Housing crash deniers ???

[Greg R.]

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

[John Myers]

@Greg R.

I guess it depends on your definition of a crash. Currently the median home price in Albuquerque is down about 3% from the high. Hardly a crash but who knows what the future holds. The Federal Reserve Chairman is clueless. Remember inflation is transitory. That was a lie. The US is in uncharted territory. The US government has been printing money like crazy. Check out these two graphs M1 money supply and M2 money supply. (Do some research if you don't know what the money supply is)  This is why we have inflation. Way too much money chasing not enough supply. Supply and demand 101. These graphs are produced by the US government so Jerome Powell has access to this if he wants to see it.

Jerome Powell has no idea what to do but raise interest rates. A rising interest rate environment is bad for almost everyone and every company.  Rising interest rates will cause a lot of other problems for the US Government and its citizens.

Just a reminder, we are at the beginning of this cycle of higher interest rates and inflation.   This will not be fixed in the next few months!

[James Hamling]

Quote from @Chris John:

Genuinely curious to those of you opposed to the Fed raising interest rates to fight inflation, what would you do instead?  Are you unconcerned about inflation or do you have a better answer.  Also, I'm new to the thread so I apologize if you've already answered this is the first 9 pages. 

The first page started pretty chippy, so I figured I'd skip ahead to see where we're at in the conversation now.

Good question. 

I would have placed rates at 2%, and left them there, and then gone at the real issue in the flow of capital which is the tax code. We have a major issue with the tax code, and it's the primary driver behind the continued concentration of capital at the top. The whole tax code would be burned to the ground, replaced as a whole with refreshed code, streamlined and simplified. A flat corporate tax rate of 40%, WITH credits for reinvestment activity of various kinds and yes, those credits can move that tax exposure down to 0. 

See right now we have a tax code that rewards a person savy enough to play games with it all, replace with a simplified one that rewards activity, actual real world activity. 

Then something needs to address the 54%+ citizenry who don't pay a dime, yet receive $. No, tax's can not be a profit center for people. 

Now, you do this, and major shifts will happen in the flow of $$$$, then one adjusts rates to influence to achieve a normalized inflationary rate. 

Also there is obvious needed action like stop handing out billions like there loli-pops at a Dr's office. 

Lastly, make use of tariff's, they need to exist, free-trade is scam to impoverish the U.S. to enrich a select few. Done. 

Much of the problem has to do with a lot more then just an interest rate, and just rate adjustments won't even fix a dang-thing. The elephant in the room must be addressed, and that's trans-national corporations, concentration of $$$ in hands of few, corruption, non-accountability, all that jazz. 

That's the root. 

It's a fact that the problem is the decline of the middle class and small business via corporate consolidation, and the actions that empower such consolidations. 

[Luka Milicevic]

@James Hamling

My solution here is quite different.

If you watch videos of Milton Friedman's lectures from the 1970s and 1980s he talks non stop about inflation. His simple definition is that it is created in Washington, and there is nothing anyone can do about it.

In one of his lectures at UC Berkley, he showed charts of many different countries through different times in history and showed the correlation between the supply of money and the rate of inflation. Any country, at any time in history the correlation is 1-1. 

He also re-iterated on his show "free to choose" that inflation is entirely created by printing money.

You can perfect the tax code all you want. It's not the problem.

Endless money printing and spending is the issue. More dollars chasing finite resources.

And also, tariffs hurt the country that puts them on just as much as the country importing products. 

[Bruce Woodruff]

Quote from @Luka Milicevic:

You can perfect the tax code all you want. It's not the problem.

Endless money printing and spending is the issue. More dollars chasing finite resources.

The above is ^^^^ right.

But I agree that the tax code needs to be revamped or eliminated and replaced with a national sales tax.....but that is not the cause of inflation.

Tariffs do hurt all concerned but are necessary to rein in a unfairly competitive country....

