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. 

[James Hamling]

Quote from @Carlos Ptriawan:

be patient a little bit James, we are in CA  helping Fed slowly by reducing the home price by -13% today. We will make it -22% don't worry :)
At least a region should hit this -20% :) LOL

 Ya think? 

Ok so picture this, say this goes the train wreck I'm seeing it go, and this is a bananas inflation train that just left the station and hasn't even gotten close to full steam, right.     Now say CA does pull back say 22%. Then all this crazy train get's going and Gov flips gear and the next phase of inflation kicks in which is WAGE INFLATION, and all that, so how much of a rubberband effect will happen in CA from that -22% load to the spring? Could it propel things to gain such velocity that CA then surges in having some of the most rapid inflation? 

Inflation is an event that has waves to it, not a singularity. We just got through the first wave, this is the beginning of the beginning. Wage inflation is coming if they can't do something to nerf it, like say kill the jobs market somehow. Sounding a bit familiar now, making a bit more sense yet why the Fed would want to harm the jobs market? yeah, cause what's next, WAGE INFLATION. 

The Fed is trying to head this off at the pass and, in large part, save the corporate interests. Wage inflation starts hitting and gaining steam corps will have to relent and take a hit to that awesome sauce of a profit they've enjoyed last few years and start kicking out those increases just to keep going. And then they price it into the goods, and then we get to suffer those increases, and on and on this lovely ride of inflation goes. 

Yupper-doodles. 

[John Carbone]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

be patient a little bit James, we are in CA  helping Fed slowly by reducing the home price by -13% today. We will make it -22% don't worry :)
At least a region should hit this -20% :) LOL

 Ya think? 

Ok so picture this, say this goes the train wreck I'm seeing it go, and this is a bananas inflation train that just left the station and hasn't even gotten close to full steam, right.     Now say CA does pull back say 22%. Then all this crazy train get's going and Gov flips gear and the next phase of inflation kicks in which is WAGE INFLATION, and all that, so how much of a rubberband effect will happen in CA from that -22% load to the spring? Could it propel things to gain such velocity that CA then surges in having some of the most rapid inflation? 

Inflation is an event that has waves to it, not a singularity. We just got through the first wave, this is the beginning of the beginning. Wage inflation is coming if they can't do something to nerf it, like say kill the jobs market somehow. Sounding a bit familiar now, making a bit more sense yet why the Fed would want to harm the jobs market? yeah, cause what's next, WAGE INFLATION. 

The Fed is trying to head this off at the pass and, in large part, save the corporate interests. Wage inflation starts hitting and gaining steam corps will have to relent and take a hit to that awesome sauce of a profit they've enjoyed last few years and start kicking out those increases just to keep going. And then they price it into the goods, and then we get to suffer those increases, and on and on this lovely ride of inflation goes. 

Yupper-doodles. 

Precisely why the fed keeps raising rates and they will keep hiking until jobs are lost and wage growth slows. I see you have taken an Econ class now. and Each hike they do, crushes housing affordability. And poof, there goes 20-30 percent. You are evolving.

[Michael Wooldridge]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @John Carbone:

looks like the fed is pricking the car bubble finally. Just received this email from a car dealer. To put this in perspective this vehicle mentioned below had a 5k premium above msrp 3 months ago. Now, it’s 4K below msrp, so in the matter of months 17 percent drop in value for new vehicle from peak.

Over the summer heard the same BS from the car gurus..”but there’s a car shortage from the chips, the chips, the chips, it will take years to recover….then rates spiked and poof there goes the demand. 

Actually CAR and FOOD prices already goes down.

Read the chart here:
https://www.zerohedge.com/mark... 

For Food it's already trending down including meat. Only cereal slightly up than last month.
Read the chart here:
https://www.fao.org/worldfoods... 

To be honest I don't understand why the Fed is so crazy fighting inflation when inflation is already almost normalized. These grand-pa really needs to be replaced their way of thinking LOL

 Carlos, my friend, I am not sure why you think inflation is under control, not even close. This is just the begining of it all. And the Fed is freaking out because of exactly what I have been saying and warning is the Front-Loading of the economy coming into this with huge shortages "nerf'd" the ability of rates to impact the inflation in meaningful ways as it should, and there seeing that. 

They are kicking out oil from strategic reserve like crazy, it's barely keeping fuel prices at this inflated level at best, they've done all these rapid rate hits, it's not pressing things down in any meaningful response. There pooping themselves thinking "Holly F#$k we are screwed once we stop kicking out oil if we can't get things knocked down because trans. cost will shot through the roof and with it, everything and spur another inflation run, WTF do we do J-POW-wow, what-do-we-do???". 

Know what J-POW says "F'd if I know, you morons made this mess! WTF do I gotta clean up your sh#t for all the time?!" And he's right. 

If the domestic tap doesnt get turned back on, and fast I mean like 35 days and ticking fast, oh man, things are gonna rip again. Buckle up kiddo's, the rides just getting started. 

And guess what, when they can't get costs under control, when they realize they can't kill this Hulk called inflation, there going to flip gears and go to the next which is some way some how of people having $$$$ to get through it. I 100% guarantee, watch.    And if you say no-way, well did ya think they'd pay people to sit at home, and they sure as heck did that didn't they. That has now set a presidence so yes 100% they can solve inflation by kicking out a national stipend, some kind of inflation-emergency-assistance-act, watch. 

Oh, but kicking out all that $$$$ will make inflation you say, lol, yeah, no kidding, but apparently Joe-Jo don't know-know because he just keeps doing it don't he. Didn't stop him before and what did he say then? That were all too dumb to get it, the gov issuing out these payments won't make inflation, no, we plebians just don't get it. Yeah, remember that. 

As I have been saying, if your planning for any big discount on anything, good luck with that, you have no idea what kind of ride were in store for, it's a whole different horror show. 

Jesus I don’t even know where to begin with this other than say first you are letting politics get in the way of money. Money has no business dealing with emotional reactions.

1) Barrels per day for the month of July was equal to barrels per day in 2019 July - https://www.eia.gov/dnav/pet/h...  - fuel is up for oh so many reasons not thel east of which is russia/ukraine.

2) the money paid out to people back in 2020 was beyond nominal in the grand scheme of things. It’s still nominal today. What wasn’t nominal? The trillions of dollar pumped into the financial system. You can’t do that and not drive up inflation. So your right govt money hit but it was nothing to do with handouts to people.

3) this time bomb has been in place in 2020. During that year though there was no avoiding it. It is what it is. 

The reality is there is no steering away from this until the jobs get hit. Simple as that. It’s why the fed wants to go after it. However, at the same time covid brought extra retirees and baby boomer retirement is accelerating. So labor force participation is down. 

At this point I’m not even sure how they get jobs down without crashing the economy, Trying to predict where the macro economy is going to go is a lost cause. but the way we got here is an absolute massive amount of factors all hitting at same time. 

On the flip side economically - we are still ine one of the strongest positions of any country in the world. Which is a feat in itself at this point. 
 

[Carlos Ptriawan]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Inflation is an event that has waves to it, not a singularity. We just got through the first wave, this is the beginning of the beginning. Wage inflation is coming if they can't do something to nerf it, like say kill the jobs market somehow. Sounding a bit familiar now, making a bit more sense yet why the Fed would want to harm the jobs market? yeah, cause what's next, WAGE INFLATION. 

