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 @Michael Wooldridge:

Quote from @John Carbone:

I’m not doom and gloom. Just stating facts. Facts don’t care about emotions. Business couldn’t be better right now, doesn’t mean I’m going to run out and buy overpriced crap people like you are trying to dump. Btw, who is Alex j? Someone else that has proven you wrong on your real estate bs mr super realtor?

Those two paragraphs really don’t add up. you aren’t doom and gloom but somehow predicting people with rentals and cash flow are going to go broke? 

This is why i keep coming at your comments despite saying I am expecting 15% nationwide adjustment - planning for it even. Does that suddenly mean we are better off with are money in the bank? Not only losing 8% to inflation but not making you money? 

Sorry but while the deal has to make sense when has that not been true? On top of that why is it you feel people should sit on cash? more importantly you yourself have outlined the tightening of underwriting and yet somehow people are going to magically lose money? 

I just don’t get it. Equity in some respects is paper money as you’ve pointed out but if you are down a bit on paper money (but up overall) and cash flowing strong why would you not keep growing? It may be a joke that realtors say now is the best time to buy BUT there is a kernel of truth in there that the saying stems from - which is simply the reality that you aren’t making money doing nothing (and right now you are losing it).  And it’s very hard to make up strong cash flow, 2 years worth, even if you buy as a house dips. If you aren’t selling in the near term you aren’t losing anything but the cash flow of 2 years + paid down principal for that time. 

So doom and gloom? yeah you pretty much are at this point. 

 To elaborate on your point Michael let game out a couple Twins, call them Ying and Yang. 

These Twins couldn't be more opposite right. And wouldn't ya know it Grandpa passed, leaving each the exact same inheritance, after tax $100k. Now the environment is today, with this roughly 8% interest rate. Ying, he get's really fearful over the impact of this inflation "burn rate" of his money, because he knows even at the best CD at the local bank, 2% means he's loosing about 6% per year. 

So, Ying spent some time researching and found an REI Realtor, because he knows Real Estate has been the #1 hedge against inflation since before America was, well, America. He sees this is a great "piggy bank" but more importantly, he can use depreciation to reduce the income tax's, the tenant pays down his mortgage, and historically real estate always appreciates over any 7yr or less timespan and since he has no plans to need it in 7yrs or less, he's loving it. 

Now Yang, he tends to get his "news" from who ever is trending on You Tube. He thinks everything is just about to crash and is just sitting on the cash in the bank, very proud to let everyone know exactly whats there but, no real plan for any use it seems. 

Now let's fast forward 10 years. 

The median home price is now $500k, a bottle of coke is $4, a gallon of gas is $10, and average rents are now $3,200. 

Ying is, well he's loving life. He bought 2 properties with the $100k and yeah, that first year kinda sucked because he was clearing a whole $425 per month in the pocket after covering all expenses including his Professional PM. But end of year that CPA was right, it made about $8,400 difference so that was nice. But then in year 2 he had to replace a couple appliances and things started to feel sucky with how the home prices dipped about 7% from when he closed, but then end of yr 2 he had a vacancy which Ying thought suked, until his PM had a new qualified tenant in just 10 days and at a 10% rent increase. That made a big difference in the net Ying got per month. And that trend kept happening, year by year, those rents kept ticking up a bit, and as his units averaged a vacancy every 2/3 yrs, well now he's putting a bit over $2k in his pocket every month PLUS he just found out he's got over $300k in equity! Holly cow, $300k and $2k in pocket every month, Ying is thinking how does life get any better, 100% worth that first year and the second!

Now Yang..... oh poor Yang. He kept that cash in the bank, earning his whole 1%. Turns out some life events happened and Yang needed a new car, so he high 5'd himself saying "i got this covered" and went to the dealership. But that's when it hit him, back when he deposited that $100k, he could get a truck, a really nice, decent truck with that $100k, but also could get a burger and fries for under $10 and now, yeah good luck as it's about $20. And as the truck sales person laughed over the $100k budget for a nice new truck, they stepped out as they took poor Yang on a tour of the "bargain" lot, because that's all that $105k would cover. That nice new truck, starts at $145k. 

Money at work CRUSHES money at rest, to a MASSIVE degree when best empowered by this beautiful thing called "Compounded Returns", or better known as Real Estate Investment. 

 Even just 24 months sitting the sideline watching, COSTS a person 24 potential rent payments, 24 tenant payments on your mortgage, 2 years of depreciation, and 2 years of inflation mitigation.     A short term fluctuation in median home prices means NOTHING, literally NOTHING, because your not selling that property in the next year or two are you? No, it's a PERFORMING Asset. And As the Great Recession proved, in math, that even if there is a GREAT RECESSION level event, all you have to do is NOT SELL for 7 years and you will never loose a penny, and actually, you'll make a whole bunch of $$$$. Because you were making $ the whole time you waited and now have nothing but opportunity for equity. 