[Aaron Gordy]

@Luka Milicevic

On point. You are absolutely correct. Milton is the man! Once the Fed made borrowing money cheap and the Government giving away money during the pandemic there is an abundance of cash. And then one has the supply issues of the LA dock bottlenecks, more recently the train union issues, the Russian invasion of Ukraine...it all means one thing: Inflation. I have never seen a time when used car/truck prices increase. My truck is now worth considerably more than what I paid for it 5 years ago. When the Govt forgives student loans, it effectively puts more money in the market. All not good for inflation. Its interesting to note though that gas prices are very low nowadays.  Today will be an interesting day. Wonder if it will be a 3/4 point hike... 

[Bruce Woodruff]

Quote from @Aaron Gordy:

Its interesting to note though that gas prices are very low nowadays.

That's only because of the administration taking oil from the Strategic Petroleum Reserve. It is now at the lowest since 1984. It's a ploy to artificially lower gas prices making him look better to people that don't know. We are in dangerous territory here.....

[Nicholas L.]

This has been a pretty good thread with some great contributions by some smart people.

Should we all meet back here next year and see whose predictions came true?

[Aaron Gordy]

@Bruce Woodruff I know. I am hoping that it will lower the transportation cost of the supply of goods which will hopefully push down prices but its a political move certainly. Its a good thing that the dollar is at a 20 year high though. its a very interesting time that we are in presently. 

[Bruce Woodruff]

Quote from @Aaron Gordy:

@Bruce Woodruff I know. I am hoping that it will lower the transportation cost of the supply of goods which will hopefully push down prices but its a political move certainly. 

It is a dangerous play because that supply is meant to be held in reserve for exigent situations...like war for instance.....

[James Hamling]

Quote from @Luka Milicevic:

@James Hamling

My solution here is quite different.

If you watch videos of Milton Friedman's lectures from the 1970s and 1980s he talks non stop about inflation. His simple definition is that it is created in Washington, and there is nothing anyone can do about it.

In one of his lectures at UC Berkley, he showed charts of many different countries through different times in history and showed the correlation between the supply of money and the rate of inflation. Any country, at any time in history the correlation is 1-1. 

He also re-iterated on his show "free to choose" that inflation is entirely created by printing money.

You can perfect the tax code all you want. It's not the problem.

Endless money printing and spending is the issue. More dollars chasing finite resources.

And also, tariffs hurt the country that puts them on just as much as the country importing products. 

 I agree, the money supply is the core issue, the tax code is a necessary component in having any real chance of ever addressing it because as it stands now money keeps concentrating in the hands of 2%. As long as an economy has such a point of loss of capital in the economy, the economy will keep inflating to have money in the "flow", and hence purchase power keeps dropping, money keeps falling into the 2% where it is removed from the "flow" and thus induces a deflationary action in the economic flow yet at a inflationary rate of the currency itself. 

Hence why solution starts with total change of tax code, to do something about the epic loss of capital in the economic eco-system, being concentrated in 2%, requiring constant inflationary cycles there in constant devaluation of the currency. 

As for tariff's, I call BS to that whole false narrative that free trade is required. Get Canada to honor such, let's start there, then when Canada drops all tariffs on U.S. imports we can remove such on Canadian exports. 

Fact is the U.S. economy has suffered from the export of base-line manufacturing. "Free-trade" has been at expense of the U.S. and in large part only the U.S. allows "free" while all other nations make sure everything works in there favor. It creates a dependent U.S., that's not a good thing. Any argument for the U.S. importing xyz is an argument to EXPORT U.S. wealth unto that country, unless there stands some parity with that nation in import/export with the U.S., which we are leagues away from. China has built it's military via U.S. consumer goods, how well is that working out? Now we face prospect of war with China because we built them a massive military all thanks to "free-trade". 

U.S. dependency on imports is absolute stupidity, unless your a trans-national corp., then it's awesome sauce because you don't give a flip, because you live in a bubble. U.S. burns to the ground, oh well, time to chillax in Luxembourg. 

The issue with the money supply has it's roots in the flow of the money supply, and there is this massive off-ramp for it right now that concentrates in the hands of exceptionally few. Thus deflationary cycle via currency concentration. Trickle down is not trickling, it's concentrating. Hence tax code being addressed, with closing of holes in taxation, with significant reprieve for re-investment, ie keeping that currency int he flow.    Step 1, keep the currency int he flow, you eliminate a major demand for added inflation.    Step 2, address the current inflation caused from such engorgement of the money supply over the years. Step 2 is a long game, but impossible without step 1. 