The Fed is trying to head this off at the pass and, in large part, save the corporate interests. Wage inflation starts hitting and gaining steam corps will have to relent and take a hit to that awesome sauce of a profit they've enjoyed last few years and start kicking out those increases just to keep going. And then they price it into the goods, and then we get to suffer those increases, and on and on this lovely ride of inflation goes. 

Yupper-doodles. 

 Yeah, so we should follow what the Fed wants. Lowering the home price and increasing unemployment. Reset everything.

[John Carbone]

To give everyone a synopsis of what our friend @James Hamling. Has been saying for the past few weeks, until recently when he pivoted to housing will drop and it will be seasonal adjustments of up to 7 percent (pretty large for just seasonal adjustment in my opinion)

Here are some direct quotes from James….do these comments from a few weeks ago seem like it’s coming from a person expecting a 7 percent drop in housing? I don’t think so….he did a “mini pivot”

“So if we want to read between the lines, "correction" would more-so mean MORE income for MORE affordability by MORE people with MORE building to meet the net unit shortage. Not crash, if anything, a bull-run. “

“Because, we all agree inflation is real, it's here, it's making the cost of a plumber more right? The electrician costs more thanks to inflation. Furnace is more, concrete, nails, insulation, tappers, roofing, all the things more more more thanks to inflation.... BUT, lol, the finished product, a house, it's going to be, LESS??????”

“Home prices WILL go UP thanks to inflation. And yes, home sales volume will go DOWN due to affordability, and that's how we get to STAGFLATION market. “

“Today is very literally the BEST time to buy, unit price wise. Because next boot to fall is rising tax's, which will push cost of inputs for housing up even more. “

[James Hamling]

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Inflation is an event that has waves to it, not a singularity. We just got through the first wave, this is the beginning of the beginning. Wage inflation is coming if they can't do something to nerf it, like say kill the jobs market somehow. Sounding a bit familiar now, making a bit more sense yet why the Fed would want to harm the jobs market? yeah, cause what's next, WAGE INFLATION. 

The Fed is trying to head this off at the pass and, in large part, save the corporate interests. Wage inflation starts hitting and gaining steam corps will have to relent and take a hit to that awesome sauce of a profit they've enjoyed last few years and start kicking out those increases just to keep going. And then they price it into the goods, and then we get to suffer those increases, and on and on this lovely ride of inflation goes. 

Yupper-doodles. 

 Yeah, so we should follow what the Fed wants. Lowering the home price and increasing unemployment. Reset everything.

 Is there an option when it comes to the Fed? I never was informed there actions were optional, lol.     Like it or not, unless you can gather up a few million people to lend a hand, i don't think the Fed gives a smurf-fart what we think of what they do or don't do, there just gonna do it. 

And I never said lowering home prices, not sure where your grabbing that. The Fed doesnt really care about home prices, there focus is on corps having to raise wages, that's the real focus. Walmart doesn't give a daamn what you home costs but they sure as heck care about a 12% wage increase which translates to something like $3.4m per hour difference for them, maybe more. 

[John Carbone]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Inflation is an event that has waves to it, not a singularity. We just got through the first wave, this is the beginning of the beginning. Wage inflation is coming if they can't do something to nerf it, like say kill the jobs market somehow. Sounding a bit familiar now, making a bit more sense yet why the Fed would want to harm the jobs market? yeah, cause what's next, WAGE INFLATION. 

The Fed is trying to head this off at the pass and, in large part, save the corporate interests. Wage inflation starts hitting and gaining steam corps will have to relent and take a hit to that awesome sauce of a profit they've enjoyed last few years and start kicking out those increases just to keep going. And then they price it into the goods, and then we get to suffer those increases, and on and on this lovely ride of inflation goes. 

Yupper-doodles. 

 Yeah, so we should follow what the Fed wants. Lowering the home price and increasing unemployment. Reset everything.

 Is there an option when it comes to the Fed? I never was informed there actions were optional, lol.     Like it or not, unless you can gather up a few million people to lend a hand, i don't think the Fed gives a smurf-fart what we think of what they do or don't do, there just gonna do it. 

And I never said lowering home prices, not sure where your grabbing that. The Fed doesnt really care about home prices, there focus is on corps having to raise wages, that's the real focus. Walmart doesn't give a daamn what you home costs but they sure as heck care about a 12% wage increase which translates to something like $3.4m per hour difference for them, maybe more. 

 Here is a quote from Jerome powell….

he doesn’t care about home price, really? if you can interpret what he’s saying here, he is going to crash housing to do a “reset” and then for housing to rise up in line with wages and real growth. He knows the housing run up in last 2 years was fake growth. He’s telling you he is going to crash housing and your still in denial about it. 

This is classic “fed talk” without causing a panic. 

For the longer term what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again,” Powell said. “We in the housing market probably have to go through a correction to get back to that place.”

[Carlos Ptriawan]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

This could become convoluted easily.

Of course, Fed does care about home prices because OER is one of the largest component/influencer in CPI Inflation calculation. 

Fed Chairman ALREADY said OPENLY they want MILD home price correction,  you may want to subscribe yourself to Bloomberg news update. James.

[James Hamling]

Quote from @Michael Wooldridge:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @John Carbone:

looks like the fed is pricking the car bubble finally. Just received this email from a car dealer. To put this in perspective this vehicle mentioned below had a 5k premium above msrp 3 months ago. Now, it’s 4K below msrp, so in the matter of months 17 percent drop in value for new vehicle from peak.

Over the summer heard the same BS from the car gurus..”but there’s a car shortage from the chips, the chips, the chips, it will take years to recover….then rates spiked and poof there goes the demand. 

Actually CAR and FOOD prices already goes down.

Read the chart here:
https://www.zerohedge.com/mark... 

For Food it's already trending down including meat. Only cereal slightly up than last month.
Read the chart here:
https://www.fao.org/worldfoods... 

To be honest I don't understand why the Fed is so crazy fighting inflation when inflation is already almost normalized. These grand-pa really needs to be replaced their way of thinking LOL

 Carlos, my friend, I am not sure why you think inflation is under control, not even close. This is just the begining of it all. And the Fed is freaking out because of exactly what I have been saying and warning is the Front-Loading of the economy coming into this with huge shortages "nerf'd" the ability of rates to impact the inflation in meaningful ways as it should, and there seeing that. 

They are kicking out oil from strategic reserve like crazy, it's barely keeping fuel prices at this inflated level at best, they've done all these rapid rate hits, it's not pressing things down in any meaningful response. There pooping themselves thinking "Holly F#$k we are screwed once we stop kicking out oil if we can't get things knocked down because trans. cost will shot through the roof and with it, everything and spur another inflation run, WTF do we do J-POW-wow, what-do-we-do???". 

Know what J-POW says "F'd if I know, you morons made this mess! WTF do I gotta clean up your sh#t for all the time?!" And he's right. 

If the domestic tap doesnt get turned back on, and fast I mean like 35 days and ticking fast, oh man, things are gonna rip again. Buckle up kiddo's, the rides just getting started. 

