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. 

[Bruce Woodruff]

Quote from @Tony Kim:

Nice response, Tony! No problems with me.... And I am not anti-California, sorry if it comes across that way. I still have family and friends there and it is still a beautiful state.

And yes, I recognize the various demographic types that are coming and going but I see that as largely irrelevant to this particular conversation...we were discussing just the numbers game, or at least I was :-)

And as to your question: why has Cali outperformed....? My belief (as I have stated earlier in this thread) is that it's because California has incredible beauty, a never-ending list of things to do and see, and near perfect weather (at least in the south, I personally never cared for NoCal weather)

[Nicholas L.]

@Will Barnard

I agree with you - there can be a "big" drop in some markets... and that will put prices back to what they were 1 or 2 or 5 years ago.  I guess that will make the crash predictors... "right"?  (note all the quotes).  But, I'm not saying there won't be a correction.  Maybe there will be.  I'm watching and trying to buy good deals to build up my small portfolio, regardless of market condition and interest rates (or rather, taking them into account.)

To the extent that there is merit in this discussion and in a "correction" or "crash" occurring, we can try to help new investors ( 1 ) not count on continued appreciation, and ( 2 ) underwrite deals to survive continued interest rate increases.  But honestly, I'm not seeing very many posts where someone says they're buying and hoping for appreciation, and appreciation will make the deal work.  Rather, it's every California resident asking what market they should invest in.  And people with no money asking how to buy with no money.

[Ethan Hanes]

Quote from @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. 

 In my opinion, "crash" is a big word. Will we see a drop in prices similar to 2007-2008? No. Will we see a drop in prices? Yes! 

We're already seeing properties sit on the market for twice as long as they were earlier this year. That's significant. A lot of sellers are scared to list because buyers are harder to find! 

I think when you look at the big picture, this will not be a SIGNIFICANT drop in values. 

I just noticed however that you are located in Dallas Texas and I'm located in Los Angeles. That could play a factor in our differing opinions too. A lot of people are moving out of Los Angeles to move to Dallas! Kind of crazy.

Let's connect and we can discuss this more!

Ethan B. Hanes
Hanes Investment Realty
(818) 865-8305 ext. 111

[Tony Kim]

Quote from @Bruce Woodruff:

Quote from @Tony Kim:

Nice response, Tony! No problems with me.... And I am not anti-California, sorry if it comes across that way. I still have family and friends there and it is still a beautiful state.

And yes, I recognize the various demographic types that are coming and going but I see that as largely irrelevant to this particular conversation...we were discussing just the numbers game, or at least I was :-)

And as to your question: why has Cali outperformed....? My belief (as I have stated earlier in this thread) is that it's because California has incredible beauty, a never-ending list of things to do and see, and near perfect weather (at least in the south, I personally never cared for NoCal weather)

Got it. 

Since this thread is about a market crash and Will was discussing the chances of a decline in California prices, just thinking out loud and can't help but think that demographics play a key role. If it didn't, then the country of India would have the highest real estate prices on the planet 🤣 It can't be easy for folks who grew up here to see all these foreign born folks come in and land high paying jobs and drive up real estate prices. Not everyone is ready for what has been happening to California and I don't blame them for leaving.

[Carlos Ptriawan]

Got it. 

Since this thread is about a market crash and Will was discussing the chances of a decline in California prices, just thinking out loud and can't help but think that demographics play a key role. If it didn't, then the country of India would have the highest real estate prices on the planet 🤣 It can't be easy for folks who grew up here to see all these foreign born folks come in and land high paying jobs and drive up real estate prices. Not everyone is ready for what has been happening to California and I don't blame them for leaving.

California home prices up or down is more related to Fed Interest Rate rather than immigration after all :)

The CA appreciation is created when there's huge hiring from tech company. The tech company can expand pretty much when the interest rate is low. With the cheap money policy, money is moving to tech. With interest rate hike is higher like this, investor choosesn not to invest at tech and they're halting the hiring spree or hiring outside CA. 

It's very natural for people to leaving CA, that's not new, and that's expected when economy is growing too fast too strong.

[Tony Kim]

Quote from @Carlos Ptriawan:

Got it. 