[James Hamling]

Quote from @Bruce Woodruff:

Quote from @Aaron Gordy:

Its interesting to note though that gas prices are very low nowadays.

That's only because of the administration taking oil from the Strategic Petroleum Reserve. It is now at the lowest since 1984. It's a ploy to artificially lower gas prices making him look better to people that don't know. We are in dangerous territory here.... 

 Very, very dangerous territory, without doubt. 

[James Hamling]

Quote from @Aaron Gordy:

@Luka Milicevic

On point. You are absolutely correct. Milton is the man! Once the Fed made borrowing money cheap and the Government giving away money during the pandemic there is an abundance of cash. And then one has the supply issues of the LA dock bottlenecks, more recently the train union issues, the Russian invasion of Ukraine...it all means one thing: Inflation. I have never seen a time when used car/truck prices increase. My truck is now worth considerably more than what I paid for it 5 years ago. When the Govt forgives student loans, it effectively puts more money in the market. All not good for inflation. Its interesting to note though that gas prices are very low nowadays.  Today will be an interesting day. Wonder if it will be a 3/4 point hike... 

 Gotta go 1 step deeper Aaron, ask why does there need to be $$$$ constantly injected into the economic system. It's supposed to be cyclical, money moving in a flow, like the cycle of water, moving through hands and function coming round and round. In theory, added currency is only for growth factor of the entire system, but that's not what's going on today is it. 

Here is the data point of proof, look at how much $$$$ was created and injected into the system, and then at the growth rate for the economy, there not even close, they are multipliers away. Think of it this way, if you have a tire, which is the economy, and you put air into it, which is $$$$, and the tire stays without change, what's going on? There is a major leak somewhere right.     So do you start with adjusting the air? No, you gotta plug the leak, yes the air matters but it's a never ending cycle until the actual root cause of that leak is addressed. 

Some $$$$ pulled out of system is normal and healthy, but it's the rate we are at, it's massive. And we know where it's going, it's concentrating into 2%. It is a fundamental "break" in the system as a whole. That leak creates a requirement to ad air ($$$$) or else the tire (economy) will go flat and then things hit rim and the whole damn thing goes off the road. 

Problem is, that 2% loves this system, it's working great for them. And, they unfortunately own the air pump, thanks to our inaction. Hell, they own the whole damn service station. The leak benefits them. 

This cycle will never change until the fundamental principles are changed. 

[Aaron Gordy]

@James Hamling take an macroeconomics 101 class. 

[Carlos Ptriawan]

Quote from @Luka Milicevic:

@James Hamling

My solution here is quite different.

If you watch videos of Milton Friedman's lectures from the 1970s and 1980s he talks non stop about inflation. His simple definition is that it is created in Washington, and there is nothing anyone can do about it.

In one of his lectures at UC Berkley, he showed charts of many different countries through different times in history and showed the correlation between the supply of money and the rate of inflation. Any country, at any time in history the correlation is 1-1. 

He also re-iterated on his show "free to choose" that inflation is entirely created by printing money.

You can perfect the tax code all you want. It's not the problem.

Endless money printing and spending is the issue. More dollars chasing finite resources.

And also, tariffs hurt the country that puts them on just as much as the country importing products. 

 The problem is significantly beyond that.  USA is not the country with the highest level of money printing.
It's Japan number one, also country like Belgium,Spain,France,Singapore has the same level as US. 

The most significant problem is since US Dollar is the default currency/reserve of the world, then if there're any **structural changes**
in interest rate in US, the Rest of the world has to adjust to US rate, this is especially true for country that has deficit on export where they
are buying things for their people in US Dollar.  Also the whole theory of 1928 inflation happened when Dollar is not the major world currency reserve. 

The US ciizen can prosper *easily* ***without too much work**** (note this) until this day because all other citizen of the world outside US has to pay their food, good and item following US Dollar. 

Indirectly the ROW  is sustaining the US economy.

IF the US Dollar too strong, then the ROW can't buy food for their people.  