And guess what, when they can't get costs under control, when they realize they can't kill this Hulk called inflation, there going to flip gears and go to the next which is some way some how of people having $$$$ to get through it. I 100% guarantee, watch.    And if you say no-way, well did ya think they'd pay people to sit at home, and they sure as heck did that didn't they. That has now set a presidence so yes 100% they can solve inflation by kicking out a national stipend, some kind of inflation-emergency-assistance-act, watch. 

Oh, but kicking out all that $$$$ will make inflation you say, lol, yeah, no kidding, but apparently Joe-Jo don't know-know because he just keeps doing it don't he. Didn't stop him before and what did he say then? That were all too dumb to get it, the gov issuing out these payments won't make inflation, no, we plebians just don't get it. Yeah, remember that. 

As I have been saying, if your planning for any big discount on anything, good luck with that, you have no idea what kind of ride were in store for, it's a whole different horror show. 

Jesus I don’t even know where to begin with this other than say first you are letting politics get in the way of money. Money has no business dealing with emotional reactions.

1) Barrels per day for the month of July was equal to barrels per day in 2019 July - https://www.eia.gov/dnav/pet/h...  - fuel is up for oh so many reasons not thel east of which is russia/ukraine.

2) the money paid out to people back in 2020 was beyond nominal in the grand scheme of things. It’s still nominal today. What wasn’t nominal? The trillions of dollar pumped into the financial system. You can’t do that and not drive up inflation. So your right govt money hit but it was nothing to do with handouts to people.

3) this time bomb has been in place in 2020. During that year though there was no avoiding it. It is what it is. 

The reality is there is no steering away from this until the jobs get hit. Simple as that. It’s why the fed wants to go after it. However, at the same time covid brought extra retirees and baby boomer retirement is accelerating. So labor force participation is down. 

At this point I’m not even sure how they get jobs down without crashing the economy, Trying to predict where the macro economy is going to go is a lost cause. but the way we got here is an absolute massive amount of factors all hitting at same time. 

On the flip side economically - we are still ine one of the strongest positions of any country in the world. Which is a feat in itself at this point. 
 

 If you think Politics and Money are in some way separate, well I don't know where to go from there, because I am sorry to say but Santa just does not exist. 

Not to mention the obvious that politics have been running this entire money ship. But I get it, you voted your guy, be dammed if hes anything but the greatest on earth and for that nobody and question any of the actions and were just going to pretend none of the last 2 years happened. Ok.     

On oil being same as 2019, quick question, how many autos are on the road today relative to 2019? Is there no more autos then in 2019? Is there no more trucks then 2019? Is there the exact same demand on oil as 2019?     No, there is more, a lot more demand then in 2019.     Your smart enough to know this was complete BS stat to use, you knew your were just skewing things. Why do you do that? I don't understand. 

And how today, with the inflation a fact IN THE FACE and still saying it had nothing to do with the trillions kicked out by Gov, how can you bury your head so deep in the dirt and ignore the obvious? Where else do you think the inflation came from? Inflation ferries?  

[Michael Wooldridge]

Quote from @James Hamling:

Quote from @Michael Wooldridge:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @John Carbone:

looks like the fed is pricking the car bubble finally. Just received this email from a car dealer. To put this in perspective this vehicle mentioned below had a 5k premium above msrp 3 months ago. Now, it’s 4K below msrp, so in the matter of months 17 percent drop in value for new vehicle from peak.

Over the summer heard the same BS from the car gurus..”but there’s a car shortage from the chips, the chips, the chips, it will take years to recover….then rates spiked and poof there goes the demand. 

Actually CAR and FOOD prices already goes down.

Read the chart here:
https://www.zerohedge.com/mark... 

For Food it's already trending down including meat. Only cereal slightly up than last month.
Read the chart here:
https://www.fao.org/worldfoods... 

To be honest I don't understand why the Fed is so crazy fighting inflation when inflation is already almost normalized. These grand-pa really needs to be replaced their way of thinking LOL

 Carlos, my friend, I am not sure why you think inflation is under control, not even close. This is just the begining of it all. And the Fed is freaking out because of exactly what I have been saying and warning is the Front-Loading of the economy coming into this with huge shortages "nerf'd" the ability of rates to impact the inflation in meaningful ways as it should, and there seeing that. 

They are kicking out oil from strategic reserve like crazy, it's barely keeping fuel prices at this inflated level at best, they've done all these rapid rate hits, it's not pressing things down in any meaningful response. There pooping themselves thinking "Holly F#$k we are screwed once we stop kicking out oil if we can't get things knocked down because trans. cost will shot through the roof and with it, everything and spur another inflation run, WTF do we do J-POW-wow, what-do-we-do???". 

Know what J-POW says "F'd if I know, you morons made this mess! WTF do I gotta clean up your sh#t for all the time?!" And he's right. 

If the domestic tap doesnt get turned back on, and fast I mean like 35 days and ticking fast, oh man, things are gonna rip again. Buckle up kiddo's, the rides just getting started. 

And guess what, when they can't get costs under control, when they realize they can't kill this Hulk called inflation, there going to flip gears and go to the next which is some way some how of people having $$$$ to get through it. I 100% guarantee, watch.    And if you say no-way, well did ya think they'd pay people to sit at home, and they sure as heck did that didn't they. That has now set a presidence so yes 100% they can solve inflation by kicking out a national stipend, some kind of inflation-emergency-assistance-act, watch. 

Oh, but kicking out all that $$$$ will make inflation you say, lol, yeah, no kidding, but apparently Joe-Jo don't know-know because he just keeps doing it don't he. Didn't stop him before and what did he say then? That were all too dumb to get it, the gov issuing out these payments won't make inflation, no, we plebians just don't get it. Yeah, remember that. 

As I have been saying, if your planning for any big discount on anything, good luck with that, you have no idea what kind of ride were in store for, it's a whole different horror show. 

Jesus I don’t even know where to begin with this other than say first you are letting politics get in the way of money. Money has no business dealing with emotional reactions.

1) Barrels per day for the month of July was equal to barrels per day in 2019 July - https://www.eia.gov/dnav/pet/h...  - fuel is up for oh so many reasons not thel east of which is russia/ukraine.

2) the money paid out to people back in 2020 was beyond nominal in the grand scheme of things. It’s still nominal today. What wasn’t nominal? The trillions of dollar pumped into the financial system. You can’t do that and not drive up inflation. So your right govt money hit but it was nothing to do with handouts to people.

3) this time bomb has been in place in 2020. During that year though there was no avoiding it. It is what it is. 

The reality is there is no steering away from this until the jobs get hit. Simple as that. It’s why the fed wants to go after it. However, at the same time covid brought extra retirees and baby boomer retirement is accelerating. So labor force participation is down. 

At this point I’m not even sure how they get jobs down without crashing the economy, Trying to predict where the macro economy is going to go is a lost cause. but the way we got here is an absolute massive amount of factors all hitting at same time. 

On the flip side economically - we are still ine one of the strongest positions of any country in the world. Which is a feat in itself at this point. 
 

 If you think Politics and Money are in some way separate, well I don't know where to go from there, because I am sorry to say but Santa just does not exist. 

Not to mention the obvious that politics have been running this entire money ship. But I get it, you voted your guy, be dammed if hes anything but the greatest on earth and for that nobody and question any of the actions and were just going to pretend none of the last 2 years happened. Ok.     