Since this thread is about a market crash and Will was discussing the chances of a decline in California prices, just thinking out loud and can't help but think that demographics play a key role. If it didn't, then the country of India would have the highest real estate prices on the planet 🤣 It can't be easy for folks who grew up here to see all these foreign born folks come in and land high paying jobs and drive up real estate prices. Not everyone is ready for what has been happening to California and I don't blame them for leaving.

California home prices up or down is more related to Fed Interest Rate rather than immigration after all :)

The CA appreciation is created when there's huge hiring from tech company. The tech company can expand pretty much when the interest rate is low. With the cheap money policy, money is moving to tech. With interest rate hike is higher like this, investor choosesn not to invest at tech and they're halting the hiring spree or hiring outside CA. 

It's very natural for people to leaving CA, that's not new, and that's expected when economy is growing too fast too strong.

Agree 100% Interest rates play a huge factor. I think there are many factors at play here. Some of it, believe it or not, are the backward laws here that were intended to protect the middle and lower class....which like most laws, had the opposite effect. 

It would be interesting to see what would happen across the country if mortgage rates went into double-digits. This was a real possibility when there were plans to dismantle Freddie Mac.  I'm certainly no expert on what's going on, but I don't think that was a feasible plan, considering what it would do to interest rates. 

[Carlos Ptriawan]

Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Got it. 

Since this thread is about a market crash and Will was discussing the chances of a decline in California prices, just thinking out loud and can't help but think that demographics play a key role. If it didn't, then the country of India would have the highest real estate prices on the planet 🤣 It can't be easy for folks who grew up here to see all these foreign born folks come in and land high paying jobs and drive up real estate prices. Not everyone is ready for what has been happening to California and I don't blame them for leaving.

California home prices up or down is more related to Fed Interest Rate rather than immigration after all :)

The CA appreciation is created when there's huge hiring from tech company. The tech company can expand pretty much when the interest rate is low. With the cheap money policy, money is moving to tech. With interest rate hike is higher like this, investor choosesn not to invest at tech and they're halting the hiring spree or hiring outside CA. 

It's very natural for people to leaving CA, that's not new, and that's expected when economy is growing too fast too strong.

Agree 100% Interest rates play a huge factor. I think there are many factors at play here. Some of it, believe it or not, are the backward laws here that were intended to protect the middle and lower class....which like most laws, had the opposite effect. 

It would be interesting to see what would happen across the country if mortgage rates went into double-digits. This was a real possibility when there were plans to dismantle Freddie Mac.  I'm certainly no expert on what's going on, but I don't think that was a feasible plan, considering what it would do to interest rates. 

 The US interest rate already creates political crashes in Srilanka and other places. Today India announced to halt rice exports. Asian currency dropped like 1998 again unnecessarily, Yen dropped like 15% so far ? it's just so stupid. 

A quarter of those tech companies can't survive without cheap financing.

Freddie Mac gone from US is equal to the end of Biggerpockets.

Btw The Fed actually have not *started* to reduce the MBS purchase, I think it started in October. When they reduced the MBS purchase back in 2018-2019, market/real estate dropped.

[Tony Kim]

Quote from @Carlos Ptriawan:

Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Got it. 

Since this thread is about a market crash and Will was discussing the chances of a decline in California prices, just thinking out loud and can't help but think that demographics play a key role. If it didn't, then the country of India would have the highest real estate prices on the planet 🤣 It can't be easy for folks who grew up here to see all these foreign born folks come in and land high paying jobs and drive up real estate prices. Not everyone is ready for what has been happening to California and I don't blame them for leaving.

California home prices up or down is more related to Fed Interest Rate rather than immigration after all :)

The CA appreciation is created when there's huge hiring from tech company. The tech company can expand pretty much when the interest rate is low. With the cheap money policy, money is moving to tech. With interest rate hike is higher like this, investor choosesn not to invest at tech and they're halting the hiring spree or hiring outside CA. 

It's very natural for people to leaving CA, that's not new, and that's expected when economy is growing too fast too strong.

Agree 100% Interest rates play a huge factor. I think there are many factors at play here. Some of it, believe it or not, are the backward laws here that were intended to protect the middle and lower class....which like most laws, had the opposite effect. 

It would be interesting to see what would happen across the country if mortgage rates went into double-digits. This was a real possibility when there were plans to dismantle Freddie Mac.  I'm certainly no expert on what's going on, but I don't think that was a feasible plan, considering what it would do to interest rates. 

