets, but then quickly surpassed it during the 2020 lockdown printing.

deleted 4y ago

[deleted]

cuteboy19 4y ago

A zero interest rate phenomenon

wesapien 4y ago

If China didn't control the outflow of Yuan, then real estate everywhere would be much higher than it is because they will just park their wealth there far away from the hands of the CCP.

cudgy 4y ago

“Houses can sit empty without tenants for years but they’ll only go up. Companies can be unprofitable for literal decades but they’ll keep finding funding and buyers. Commercial properties can bleed tenant but the prices will only be up.” This is not sustainable over the long haul and is basically asset holders holding out for better days (e.g. waiting for the Fed to lower interest rates to recreate the frenzy). In the meantime, cash flows and operating profits are going to get hammered until those with the shallowest pockets can no longer keep up the charade, and the fire sales begin.