On oil being same as 2019, quick question, how many autos are on the road today relative to 2019? Is there no more autos then in 2019? Is there no more trucks then 2019? Is there the exact same demand on oil as 2019?     No, there is more, a lot more demand then in 2019.     Your smart enough to know this was complete BS stat to use, you knew your were just skewing things. Why do you do that? I don't understand. 

And how today, with the inflation a fact IN THE FACE and still saying it had nothing to do with the trillions kicked out by Gov, how can you bury your head so deep in the dirt and ignore the obvious? Where else do you think the inflation came from? Inflation ferries?  

Couldn’t be more wrong. I don’t vote. I could care less about politics. I pay attention to policy swings (which both sides cause) that relate to economics. But other than that could care less so no don’t care who is in office. Now somebody in this thread does care about office and it’s obvious from your emotional response you do. 

Consumption. Funny stat you’d actually be wrong about whats consumed per day, especially with remote work and the way EPA has changed. here’s a historical chart against it:

https://www.statista.com/stati...

As to inflation. I specifically pointed to the trillions kicked out by the gov into the financial system - so literally said it was the cause. Just not the slanted way you claimed it was. 

but decade of low rates (should have been raised starting in 2017 btw), longest bull run ever, reduced labor force participation, massive tax cuts leading to the great stock buybacks no cuts to spending, Covid, and then yes covid spending globally. We were overdue for a correction to say the least and then accelerated it. 

If you want to argue govt money overall happy to have a real discussion about it. And even that isn’t so simple after a 12 year bull run and free money. 

[Carlos Ptriawan]

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

[Jason Jaan]

A crash may be likely.

One thing to consider is the degree of damage that the coming recession will cause. Some of us say we are already in a recession, and thus how deep and for how long the recession will go. Recession leads to unemployment and we are starting to see news of layoffs trickling in. So you have homeowners laid off and wants to sell, at the same time you have buyers laid off so can't qualify for loan, thus the unraveling begins. There are those among us who are situated favorably so will not be affected by the recession and can keep their home or can do the loans, but there is the prognosis that a significant number of folks will be negatively impacted by the recession. It may take a few months to get there. I hope it doesn't happen but it appears likely.

[Joe Villeneuve]

Quote from @Michael Wooldridge:

Quote from @Joe Villeneuve:

Quote from @Nick H.:

@Michael Wooldridge @John Carbone & @john Carbone's PHD Stats friend - you guys have the right idea. As I mentioned, Joe V is really not saying anything other than "more leverage is good" or 80% leverage is good, but just wrapping it up in a very convoluted way (maybe to make it sound more sophisticated?), and to hide the assumptions he's making.

He makes (questionable) assumptions but doesn't disclose them, and makes them as if they are universally good assumptions (which they aren't - they're worth disclosing and worth discussion). For example, see the below from @Joe Villeneuve:

"Goes up or down, the impact is the same for everyone. When a property goes down it wipes out the same equity gains for all...from a percentage standpoint. From a dollar standpoint, the only one that matters, the more equity you have in a property, the more you have to lose.
Property 1:
Property Value = $200k
Equity = $100k (50%)
Market/Equity Loss/New PV = 20%/$40k/$160k
Cash flow after loss = Same as before loss

Property 2:
Property Value = $200k
Equity = $40k (20%)
Market/Equity Loss/New PV = 20%/$40k/$160k
Cash flow after loss = Same as before loss"

He is assuming that when properties lose equity value, it is not possible for rent (and ultimately cash flow) to go down. I wouldn't say that's a given - but if you did choose to make that assumption, at least be more explicit that you are preaching a strategy where an input is "rent cannot go down". Instead of just clearly communicating "Joe V is assuming rents will not go down even if property values go down" - he just writes out math as if that is a ubiquitous scenario that cash flow after loss would = same as before loss. It isn't - it's worth disclosing and worth discussion.

Clearly, if rents did go down, you would have less cushion on the downside with a property that had more leverage, because your net profit margin % would be lower w/ more leverage and higher with less leverage. i.e. RISKIER in a downside scenario. 

Re selling a property vs. refinancing, which he was asked countless times and finally chose to answer, the main thing I can discern (that ultimately shows you what assumption he is actually making) is: "1 - Cash out refi reduces the cash flow on the original property due to the larger mortgage payment" 

He is assuming that property B that you're buying (instead of refinancing property A) has more NOI (or a better risk adjusted return) than the property you're buying (and hopefully enough extra NOI to cover the transaction cost of selling + any loss if you're trading out of a lower interest mortgage into a higher interest mortgage).

Sure, if you have high conviction that there are much better properties than the one you bought a few years ago, then consider 1031. But it's still an assumption you're making. It's not "basic math" - it's just a simple assumption of, if there are much better properties out there, 1031 into them. 

Devil is always in the detail. Be weary of people that won't answer questions, and when they do, aren't straight with their answers. And those that appeal to authority (https://en.wikipedia.org/wiki/...) or in this case, Appeal to "math". 

I'd be more weary of those that tell others something can't be done, just because they can't do it.

I'll say this. I know it can be done but I think there is a bit more risk than outlined in the process especially if you lose 3-4 months of cash flow. Which I don't see how you don't lose. That said flipping houses to a bigger house can make sense 1000%. But you'd really have to know all ends of the spectrum.

Given that my ultimate goal is cash flow of say $4 Million (post taxes) - so that $2.5 - $3million is being paid directly as income. I don't see a scenario where flipping the houses makes sense.  Refinancing makes sense at a certain point to accelerate in about the middle of the process but I'm not sure I can find math that makes sense in the scenario I outlined above. 

Let me clarify something.  When I say "flip" I'm not referring to only houses.  Actually, what I'm referring to is what all flips actually are flipping...the cash that is in the current deals.  Keep in mind, when I refer to "cash" I mean both the liquid cash (cash flow) and frozen cash
(equity).
As you move up the ladder, or forward if you prefer, you are moving that cash from one resting place to another...each with a higher "value" than the previous one.  That means where you move it can be one location or many, one type of investment or many different ones, one market or a number of different ones.  All aspects of investing are open.
In my experiences, it isn't impossible to keep all of those locations in RE, although sometimes it can be more difficult than others.  The way I make it happen is based on knowing an unlimited number of ways to move that cash (strategies) and fit the correct strategy to the right property that works which delivers the specific financial criteria dictated by your REI plan,  at the specific timeline in that plan.  To do this the REI must stop looking for a needle in a haystack (one property at a time), and start looking for stacks of needles (markets).  Markets, need not be geographically based either.  Markets can refer to anything that is a group of common members that have common financial characteristics. This can be a group of properties, but it can also be a group based on a type of seller, or a type of RE (NNN).

[Joe Villeneuve]

Quote from @Michael Wooldridge:

Quote from @Greg R.:

Quote from @Michael Wooldridge:

Quote from @Joe Villeneuve:

Quote from @Nick H.:

@Michael Wooldridge @John Carbone & @john Carbone's PHD Stats friend - you guys have the right idea. As I mentioned, Joe V is really not saying anything other than "more leverage is good" or 80% leverage is good, but just wrapping it up in a very convoluted way (maybe to make it sound more sophisticated?), and to hide the assumptions he's making.