 The US interest rate already creates political crashes in Srilanka and other places. Today India announced to halt rice exports. Asian currency dropped like 1998 again unnecessarily, Yen dropped like 15% so far ? it's just so stupid. 

A quarter of those tech companies can't survive without cheap financing.

Freddie Mac gone from US is equal to the end of Biggerpockets.

Btw The Fed actually have not *started* to reduce the MBS purchase, I think it started in October. When they reduced the MBS purchase back in 2018-2019, market/real estate dropped.

It's actually a great time for us to pay down some of the small remaining debt we have for our home in S Korea as the currency rates are pretty crazy right now. Also, it's a good time to take a trip anywhere overseas. When was the last time the EUR and USD were 1:1?

Most tech financing is done through Venture Capital firms by issuing equity and not private credit though..unless special situations dictate they issue pref shares. Even then, the financing payments are done via PIK and not actual cash coupon payments.

[Bruce Woodruff]

Quote from @Tony Kim:

Yes it would...... I think people would just adjust their thinking (pretty quickly) and keep going after perceived deals..

[Carlos Ptriawan]

Quote from @Tony Kim:

Most tech financing is done through Venture Capital firms by issuing equity and not private credit though..unless special situations dictate they issue pref shares. Even then, the financing payments are done via PIK and not actual cash coupon payments.

recently tech financing is also coming from private credit as VC funding evaporated. Even VC funding is extremely selected now as many co. doesn't generate cash.

Also for US company that has to make money aka to sell product, the product becoming incredibly expensive now. The Biden adm. wants to move semiconductor production to US but at the same time,the cost here is already 20% more expensive just because of dollar rising.

The double digit mortgage will create worldwide crash, not just in california. CA will feel the immediate impact for sure. 

So like every economic pundit says: the Fed is killing  the inflation by making worldwide recessions (or James said  as staglation).

[James Hamling]

Quote from @Carlos Ptriawan:

Quote from @Tony Kim:

Most tech financing is done through Venture Capital firms by issuing equity and not private credit though..unless special situations dictate they issue pref shares. Even then, the financing payments are done via PIK and not actual cash coupon payments.

recently tech financing is also coming from private credit as VC funding evaporated. Even VC funding is extremely selected now as many co. doesn't generate cash.

Also for US company that has to make money aka to sell product, the product becoming incredibly expensive now. The Biden adm. wants to move semiconductor production to US but at the same time,the cost here is already 20% more expensive just because of dollar rising.

The double digit mortgage will create worldwide crash, not just in california. CA will feel the immediate impact for sure. 

So like every economic pundit says: the Fed is killing  the inflation by making worldwide recessions (or James said  as staglation).

Ok were getting deep now, i like this, some thinking caps are firmly attached I see! 

To understand the Fed actions today a person has to first understand how they think, which is the very definition of mental stagnation. The Fed is where creativity goes to die! The primary response to anything at the Fed is to look back, find a time that ___ happened before, what was done, and do it again. This is why so often they get things wrong, proactively, and act so often in a reactive manner, there entire thought process is not set for any form of changing environment. 

With that understanding, todays actions are HEAVILY influenced by Volcker's actions "back when". For many on BP, this is probably before you were even born, no joke, were getting into the 70's/80's now. Those actions were not just to increase rates to slow inflation, no, it was raising rates to purposefully induce a recession, as the recession was direction to break the inflation cycle. Recession was the goal. 

Today, that's the leading direction, the Fed is very literally trying to induce recession, with expectations it will fix everything. It won't. Yes, that's right, I said it, I said the Fed and all the Jurassic slap-azz's there are wrong, and in a way that I am right, but that's just because i am, lol. 

Look, there using the wrong map. Or better said, a severely outdated one. The entire landscape is different yet they think if they travel the same route of decades past they will arrive where they want to, not gonna happen. 

This is one reason Stagflation is taking hold vs recession. And believe you-me, they know this, are freaking out about it, because stagflation is the absolute worst case scenario, that's a hole that nobody has ever easily or quickly slogged out of, collapse would be preferred over stagflation. 

The Fed is not good at being honest, maybe one of those reasons why they get along so well with politicians.... huh, taught myself something here...... Point is, there honestly fumbling around in the dark hoping. There is no playbook for the market compression that happened, it's uncharted waters. 