[John Carbone]

Quote from @James Hamling:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

I’m not doom and gloom. Just stating facts. Facts don’t care about emotions. Business couldn’t be better right now, doesn’t mean I’m going to run out and buy overpriced crap people like you are trying to dump. Btw, who is Alex j? Someone else that has proven you wrong on your real estate bs mr super realtor?

Those two paragraphs really don’t add up. you aren’t doom and gloom but somehow predicting people with rentals and cash flow are going to go broke? 

This is why i keep coming at your comments despite saying I am expecting 15% nationwide adjustment - planning for it even. Does that suddenly mean we are better off with are money in the bank? Not only losing 8% to inflation but not making you money? 

Sorry but while the deal has to make sense when has that not been true? On top of that why is it you feel people should sit on cash? more importantly you yourself have outlined the tightening of underwriting and yet somehow people are going to magically lose money? 

I just don’t get it. Equity in some respects is paper money as you’ve pointed out but if you are down a bit on paper money (but up overall) and cash flowing strong why would you not keep growing? It may be a joke that realtors say now is the best time to buy BUT there is a kernel of truth in there that the saying stems from - which is simply the reality that you aren’t making money doing nothing (and right now you are losing it).  And it’s very hard to make up strong cash flow, 2 years worth, even if you buy as a house dips. If you aren’t selling in the near term you aren’t losing anything but the cash flow of 2 years + paid down principal for that time. 

So doom and gloom? yeah you pretty much are at this point. 

 To elaborate on your point Michael let game out a couple Twins, call them Ying and Yang. 

These Twins couldn't be more opposite right. And wouldn't ya know it Grandpa passed, leaving each the exact same inheritance, after tax $100k. Now the environment is today, with this roughly 8% interest rate. Ying, he get's really fearful over the impact of this inflation "burn rate" of his money, because he knows even at the best CD at the local bank, 2% means he's loosing about 6% per year. 

So, Ying spent some time researching and ford an REI Realtor, because he knows Real Estate has been the #1 hedge against inflation since before America was, well, America. He sees this is a great "piggy bank" but more importantly, he can use depreciation to reduce the income taxs he pays, the tenant pays down his mortgage, and historically real estate always appreciates over any 8yr+ timespan and since he has no plans to need it in 7yrs or less, he's loving it.

Now Yang, he tends to get his "news" from who ever is trending on You Tube. He thinks everything is just about to crash and is just sitting on the cash in the bank, very proud to let everyone know exactly whats there but, no real plan for any use it seems. 

Now let's fast forward 10 years. 

The median home price is now $500k, a bottle of coke is $4, a gallon of gas is $10, and average rents are now $3,200. 

Ying is, well he's loving life. He bought 2 properties with the $100k and yeah, that first year kinda sucked because he was clearing a whole $425 per month in the pocket after covering all expenses including his Professional PM. But end of year that CPA was right, it made about $8,400 difference so that was nice. But then in year 2 he had to replace a couple appliances and things started to feel sucky with how the home prices dipped about 7% from when he closed, but then end of yr 2 he had a vacancy which Ying thought suked, until his PM had a new qualified tenant in just 10 days and at a 10% rent increase. That made a big difference in the net Ying got per month. And that trend kept happening, year by year, those rents kept ticking up a bit, and as his units averaged a vacancy every 2/3 yrs, well now he's putting a bit over $2k in his pocket every month PLUS he just found out he's got over $300k in equity! Holly cow, $300k and $2k in pocket every month, Ying is thinking how does life get any better, 100% worth that first year and the second!

Now Yang..... oh poor Yang. He kept that cash in the bank, earning his whole 1%. Turns out some life events happened and Yang needed a new car, so he high 5'd himself saying "i got this covered" and went to the dealership. But that's when it hit him, back when he deposited that $100k, he could get a truck, a really nice, decent truck with that $100k, but also could get a burger and fries for under $10 and now, yeah good luck as it's about $20. And as the truck sales person laughed over the $100k budget for a nice new truck, they stepped out as they took poor Yang on a tour of the "bargain" lot, because that's all that $105k would cover. That nice new truck, starts at $145k. 

Money at work CRUSHES money at rest, to a MASSIVE degree when best empowered by this beautiful thing called "Compounded Returns", or better known as Real Estate Investment. 