That's why at this very second, investors in Japan is now selling their US bond.

In today's structure global world system. It's expected US and Japan to be have the lowest interest rate in the world, with the developing world having higher interest rate.

Interest rate hikes in US is equal to ecomic crash in Asia and ROW.

If this continue, this will trigger de-dollarization and ROW is starting to use non-Dollar as the alternative reserve currency.

[Corey Martin]

Certain markets are still seeing appreciation and I belive they will continue. Nashville is a prime example. We won't see cray growth but we will still see growth nonetheless 

[James Hamling]

Quote from @Aaron Gordy:

@James Hamling take an macroeconomics 101 class. 

 I believe my 401 exceeds that mark but, ok. 

[Carlos Ptriawan]

Quote from @Chris John:

Genuinely curious to those of you opposed to the Fed raising interest rates to fight inflation, what would you do instead?  Are you unconcerned about inflation or do you have a better answer.  Also, I'm new to the thread so I apologize if you've already answered this is the first 9 pages. 

The first page started pretty chippy, so I figured I'd skip ahead to see where we're at in the conversation now.

There is no one really opposed as the Fed itself actually does not know what will happen.

The Fed chairman already said they do not care if there's unemployment rising because of interest rate hikes.

So you may see the condition where you do not have inflation anymore,  but you lose your home because you lost your job since your company no longer exists (because of the self-induced recession).

[James Hamling]

Quote from @Carlos Ptriawan:

Quote from @Luka Milicevic:

@James Hamling

My solution here is quite different.

If you watch videos of Milton Friedman's lectures from the 1970s and 1980s he talks non stop about inflation. His simple definition is that it is created in Washington, and there is nothing anyone can do about it.

In one of his lectures at UC Berkley, he showed charts of many different countries through different times in history and showed the correlation between the supply of money and the rate of inflation. Any country, at any time in history the correlation is 1-1. 

He also re-iterated on his show "free to choose" that inflation is entirely created by printing money.

You can perfect the tax code all you want. It's not the problem.

Endless money printing and spending is the issue. More dollars chasing finite resources.

And also, tariffs hurt the country that puts them on just as much as the country importing products. 

 The problem is significantly beyond that.  USA is not the country with the highest level of money printing.
It's Japan number one, also country like Belgium,Spain,France,Singapore has the same level as US. 

The most significant problem is since US Dollar is the default currency/reserve of the world, then if there're any **structural changes**
in interest rate in US, the Rest of the world has to adjust to US rate, this is especially true for country that has deficit on export where they
are buying things for their people in US Dollar.  Also the whole theory of 1928 inflation happened when Dollar is not the major world currency reserve. 

The US ciizen can prosper *easily* ***without too much work**** (note this) until this day because all other citizen of the world outside US has to pay their food, good and item following US Dollar. 

Indirectly the ROW  is sustaining the US economy.

IF the US Dollar too strong, then the ROW can't buy food for their people.  

That's why at this very second, investors in Japan is now selling their US bond.

In today's structure global world system. It's expected US and Japan to be have the lowest interest rate in the world, with the developing world having higher interest rate.

Interest rate hikes in US is equal to ecomic crash in Asia and ROW.

If this continue, this will trigger de-dollarization and ROW is starting to use non-Dollar as the alternative reserve currency.

 Yeah, it really is a complex web of many moving parts, interwoven into this rat's-nest it is today. 

The USD starts getting removed as world currency, oh-daddy will we see problems beyond the likes anyone has ever imagined. That's when all the M2 woe's will really come home to roost. I think that's when we see a shift to the Amero. Or DGC. Certainly won't be able to leap back into the gold standard. 

OR.... the great protector of inflation: war. 

[Tony Kim]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Luka Milicevic:

@James Hamling

My solution here is quite different.

If you watch videos of Milton Friedman's lectures from the 1970s and 1980s he talks non stop about inflation. His simple definition is that it is created in Washington, and there is nothing anyone can do about it.

In one of his lectures at UC Berkley, he showed charts of many different countries through different times in history and showed the correlation between the supply of money and the rate of inflation. Any country, at any time in history the correlation is 1-1. 