To throw rate increases at it, yes will achieve a recession action BUT, a recession at net shortage of fundamental human need items, that is what births stagflation. The solution to defeat stagflation is stimulus, but, stimulus feeds inflation. See the catch-22 of it all. 

The way to get out of stagflation (high price, low volume) is to empower velocity, which raises volume, in simplest way of viewing it growing ones way out of it. But, the issue is the growth, too much growth, which is inflation, is bad because not all persons elevate at same rate in growth, so too rapid of a growth rate, grows disparity gaps at enhanced velocity and if unchecked, in compounded rates. Hence why Fed works to keep inflation at a steady, lower, stabilized rate. Big disparity gaps lead to social unrest, unchecked, leads to civil unrest, and eventually, revolt, destruction, the powder keg blowing. There comes a point in disparity gaps and the following unrest cycle that it takes on a self sustaining velocity, call it a Vector of pist-off, where it hit's a point that it really can't be stopped, the actions to stop it just feed it. We recently saw this in the "Arab Spring". It can collapse a entire society, even of our size, just ask the USSR. 

So how will the Jurassic slap-azz club slow or stop growth, while creating growth???? Hence todays argument over 100 basis pts or 25, because they are clueless. 

it's just a matter of time before the natural conclusion the dinosaurs will make, which is borrowed $, finance, that people have too much liquidity, that's the villain. And with that, longer term finance, which gives growth without growth. 

Yes, it does set things up for a future collapse, a "debt default", but that's someone else's problem, that's down the road, and that can be sorted out when it comes time. Or not.  

Again, stagflation is fear #1, collapse is better, in there eyes. 

I have said this before, look up Davos 2022 World Economic Forum, the world of elite'$ literally laid all this out, is proud of it, it's not hidden or secret. At this point I feel like that little Jewish kid in the late 20's, tugging at Grandpa's pants, pointing to Mein Kampf saying "No, grandpa, it's not ok, we gotta get the hell outta here, look". It's literally out in the open people, in our faces, and everyone is just ignoring it. 

[Bruce Woodruff]

Quote from @James Hamling:

I was there :-) And I just made this point on another forum......the Fed is stupidly trying to recreate this period.....thinking that raising interest rates will do what it did 30-something years ago. But they don't comprehend that different times had different reasons/factors and that doing the same thing may/will not create the same results.....

I have trouble believing that a bunch of people on a Forum comprehend the problem better than the appointed financial gurus in DC...but yet, here we are.

Another conversation worth having some day is this - do we really even need the Federal Reserve? Over 100 years and what/why? But I digress........

[Bruce Woodruff]

Quote from @James Hamling:

I gotta add this - the cynic in me wonders how much of this Fed reaction is due to the upcoming election? Meaning that they are desperately trying to reduce inflation to help the side in power.

Or am I just getting too deep now....?

[Scott Mac]

Quote from @Bruce Woodruff:

Quote from @James Hamling:

I was there :-) And I just made this point on another forum......the Fed is stupidly trying to recreate this period.....thinking that raising interest rates will do what it did 30-something years ago. But they don't comprehend that different times had different reasons/factors and that doing the same thing may/will not create the same results.....

I have trouble believing that a bunch of people on a Forum comprehend the problem better than the appointed financial gurus in DC...but yet, here we are.

Another conversation worth having some day is this - do we really even need the Federal Reserve? Over 100 years and what/why? But I digress........

30 years wow, that's a long time.

Just several months ago we had Negative Interest, Negative Inflation, and stunning Economic Growth, as well as handing out money to the Working People like they hand it out to the Welfare People (though on a much smaller scale), and the amount of federal laws were drastically being cut on a regular basis.

Then it all was stopped, then they implemented inflation and higher interest and higher taxes and more laws, (and) no more free money for working people (just welfare people get free money now--and lots of it), and the economy went into the dark waters that we have today.

If someone official says they are "Trying" something from 30 years ago--they didn't have to try anything--because what we had was working like gangbusters--there was nothing wrong with it--they should have just kept it up--because it was working.

Whatever they were doing it was working--now it's not.

If this current stuff pushes the USA into a Depression, it will be hard times for a lot of working people.

Even though some of us in here will still lead comfortable lives, many will suffer from it.

Just my 2 Cents.


 

[Bruce Woodruff]

@Scott Mac Yes, if this comes down too hard, we will have a Recession. If it crashes like some think it could be the 'D' word. What a mess, and no reason for it, what a shame...