 Even just 24 months sitting the sideline watching, COSTS a person 24 potential rent payments, 24 tenant payments on your mortgage, 2 years of depreciation, and 2 years of inflation mitigation.     A short term fluctuation in median home prices means NOTHING, literally NOTHING, because your not selling that property in the next year or two are you? No, it's a PERFORMING Asset. And As the Great Recession proved, in math, that even if there is a GREAT RECESSION level event, all you have to do is NOT SELL for 7 years and you will never loose a penny, and actually, you'll make a whole bunch of $$$$. Because you were making $ the whole time you waited and now have nothing but opportunity for equity. 

Yang decides to not go on YouTube, and instead talks to someone unbiased with a 5th grade calculator in his pocket. This person tells him, almost everything your brother is doing is right, the depreciation, inflation projection etc, but it’s clear to see housing is overpriced now. He shows him that 2 percent risk free is not the best he can get. He tells Yang only grandmas and realtors with no financial background even mention CD’s. He gets advised to put 10k now in IBONDS at almost 10 percent, and then another 10k in January (10k per calendar year, even more if yang is married and he can have his spouse do it too for 40K) but let’s assume he’s not married. 2K interest in 12 months, he takes the other 80k and chops it up with 40K in a 1 year treasury at 4.25 percent that will yield him $1700, and then the other 40K in a AAA bond yielding 8 percent earning him $3,200 a year. His total return on 100k is (3200+1700+2000) $6900 for a 6.9 percent return, over 3x better than what the realtor told his brother he could get. After the 12 months real estate drops 15 percent in value. That 500k house his brother bought last year is now only worth 425k and because conditions are softer now the seller will even pay his closing costs ($12,750 savings), and that starving realtor who represented his brother last year will even give Yang a 2 percent buyer rebate on commission for a cool $8500 in yangs pocket at closing. Since the home is only 425k now, Yang only needs to put down 85k for 20 percent down. So by waiting a year Yang now has his same house as his brother on the same block but let’s see how their numbers compare.

yang 425k purchase price 7 percent mortgage (assuming same rates for both and 85k dp ) with a $2,262 mortgage, with money in the bank of ($6900 in returns over last year, 15k dp savings, 12.75k from closing costs saved since paid by seller due to buyers market, and 8.5k from his realtor James as a rebate since he needs food money to survive) for a grand total of $43,150 with a house!

ying looks over his documents from last year to compare, and he sees he paid 515k with 20 percent down, his rei super realtor told him to just roll the closing costs into the loan and finance it since a tenant will be paying it anyway, so he paid 103k down (took 3K from his savings) with a 412k mortgage at 7 percent for a monthly payment of $2,741 with only 14K in equity.

after year 1 it looks like this:

yang:
43k cash in bank
$2,262 mortgage
85k in equity

ying:
immaterial amount of principle paid and rent
$2,741 mortgage 
15k in equity 

for next 30 years, Yang will be profiting $479 more than his brother, and Yang is halfway to buying a 2nd home. Yang then follows his realtors advice to talk with the accountant and he gets all the same benefits his brother is getting.

All by waiting a year for prices to only drop 15 percent (he didn’t want to time the bottom) he has over 100k in cash/equity than his brother now with almost $500 bucks more a month forever than his brother. He takes that $500 every month and pays his truck payment on a 6 month old truck that got repod from ironically him and his brothers realtor who couldn’t make the payments on it.  

yang is set for some serious profits going forward and ying is going to have to wait 7 years to see anything material, which by then Yang will have several cash flowing properties and that nice truck! 

[Carlos Ptriawan]

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

housing is overvalued by every metric right now. For me to buy something right now, I would need to have a return of capital <18 months. There are also AAA bonds that are yielding close to 9 percent now that are liquid. Cash flow is better with a lower rate…you have more room for error with a low rate. If you are buying with a 7 percent rate right now, property dependent, you will not be in a better spot a year from now had you parked that cash in tbills or AAA credit. The deals will be much better next year. 

 One thing that I learned over time is... "overvalued" is very very relative and subjective. You talk to someone from Alabama and they will say Bay Area homes are ridiculously overvalued, while someone from Taiwan will say what the hell why Bay Area housing is so affordable.

I am actually more interested, based on data, which factor drives price up and down. In Stock I know it's all about liquidity, not those PE ratio/inflation BUlls*t :-) :-) so after researching real estate so far, it seems..........liquidity is the highest factor affecting home price, rather than valuation itself.  

I'm extremely amazed by how supply growth reduced so much in this month of September (that it was killing the previous record of average supply declines).

[Michael Wooldridge]

Quote from @Carlos Ptriawan:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

housing is overvalued by every metric right now. For me to buy something right now, I would need to have a return of capital <18 months. There are also AAA bonds that are yielding close to 9 percent now that are liquid. Cash flow is better with a lower rate…you have more room for error with a low rate. If you are buying with a 7 percent rate right now, property dependent, you will not be in a better spot a year from now had you parked that cash in tbills or AAA credit. The deals will be much better next year. 