He also re-iterated on his show "free to choose" that inflation is entirely created by printing money.

You can perfect the tax code all you want. It's not the problem.

Endless money printing and spending is the issue. More dollars chasing finite resources.

And also, tariffs hurt the country that puts them on just as much as the country importing products. 

 The problem is significantly beyond that.  USA is not the country with the highest level of money printing.
It's Japan number one, also country like Belgium,Spain,France,Singapore has the same level as US. 

The most significant problem is since US Dollar is the default currency/reserve of the world, then if there're any **structural changes**
in interest rate in US, the Rest of the world has to adjust to US rate, this is especially true for country that has deficit on export where they
are buying things for their people in US Dollar.  Also the whole theory of 1928 inflation happened when Dollar is not the major world currency reserve. 

The US ciizen can prosper *easily* ***without too much work**** (note this) until this day because all other citizen of the world outside US has to pay their food, good and item following US Dollar. 

Indirectly the ROW  is sustaining the US economy.

IF the US Dollar too strong, then the ROW can't buy food for their people.  

That's why at this very second, investors in Japan is now selling their US bond.

In today's structure global world system. It's expected US and Japan to be have the lowest interest rate in the world, with the developing world having higher interest rate.

Interest rate hikes in US is equal to ecomic crash in Asia and ROW.

If this continue, this will trigger de-dollarization and ROW is starting to use non-Dollar as the alternative reserve currency.

 Yeah, it really is a complex web of many moving parts, interwoven into this rat's-nest it is today. 

The USD starts getting removed as world currency, oh-daddy will we see problems beyond the likes anyone has ever imagined. That's when all the M2 woe's will really come home to roost. I think that's when we see a shift to the Amero. Or DGC. Certainly won't be able to leap back into the gold standard. 

OR.... the great protector of inflation: war. 

Another 0.75% increase in rates today from the Fed. Can someone tell me how this is going to affect mortgage rates? You'd think someone who worked in finance for 30 years would know this, but alas, never worked in Real Estate.

[Carlos Ptriawan]

Another 0.75% increase in rates today from the Fed. Can someone tell me how this is going to affect mortgage rates? You'd think someone who worked in finance for 30 years would know this, but alas, never worked in Real Estate.

https://www.mortgagenewsdaily....

6.5% today

[James Hamling]

Quote from @Tony Kim:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Luka Milicevic:

@James Hamling

My solution here is quite different.

If you watch videos of Milton Friedman's lectures from the 1970s and 1980s he talks non stop about inflation. His simple definition is that it is created in Washington, and there is nothing anyone can do about it.

In one of his lectures at UC Berkley, he showed charts of many different countries through different times in history and showed the correlation between the supply of money and the rate of inflation. Any country, at any time in history the correlation is 1-1. 

He also re-iterated on his show "free to choose" that inflation is entirely created by printing money.

You can perfect the tax code all you want. It's not the problem.

Endless money printing and spending is the issue. More dollars chasing finite resources.

And also, tariffs hurt the country that puts them on just as much as the country importing products. 

 The problem is significantly beyond that.  USA is not the country with the highest level of money printing.
It's Japan number one, also country like Belgium,Spain,France,Singapore has the same level as US. 

The most significant problem is since US Dollar is the default currency/reserve of the world, then if there're any **structural changes**
in interest rate in US, the Rest of the world has to adjust to US rate, this is especially true for country that has deficit on export where they
are buying things for their people in US Dollar.  Also the whole theory of 1928 inflation happened when Dollar is not the major world currency reserve. 

The US ciizen can prosper *easily* ***without too much work**** (note this) until this day because all other citizen of the world outside US has to pay their food, good and item following US Dollar. 

Indirectly the ROW  is sustaining the US economy.

IF the US Dollar too strong, then the ROW can't buy food for their people.  

That's why at this very second, investors in Japan is now selling their US bond.

In today's structure global world system. It's expected US and Japan to be have the lowest interest rate in the world, with the developing world having higher interest rate.

Interest rate hikes in US is equal to ecomic crash in Asia and ROW.