He makes (questionable) assumptions but doesn't disclose them, and makes them as if they are universally good assumptions (which they aren't - they're worth disclosing and worth discussion). For example, see the below from @Joe Villeneuve:

"Goes up or down, the impact is the same for everyone. When a property goes down it wipes out the same equity gains for all...from a percentage standpoint. From a dollar standpoint, the only one that matters, the more equity you have in a property, the more you have to lose.
Property 1:
Property Value = $200k
Equity = $100k (50%)
Market/Equity Loss/New PV = 20%/$40k/$160k
Cash flow after loss = Same as before loss

Property 2:
Property Value = $200k
Equity = $40k (20%)
Market/Equity Loss/New PV = 20%/$40k/$160k
Cash flow after loss = Same as before loss"

He is assuming that when properties lose equity value, it is not possible for rent (and ultimately cash flow) to go down. I wouldn't say that's a given - but if you did choose to make that assumption, at least be more explicit that you are preaching a strategy where an input is "rent cannot go down". Instead of just clearly communicating "Joe V is assuming rents will not go down even if property values go down" - he just writes out math as if that is a ubiquitous scenario that cash flow after loss would = same as before loss. It isn't - it's worth disclosing and worth discussion.

Clearly, if rents did go down, you would have less cushion on the downside with a property that had more leverage, because your net profit margin % would be lower w/ more leverage and higher with less leverage. i.e. RISKIER in a downside scenario. 

Re selling a property vs. refinancing, which he was asked countless times and finally chose to answer, the main thing I can discern (that ultimately shows you what assumption he is actually making) is: "1 - Cash out refi reduces the cash flow on the original property due to the larger mortgage payment" 

He is assuming that property B that you're buying (instead of refinancing property A) has more NOI (or a better risk adjusted return) than the property you're buying (and hopefully enough extra NOI to cover the transaction cost of selling + any loss if you're trading out of a lower interest mortgage into a higher interest mortgage).

Sure, if you have high conviction that there are much better properties than the one you bought a few years ago, then consider 1031. But it's still an assumption you're making. It's not "basic math" - it's just a simple assumption of, if there are much better properties out there, 1031 into them. 

Devil is always in the detail. Be weary of people that won't answer questions, and when they do, aren't straight with their answers. And those that appeal to authority (https://en.wikipedia.org/wiki/...) or in this case, Appeal to "math". 

I'd be more weary of those that tell others something can't be done, just because they can't do it.

I'll say this. I know it can be done but I think there is a bit more risk than outlined in the process especially if you lose 3-4 months of cash flow. Which I don't see how you don't lose. That said flipping houses to a bigger house can make sense 1000%. But you'd really have to know all ends of the spectrum.

Given that my ultimate goal is cash flow of say $4 Million (post taxes) - so that $2.5 - $3million is being paid directly as income. I don't see a scenario where flipping the houses makes sense.  Refinancing makes sense at a certain point to accelerate in about the middle of the process but I'm not sure I can find math that makes sense in the scenario I outlined above. 

 You're maximizing your buying power and can achieve the amount of properties needed to CF a lot faster w/ this method. If you hold you're just increasing rents as normally, 3-5% a year or whatever while also diminishing CF by pulling out cash. 

I gave a scenario above at $40k cash flow per year, that gets added to the $125k a yer in capital. The properties cost $220k to buy/furnish and add. The net of it is it's steam rolls fast. These are $720k properties. yes I could go up to 1.5-3million properties but given the risk there I'll wait until I have at least $300k in cash flow (100% reinvested right now) and buy one before I ever consider flipping. 

The problem I have with the premise is it assumes I go to $1.4million lets say and cash flow at least $95k a year (would roughly be the point where it makes sense). Maybe that's possible but I better have some decent cash flow before I do that. 

I'm just saying there are a whole lot more variables when you get to a certain point. So far I've heard the basics and yes it "could" work but I don't see a clear path to make that jump. Not in the way that is described anyway. 

Or put another way short of jumping into commercial or going very big on the purchases - I don't see any easy way to replace $40k cash flowing properties that quickly. When I hit something like $400k a year in cash flow I'll take a look at one of these larger properties and potentially test the water. If it works then I'll move to that but still keeping the small ones for a bit anyway. 

I think you are making assumptions here that are based on a common set of previous rules.  There are many, many rules that have existed for years (decades) that have never been used because there was never a need to use them.  They have existed, and they do work.  It has always been my way to think outside the box, but make no mistake, I NEVER act outside the box.  That box represents a person's knowledge, and it is the one thing in life that has absolutely no limits on it.  Thank God.
I also believe that the solution to every problem is buried within that problem, hidden in plain sight.  To find it one must train their brain to know what to look for, and their eyes to see it when they are staring right at it.  Once I finally realized this, the system I've developed, and described here, unfolded before me in slow motion.  It was a beautiful thing.  Unfortunately for me, it took many years to see it.  Now I do.
Two of the biggest road blocks to me understanding what I was looking at was a complete lack of understanding of how "risk" and "loss" existing in REI, and then it was easy to implement controls to both.  Risk will always be there, and so will the potential (and eventual) losses.  It is simply a matter of how you control those risks, and recover from losses that makes all forms of REI successful or not.
It all comes down to the REI ability to adjust, which comes down to strategies...and how they can turn mere properties into deals.  It isn't just the math that makes my system work.  It's how many options I have and how those options allow me to execute each step.
Unfortunately, this format is difficult at best to convey all of this...and that's very unfortunate...and, I might add, very frustrating, LOL.

[John Carbone]

I think what gets lost on a lot of people is that real estate investing, is actually pretty simple when real estate is undervalued with low rates. Some of the dumbest people I know have an amazing net worth because of investments in real estate. Everyone claims to have the “system”, but really it all boils down to they bought assets with cheap money (low rates) with max leverage, and they have been riding the wave of the fed. Real estate values just peaked so everyone was a winner. It’s smart to be invested in RE, but ultimately the compounded gains and multiple investments is derived off of leverage (I use it myself). We will see how this all unfolds as real estate adjusts to higher interest rates…it’s this new era of real estate that is going to require skill, and a great “system”

[Carlos Ptriawan]

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

[John Carbone]

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

[Michael Wooldridge]

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

Actually they’ve already stopped the borrowing against the houses with rates. Have you looked at HELOCs lately? 

As you said inflation is being caused by a lot of issues, the primary one at end of day is supply chains, both in terms of people and products, it’s also why the whole globe felt it. All the other factors really pale when compared against that. Simple statistic during 2020, 2021 we saw shipping containers hit $25,000, now they are right about $2,500. You want to talk about inflation….

As to making money with real estate investments. People have always made money. They will continue to make money in this environment and the next decade as well. Will it not be as lucrative temporarily? Sure. But then overall cash flow is unlikely to change. Yes rates are up but it should be offset by valuations. 

I think you’ll find people that were leveraged to the hilt having problems. BUt if you were putting down 25% doubt it will matter much in the grand scheme. Hell with 25% down this month I didn’t even need an appraisal for my last purchase given the property info and % down. 

Are there other investments that could make more? Of course always have been though with stocks. Thye bring entirely different risks. There is a saying though in the markets, it’s not a loss if you don’t sell it. Property isn’t much different either. 

[John Carbone]

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

Actually they’ve already stopped the borrowing against the houses with rates. Have you looked at HELOCs lately? 