[Carlos Ptriawan]

Quote from @Bruce Woodruff:

Quote from @James Hamling:

I gotta add this - the cynic in me wonders how much of this Fed reaction is due to the upcoming election? Meaning that they are desperately trying to reduce inflation to help the side in power.

Or am I just getting too deep now....?

 no it has nothing to do with election or politics.

basically the fed is trying to avoid inflation of 70 and 28 , so they (think) their only weapon is to ........... kill the economy before the recession is growing too strong too long

that's kinda old people theory which some people (including James)  argue that would not be the case (as majority opinion also in ZH)

[Bruce Woodruff]

Quote from @Carlos Ptriawan:

no it has nothing to do with election or politics.

Ahhh...but it could. Certainly wouldn't be the first time......

[James Hamling]

Quote from @Bruce Woodruff:

Quote from @James Hamling:

I gotta add this - the cynic in me wonders how much of this Fed reaction is due to the upcoming election? Meaning that they are desperately trying to reduce inflation to help the side in power.

Or am I just getting too deep now....?

Ever wonder why it's called RIGHT wing or LEFT wing? Two sides of the same Vulture, lol. 

But seriously, yeah, I do believe right and left are just each 1 side of the "whole", and the body, being central banking, owns everything. So no, I don't think the body will care to do anything for any 1 part, unless it's for the greater benefit of the body. Central banking is patient beyond belief, remember this is the creature from Jekyll island. (let's see how many pickup on that nod).  

But then again, political law is "never let a good crisis go to waste". 

[Tony Kim]

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @James Hamling:

I gotta add this - the cynic in me wonders how much of this Fed reaction is due to the upcoming election? Meaning that they are desperately trying to reduce inflation to help the side in power.

Or am I just getting too deep now....?

 no it has nothing to do with election or politics.

basically the fed is trying to avoid inflation of 70 and 28 , so they (think) their only weapon is to ........... kill the economy before the recession is growing too strong too long

that's kinda old people theory which some people (including James)  argue that would not be the case (as majority opinion also in ZH)

 It's too bad the Fed succumbed to pressure to reduce rates from the previous admin. Don't really blame them...he was a persuasive dude.

[Eliott Elias]

I don’t care if it crashes or not. I’m still buying a steep discounts 

[James Hamling]

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @James Hamling:

I gotta add this - the cynic in me wonders how much of this Fed reaction is due to the upcoming election? Meaning that they are desperately trying to reduce inflation to help the side in power.

Or am I just getting too deep now....?

 no it has nothing to do with election or politics.

basically the fed is trying to avoid inflation of 70 and 28 , so they (think) their only weapon is to ........... kill the economy before the recession is growing too strong too long

that's kinda old people theory which some people (including James)  argue that would not be the case (as majority opinion also in ZH)

Lol "old people theory"....... 

I am already regretting asking but I gotta; what is "old people theory" exactly, lol? 

[Carlos Ptriawan]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Bruce Woodruff:

Quote from @James Hamling:

I gotta add this - the cynic in me wonders how much of this Fed reaction is due to the upcoming election? Meaning that they are desperately trying to reduce inflation to help the side in power.

Or am I just getting too deep now....?

 no it has nothing to do with election or politics.

basically the fed is trying to avoid inflation of 70 and 28 , so they (think) their only weapon is to ........... kill the economy before the recession is growing too strong too long

that's kinda old people theory which some people (including James)  argue that would not be the case (as majority opinion also in ZH)

Lol "old people theory"....... 

I am already regretting asking but I gotta; what is "old people theory" exactly, lol? 

 haha you know when those UC Berkeley  PhD economic students bring a very thick book to a cafe in College Ave.

The book is authored by Hayek and Keynes (economist of the 1920s era) that's the theory that Powell and Volcker borrows

[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.

[Bruce Woodruff]

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?  

Let the economy collapse. 

We are in such deep doo-doo with a massive amount of debt and out-of-control spending.....time to hit the reset button....

[Jay Hinrichs]

Quote from @Eliott Elias:

I don’t care if it crashes or not. I’m still buying a steep discounts 

 if it crash's your not going to get rent what will you do then.. a lot of BP folks started investing after the GFC and have no clue that many markets vacancies skied to 30 40% with some properties 100% vacant how long can you last with significant vacancies ?  we dont want a crash it crush's landlords along with everyone else.