If this continue, this will trigger de-dollarization and ROW is starting to use non-Dollar as the alternative reserve currency.

 Yeah, it really is a complex web of many moving parts, interwoven into this rat's-nest it is today. 

The USD starts getting removed as world currency, oh-daddy will we see problems beyond the likes anyone has ever imagined. That's when all the M2 woe's will really come home to roost. I think that's when we see a shift to the Amero. Or DGC. Certainly won't be able to leap back into the gold standard. 

OR.... the great protector of inflation: war. 

Another 0.75% increase in rates today from the Fed. Can someone tell me how this is going to affect mortgage rates? You'd think someone who worked in finance for 30 years would know this, but alas, never worked in Real Estate.

 Depends who you ask, shouldn't but that's the case. Some are saying it was already priced in, others say it will bring it up, and a select few have argued it will "soon" be coming down. I think the last group is hitting the good-ole "hopeium" pipe but, who knows. 

As long as bond rates stay up, I think the answer lies there as a primary competitor to MBS and the resulting rates. I prefer MBS over bonds, I have a lot more questions on the actual ability to repay on bonds then MBS, although I may be the odd duck in that respect.

[James De Stefano]

Good thread, good read. 

I love the macro conversation about where we are headed, but I believe in areas of strong enough demand, the short-term demand will remain high.  Texas continues to see people flood into the state, and we do need prices and demand to level out.   But the days of spending $90-100k  for an acceptable starter home w/  averages schools are likely done in any big city.   Those homes are now $170-200k   and most people on this website wouldn't live in those C-class areas. 

[Will Barnard]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @Will Barnard:

Although in every recent year, Cal experiences a net population loss....you can tweak the number s any way you like, but they are the numbers.....

(From Cal Matters, a non-partisan news org. Bold is mine)

“California appears to be on the verge of a new demographic era, one in which population declines characterize the state,” PPIC demographer Hans Johnson writes in a new analysis. “Lower levels of international migration, declining birth rates, and increases in deaths all play a role. But the primary driver of the state’s population loss over the past couple years has been the result of California residents moving to other states.”

 

 And now interest rate is 6%, this post is becoming even more important.

I remember someone in BP posted a month ago that NAHB predicts interest rate in 2022/2023 is 6%. Now it's the reality. We don't know what would happen with rate so crazy like this. 

Refinance is totally dead now. People doesn't want to sell their home. Home Depot started laying off people.

 Carlos, you totally missed this EPIC data point which 100% clarifies there is NO collapse threat going on! Refi's have dropped almost 90%! If there was any "collapse" risk going on refi's would be UP, not down, people would be converting equity too $$$$ to make payments, right. 

So what does a near 90% drop in refi's say? That people DON'T need the $$$$, right. 

So not only do people NOT need the $$$$, there also sitting on that nice "piggy-bank" of $$$$ called equity. 

What we are experiencing in the market is called STAGFLATION, not collapse, not recession, STAGFLATION.     And yeah, I have been forecasting this for some considerable time, as i predicted google it, there is a chorus of industry "captains" now declaring the same; STAGFLATION. It's here, it's a reality, and it's NOT collapse.

High prices, low volume. STAGFLATION. 

 I wanted to point out my opinion on the refi market. You are stating that Regis dropped by 90% because people don’t need to turn equity into cash because they already have it. I am not sure that is the true reason. I would say that it is because only fools would refi a sub 3 or even a sub 5 interest rate to pull cash to then raise their rate to 6+%. Refis are dead because those with lower rates will hold on to them for dear life!

[Bruce Woodruff]

Quote from @Aaron Gordy:

@James Hamling take an macroeconomics 101 class. 

I enjoy your posts and generally agree, Aaron..... but people using 'more schooling' to suggest that someone else will learn more (what you want them to learn)  is flawed thinking.  

A lot of the alleged 'scholars' on this planet are how we get into these messes. High IQ's and zero common sense.....and their thoughts are generally theories anyway.

There is more combined wisdom on this forum than most Ivy League faculties without a doubt.... :-)

[Bruce Woodruff]

Quote from @James Hamling:

Agreed. Free trade is not free unless everyone plays the game by the same rules.