As you said inflation is being caused by a lot of issues, the primary one at end of day is supply chains, both in terms of people and products, it’s also why the whole globe felt it. All the other factors really pale when compared against that. Simple statistic during 2020, 2021 we saw shipping containers hit $25,000, now they are right about $2,500. You want to talk about inflation….

As to making money with real estate investments. People have always made money. They will continue to make money in this environment and the next decade as well. Will it not be as lucrative temporarily? Sure. But then overall cash flow is unlikely to change. Yes rates are up but it should be offset by valuations. 

I think you’ll find people that were leveraged to the hilt having problems. BUt if you were putting down 25% doubt it will matter much in the grand scheme. Hell with 25% down this month I didn’t even need an appraisal for my last purchase given the property info and % down. 

Are there other investments that could make more? Of course always have been though with stocks. Thye bring entirely different risks. There is a saying though in the markets, it’s not a loss if you don’t sell it. Property isn’t much different either. 

Yes, I’m aware helocs are down now. High rates. which is one reason the fed is hiking. With higher rates, inflation (including home equity) will come down and it already is working. The fed can’t control supply side of it in terms of shipping, so I didn’t mention that. But yes, those prices are down too. Giving money people to stay home though, which was done by the gov, contributed to the supply chain issues. Without government interference in this whole fiasco, we would be in a much better spot. 

it’s been nearly impossible to lose money in real estate. With higher rates and other options that are cheaper, real estate is a bad investment for most people now. 

[Michael Wooldridge]

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

Actually they’ve already stopped the borrowing against the houses with rates. Have you looked at HELOCs lately? 

As you said inflation is being caused by a lot of issues, the primary one at end of day is supply chains, both in terms of people and products, it’s also why the whole globe felt it. All the other factors really pale when compared against that. Simple statistic during 2020, 2021 we saw shipping containers hit $25,000, now they are right about $2,500. You want to talk about inflation….

As to making money with real estate investments. People have always made money. They will continue to make money in this environment and the next decade as well. Will it not be as lucrative temporarily? Sure. But then overall cash flow is unlikely to change. Yes rates are up but it should be offset by valuations. 

I think you’ll find people that were leveraged to the hilt having problems. BUt if you were putting down 25% doubt it will matter much in the grand scheme. Hell with 25% down this month I didn’t even need an appraisal for my last purchase given the property info and % down. 

Are there other investments that could make more? Of course always have been though with stocks. Thye bring entirely different risks. There is a saying though in the markets, it’s not a loss if you don’t sell it. Property isn’t much different either. 

Yes, I’m aware helocs are down now. High rates. which is one reason the fed is hiking. With higher rates, inflation (including home equity) will come down and it already is working. The fed can’t control supply side of it in terms of shipping, so I didn’t mention that. But yes, those prices are down too. Giving money people to stay home though, which was done by the gov, contributed to the supply chain issues. Without government interference in this whole fiasco, we would be in a much better spot. 

it’s been nearly impossible to lose money in real estate. With higher rates and other options that are cheaper, real estate is a bad investment for most people now. 

Unemployment did not change peoples cash flow. If anything it lowered it so I’d love the logic how they caused inflation with that. BTW labor participation is still down so it wasn’t the unemployment and those dollar numbers are relatively small but somehow they caused inflation?   

Second would love to know how we would be better if not for some of the covid benefits. Even though some of the small business benefits were taken advantage of they kept many businesse afloat. Which again wasn’t changing overall cash flow. Countries that did nothing btw was worse off then the US, so no it’s unlikely we would be ifne.

As to real estate. I’d love the logic for how it’s a bad investment? It might require more capital, than it did in the past, but the basic principals haven’t changed. Unless you expect rents to drop dramatically also? 

[John Carbone]

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

Actually they’ve already stopped the borrowing against the houses with rates. Have you looked at HELOCs lately? 

As you said inflation is being caused by a lot of issues, the primary one at end of day is supply chains, both in terms of people and products, it’s also why the whole globe felt it. All the other factors really pale when compared against that. Simple statistic during 2020, 2021 we saw shipping containers hit $25,000, now they are right about $2,500. You want to talk about inflation….

As to making money with real estate investments. People have always made money. They will continue to make money in this environment and the next decade as well. Will it not be as lucrative temporarily? Sure. But then overall cash flow is unlikely to change. Yes rates are up but it should be offset by valuations. 

I think you’ll find people that were leveraged to the hilt having problems. BUt if you were putting down 25% doubt it will matter much in the grand scheme. Hell with 25% down this month I didn’t even need an appraisal for my last purchase given the property info and % down. 

Are there other investments that could make more? Of course always have been though with stocks. Thye bring entirely different risks. There is a saying though in the markets, it’s not a loss if you don’t sell it. Property isn’t much different either. 

Yes, I’m aware helocs are down now. High rates. which is one reason the fed is hiking. With higher rates, inflation (including home equity) will come down and it already is working. The fed can’t control supply side of it in terms of shipping, so I didn’t mention that. But yes, those prices are down too. Giving money people to stay home though, which was done by the gov, contributed to the supply chain issues. Without government interference in this whole fiasco, we would be in a much better spot. 

it’s been nearly impossible to lose money in real estate. With higher rates and other options that are cheaper, real estate is a bad investment for most people now. 

Unemployment did not change peoples cash flow. If anything it lowered it so I’d love the logic how they caused inflation with that. BTW labor participation is still down so it wasn’t the unemployment and those dollar numbers are relatively small but somehow they caused inflation?   

Second would love to know how we would be better if not for some of the covid benefits. Even though some of the small business benefits were taken advantage of they kept many businesse afloat. Which again wasn’t changing overall cash flow. Countries that did nothing btw was worse off then the US, so no it’s unlikely we would be ifne.

As to real estate. I’d love the logic for how it’s a bad investment? It might require more capital, than it did in the past, but the basic principals haven’t changed.

Are you serious with this? What causes supply chain to be impacted? Think about that for a minute. If you take a factory and shut it down, and pay those people to sit at home, they aren’t producing anything (less supply in the economy) Econ 101 says prices rise. Do that across the globe and that’s why it was 25K or whatever. 

well let’s see regarding real estate. How many developers went bankrupt last 10 years? Get back to me in 5 years and let’s see how many go bankrupt and you will see what I’m talking about. 

[Michael Wooldridge]

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

Actually they’ve already stopped the borrowing against the houses with rates. Have you looked at HELOCs lately? 

As you said inflation is being caused by a lot of issues, the primary one at end of day is supply chains, both in terms of people and products, it’s also why the whole globe felt it. All the other factors really pale when compared against that. Simple statistic during 2020, 2021 we saw shipping containers hit $25,000, now they are right about $2,500. You want to talk about inflation….

As to making money with real estate investments. People have always made money. They will continue to make money in this environment and the next decade as well. Will it not be as lucrative temporarily? Sure. But then overall cash flow is unlikely to change. Yes rates are up but it should be offset by valuations. 

I think you’ll find people that were leveraged to the hilt having problems. BUt if you were putting down 25% doubt it will matter much in the grand scheme. Hell with 25% down this month I didn’t even need an appraisal for my last purchase given the property info and % down. 

Are there other investments that could make more? Of course always have been though with stocks. Thye bring entirely different risks. There is a saying though in the markets, it’s not a loss if you don’t sell it. Property isn’t much different either. 

Yes, I’m aware helocs are down now. High rates. which is one reason the fed is hiking. With higher rates, inflation (including home equity) will come down and it already is working. The fed can’t control supply side of it in terms of shipping, so I didn’t mention that. But yes, those prices are down too. Giving money people to stay home though, which was done by the gov, contributed to the supply chain issues. Without government interference in this whole fiasco, we would be in a much better spot. 

it’s been nearly impossible to lose money in real estate. With higher rates and other options that are cheaper, real estate is a bad investment for most people now. 

Unemployment did not change peoples cash flow. If anything it lowered it so I’d love the logic how they caused inflation with that. BTW labor participation is still down so it wasn’t the unemployment and those dollar numbers are relatively small but somehow they caused inflation?   

Second would love to know how we would be better if not for some of the covid benefits. Even though some of the small business benefits were taken advantage of they kept many businesse afloat. Which again wasn’t changing overall cash flow. Countries that did nothing btw was worse off then the US, so no it’s unlikely we would be ifne.

As to real estate. I’d love the logic for how it’s a bad investment? It might require more capital, than it did in the past, but the basic principals haven’t changed.

Are you serious with this? What causes supply chain to be impacted? Think about that for a minute. If you take a factory and shut it down, and pay those people to sit at home, they aren’t producing anything (less supply in the economy) Econ 101 says prices rise. Do that across the globe and that’s why it was 25K or whatever. 

well let’s see regarding real estate. How many developers went bankrupt last 10 years? Get back to me in 5 years and let’s see how many go bankrupt and you will see what I’m talking about. 

We have no control over china. Pretty sure they didn’t get unemployment. We had approximately 6-8 weeks where we were shut down. Is your premise that was game over at that point? and if so how would you have avoided it at that time?

As to developers, what does that have to do with investors? There have always been shift in that space. 08 saw some and we’ll see some here. Why does that mean people can’t make money in real estate?  UNless you are literally talking about everybody but the investors, the builders, agents and lenders? 

[John Carbone]

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

Actually they’ve already stopped the borrowing against the houses with rates. Have you looked at HELOCs lately? 

As you said inflation is being caused by a lot of issues, the primary one at end of day is supply chains, both in terms of people and products, it’s also why the whole globe felt it. All the other factors really pale when compared against that. Simple statistic during 2020, 2021 we saw shipping containers hit $25,000, now they are right about $2,500. You want to talk about inflation….

As to making money with real estate investments. People have always made money. They will continue to make money in this environment and the next decade as well. Will it not be as lucrative temporarily? Sure. But then overall cash flow is unlikely to change. Yes rates are up but it should be offset by valuations. 

I think you’ll find people that were leveraged to the hilt having problems. BUt if you were putting down 25% doubt it will matter much in the grand scheme. Hell with 25% down this month I didn’t even need an appraisal for my last purchase given the property info and % down. 

Are there other investments that could make more? Of course always have been though with stocks. Thye bring entirely different risks. There is a saying though in the markets, it’s not a loss if you don’t sell it. Property isn’t much different either. 

Yes, I’m aware helocs are down now. High rates. which is one reason the fed is hiking. With higher rates, inflation (including home equity) will come down and it already is working. The fed can’t control supply side of it in terms of shipping, so I didn’t mention that. But yes, those prices are down too. Giving money people to stay home though, which was done by the gov, contributed to the supply chain issues. Without government interference in this whole fiasco, we would be in a much better spot. 

it’s been nearly impossible to lose money in real estate. With higher rates and other options that are cheaper, real estate is a bad investment for most people now. 

Unemployment did not change peoples cash flow. If anything it lowered it so I’d love the logic how they caused inflation with that. BTW labor participation is still down so it wasn’t the unemployment and those dollar numbers are relatively small but somehow they caused inflation?   

Second would love to know how we would be better if not for some of the covid benefits. Even though some of the small business benefits were taken advantage of they kept many businesse afloat. Which again wasn’t changing overall cash flow. Countries that did nothing btw was worse off then the US, so no it’s unlikely we would be ifne.

As to real estate. I’d love the logic for how it’s a bad investment? It might require more capital, than it did in the past, but the basic principals haven’t changed.

Are you serious with this? What causes supply chain to be impacted? Think about that for a minute. If you take a factory and shut it down, and pay those people to sit at home, they aren’t producing anything (less supply in the economy) Econ 101 says prices rise. Do that across the globe and that’s why it was 25K or whatever. 

well let’s see regarding real estate. How many developers went bankrupt last 10 years? Get back to me in 5 years and let’s see how many go bankrupt and you will see what I’m talking about. 

We have no control over china. Pretty sure they didn’t get unemployment. We had approximately 6-8 weeks where we were shut down. Is your premise that was game over at that point? and if so how would you have avoided it at that time?

As to developers, what does that have to do with investors? There have always been shift in that space. 08 saw some and we’ll see some here. Why does that mean people can’t make money in real estate?  UNless you are literally talking about everybody but the investors, the builders, agents and lenders? 

I clearly said “ We will see how this all unfolds as real estate adjusts to higher interest rates…it’s this new era of real estate that is going to require skill, and a great “system”
Anybody who could qualify for a loan last 10 years had made money. Most people will do what they always did and that won’t work. every time interest rates go up, that’s more money that gets transferred from the “investor” to the “bank” in the cash flow formula. Every hike is a tax to the investor.

 Regarding China, whose fault is it that we became reliant on them?

[Michael Wooldridge]

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Carlos Ptriawan:

Before it becomes very messy, Shelter/Rent/Owner Mortgage is one of the very important relative factors for CPI/Inflation calculation.

You could see the information how to calculate inflation here:

https://www.bls.gov/cpi/tables... 

Let's check Shelter Owner OER number : 22.988, it's an even higher importance than "Food price".

....So here is the problem, the way this dude calculating OER is by aggregating multiple regions, so we know in CA, for example, there's irrational exuberance activity in CA where some people overbid house, let's say 100 people doing this okay, but somewhere in Maine and Minnesota, there're 2,000 buyers that purchases home without overbid (normal price). The result of this aggregation is giving AN ILLUSION that there's nationwide irrational activity in housing, BUT THAT only happened in CA/WA only ; AND the number is statistically insignificant ! 

, to solve that problem it's best if Fed is doing recalculation WITHOUT the California number, we already calculated that mortgage/rent ratio is 0.67 in CA and 0.34 in the snow belt somewhere.... 
So if we do not include western/california number, suddenly you have MUCH  BETTER INFLATION number.



That's the first issue. The second issue is not about OK or not OK for Fed to hike rate. It's OK to rise but it still has to protect the market. For example, in my stupid calculation I know , with mortgage rate of 5% there's a match supply and demand for housing, especially in the west coast region. If they continue rising, the risk is overtightening unnecessarily and it cause more damaging economic activity/depression. 

As illustration, you know why The doc is asking our Blood Pressure to be below 120/80 right ? but they will increase your blood pressure if it goes below 100 as your organ could be damage. The Fed is doing this virtually hahaha, they lower our BP too much it causes organ failure LOL

 To prove my point, I'll open Fed Data for Owning Home and Zillow Monthly data.

Source/Month                  Jan Feb Mar Apr May Jun July Aug

West Fed OER Index 2022___394.239 395.783 397.457 399.367 401.519 404.144 406.994 409.704
CA Zillow 2022__$754 $769 $787 $801 $803 $792 $782 $764

If you examine this data series, there's home price reduction in CA/West region from May to June.
But if you see the data series from Fed, August data is still higher than May !

What does it mean ? The Fed is over-estimating data for home ownership cost, and since their calculation is wrong
and shelter is the major component, it gives an illusion of inflation. 

Second issue is they don't consider liquidity and 30 Year fixed rate mortgage.
My mortgage in 2022 is still the same as my mortgage in 2009, it's flat line.
Imagine if there're 1000 houses in CA, with 90% of people purchasing the property during 2009-2015.
So what's being sold and purchased is only about 2% of inventory. Those 2% buyers are the one that's driving up the price but the 90%
owner actually has no increasing mortgage payment. 
Since they follow home price it gives an illusion there's massive inflation while most people are living in deflation actually
as homeowners are having a static mortgage payments.

Fed is having statistics wrong all over the place.

Isn’t this true with any asset though. For example, stocks rise and fall daily, but only a small percent of shares trade hands on a given day. We have a 40 trillion dollar housing market, a lot of the “inflation” out there is not actually in the system since it’s just “equity” doing nothing in the economy. Problem is, people borrowed from this equity at highest levels ever recently, and it tapped into that 40 trillion and flooded the economy with actual dollars (ie inflation was unleashed). Obviously this is just one contributor to inflation, but In order to get all of these inflation bubbles out of the way, you have to bring down home values so people stop using them as piggy banks. People also do this with stocks, buying on margin and pledging portfolios as collateral for other purchases in the economy.   Fed lowering house/car/stock prices achieves this. It’s true though that people who own and hold don’t directly experience the inflation from a monthly cash flow. 

 Also, when you think about it, the welfare the government has given the housing market during covid pales in comparison to the direct stimmies. The former isn’t talked about though. 

Actually they’ve already stopped the borrowing against the houses with rates. Have you looked at HELOCs lately? 

As you said inflation is being caused by a lot of issues, the primary one at end of day is supply chains, both in terms of people and products, it’s also why the whole globe felt it. All the other factors really pale when compared against that. Simple statistic during 2020, 2021 we saw shipping containers hit $25,000, now they are right about $2,500. You want to talk about inflation….

As to making money with real estate investments. People have always made money. They will continue to make money in this environment and the next decade as well. Will it not be as lucrative temporarily? Sure. But then overall cash flow is unlikely to change. Yes rates are up but it should be offset by valuations. 

I think you’ll find people that were leveraged to the hilt having problems. BUt if you were putting down 25% doubt it will matter much in the grand scheme. Hell with 25% down this month I didn’t even need an appraisal for my last purchase given the property info and % down. 

Are there other investments that could make more? Of course always have been though with stocks. Thye bring entirely different risks. There is a saying though in the markets, it’s not a loss if you don’t sell it. Property isn’t much different either. 

Yes, I’m aware helocs are down now. High rates. which is one reason the fed is hiking. With higher rates, inflation (including home equity) will come down and it already is working. The fed can’t control supply side of it in terms of shipping, so I didn’t mention that. But yes, those prices are down too. Giving money people to stay home though, which was done by the gov, contributed to the supply chain issues. Without government interference in this whole fiasco, we would be in a much better spot. 

it’s been nearly impossible to lose money in real estate. With higher rates and other options that are cheaper, real estate is a bad investment for most people now. 

Unemployment did not change peoples cash flow. If anything it lowered it so I’d love the logic how they caused inflation with that. BTW labor participation is still down so it wasn’t the unemployment and those dollar numbers are relatively small but somehow they caused inflation?   

Second would love to know how we would be better if not for some of the covid benefits. Even though some of the small business benefits were taken advantage of they kept many businesse afloat. Which again wasn’t changing overall cash flow. Countries that did nothing btw was worse off then the US, so no it’s unlikely we would be ifne.

As to real estate. I’d love the logic for how it’s a bad investment? It might require more capital, than it did in the past, but the basic principals haven’t changed.

Are you serious with this? What causes supply chain to be impacted? Think about that for a minute. If you take a factory and shut it down, and pay those people to sit at home, they aren’t producing anything (less supply in the economy) Econ 101 says prices rise. Do that across the globe and that’s why it was 25K or whatever. 

well let’s see regarding real estate. How many developers went bankrupt last 10 years? Get back to me in 5 years and let’s see how many go bankrupt and you will see what I’m talking about. 

We have no control over china. Pretty sure they didn’t get unemployment. We had approximately 6-8 weeks where we were shut down. Is your premise that was game over at that point? and if so how would you have avoided it at that time?

As to developers, what does that have to do with investors? There have always been shift in that space. 08 saw some and we’ll see some here. Why does that mean people can’t make money in real estate?  UNless you are literally talking about everybody but the investors, the builders, agents and lenders? 

I clearly said “ We will see how this all unfolds as real estate adjusts to higher interest rates…it’s this new era of real estate that is going to require skill, and a great “system”
Anybody who could qualify for a loan last 10 years had made money. Most people will do what they always did and that won’t work. every time interest rates go up, that’s more money that gets transferred from the “investor” to the “bank” in the cash flow formula. Every hike is a tax to the investor.

Most people. That's a tough one to quantify since it's so broad. Most here look at the cash flow and CoC. If it makes them money they will still do it. I fit doesn't they won't. The principals there haven't really changed.

Most will also have to put 25% down now anyway so the lending should stop the true idiots.

[Greg R.]

I clearly said “ We will see how this all unfolds as real estate adjusts to higher interest rates…it’s this new era of real estate that is going to require skill, and a great “system”

Anybody who could qualify for a loan last 10 years had made money. Most people will do what they always did and that won’t work. every time interest rates go up, that’s more money that gets transferred from the “investor” to the “bank” in the cash flow formula. Every hike is a tax to the investor.

Most people. That's a tough on to quantify since it's so broad. Most here look at the cash flow and CoC. If it makes them money they will still do it. I fit doesn't they won't. The principals there haven't really changed.

Most will also have to put 25% down now anyway so the lending should stop the true idiots.

In my mind it's pretty clear as to how it will unfold. In economics/ business competitive landscapes there is a fundamental concept called "barrier to entry". The barrier to entry regarding REI and basic home ownership just had a significant shift. It's much more difficult now for investors and aspiring home owners to "get in" than what it's been in the last decade +.

Most investors, or at least most smart ones aren't going to buy a property that isn't going to make money - even if they are in position to place a big down payment and live with a 7% + rate. So again, something's got to give. Investors are only going to buy if there's money to be made (CF, COC, appreciation), and aspiring home owners are only going to buy if 1) they're able to (rates & qualification), and 2) if it's less expensive than renting.

Rates are over 7% and seem poised to keep climbing. A lender that I spoke to yesterday said that he thinks rates will come down probably beginning-mid 2024 prior to the elections, which I think is possible. Makes a lot of sense that politicians and bureaucrats would try to give people temporary amnesia prior to an election. But who knows what the heck can happen between now and then.