 One thing that I learned over time is... "overvalued" is very very relative and subjective. You talk to someone from Alabama and they will say Bay Area homes are ridiculously overvalued, while someone from Taiwan will say what the hell why Bay Area housing is so affordable.

I am actually more interested, based on data, which factor drives price up and down. In Stock I know it's all about liquidity, not those PE ratio/inflation BUlls*t :-) :-) so after researching real estate so far, it seems..........liquidity is the highest factor affecting home price, rather than valuation itself.  

I'm extremely amazed by how supply growth reduced so much in this month of September (that it was killing the previous record of average supply declines).

 September data is out? You could see a 4 month drop July to August but where are you seeing sept?

[Carlos Ptriawan]

The world just 17 years ago could live without crypto, NFT, SPAC, Zombie.
The world 200 years ago even could live without democracy and without a nation-state.

But the world population, last time I checked 2000 years ago, they still have houses LOL
real estate is totally different animal, it can't be compared to some bogus investment like nft lol

[Carlos Ptriawan]

It doesnt matter what you make what matter is what you save.
Even if your rental is having 90% COC but if you keep buying 80k european car continously , that car would cause inflation in your wallet, I think this is why 250k folks live paycheck to paycheck, they just dont have good financial sense, lot of people is like that, i know so many lol but they will say ooh I only live once and I hate being poor so there you go

[Carlos Ptriawan]

 September data is out? You could see a 4 month drop July to August but where are you seeing sept?

Prior 4 years data has September with new list of $490k-$500k houses availability, Sep 22 reduced this number to $440k; approximately -10% 

 
I guess primarily this is the reason why the home price is adjusted back to the upper 5% based on my quick zillow sold listing. 

The intel from my bay area realtor says they see more activities starting in august. 

if liquidity pattern move like this until 2024 we may not even have a crash after all. 

[Michael Wooldridge]

Quote from @Carlos Ptriawan:

 September data is out? You could see a 4 month drop July to August but where are you seeing sept?

Prior 4 years data has September with new list of $490k-$500k houses availability, Sep 22 reduced this number to $440k; approximately -10% 

 
I guess primarily this is the reason why the home price is adjusted back to the upper 5% based on my quick zillow sold listing. 

The intel from my bay area realtor says they see more activities starting in august. 

if liquidity pattern move like this until 2024 we may not even have a crash after all. 

Interesting so it’s still July to August where you saw a massive swing. But it did continue down in September. Honestly we really need to see sold vs yanked off market numbers. My gut says some of that extra downgrade is people realizing they can’t get top tier price (same thing in August) and yanking it off market. And like so many people they will just sit on nit. There is a person in the nation who hasn’t seen housing bouncing back recently. And unless they are forced to move they won’t which is sort of what we have been saying al along. 

That said I still think we see the downturn. Some people will have to sell it’s just not going to approach 08 levels which a 20% or higher number would be.

@John Carbone oddly enough looks like that trend down in August we were discussing continued in September.

[Carlos Ptriawan]

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @Michael Wooldridge:

yang is set for some serious profits going forward and ying is going to have to wait 7 years to see anything material, which by then Yang will have several cash flowing properties and that nice truck! 

Both of you John and James are really great at investments. So this is what I know from your conversation. 

The Ying guy.....seems like a realtor working for Lennar
The Yang guy.....seems like an investment banker working for JP morgan LOL

The yang guy, hates real estate, he doesn't like to fix other people toilet ; the ying guy is kinda lazy, he wanna get rent from his tenant out of Cleveland  LOL 

Both of you are good haha I really enjoyed the conversation.

[Carlos Ptriawan]

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

Interesting so it’s still July to August where you saw a massive swing. But it did continue down in September. Honestly we really need to see sold vs yanked off market numbers. My gut says some of that extra downgrade is people realizing they can’t get top tier price (same thing in August) and yanking it off market. And like so many people they will just sit on nit. There is a person in the nation who hasn’t seen housing bouncing back recently. And unless they are forced to move they won’t which is sort of what we have been saying al along. 

That said I still think we see the downturn. Some people will have to sell it’s just not going to approach 08 levels which a 20% or higher number would be.

@John Carbone oddly enough looks like that trend down in August we were discussing continued in September.

This is really surprising,  as it seems "the seller" is able to outsmart the Fed.

IF September is higher than July data for sure we will have a larger downturn. With this kind of liquidity, we may see a flat line or slight adjustment.

Let's see if the same liquidity pattern continues. Too bad I can't monitor this on a weekly basis.

[Michael Wooldridge]

Quote from @Carlos Ptriawan:

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

Interesting so it’s still July to August where you saw a massive swing. But it did continue down in September. Honestly we really need to see sold vs yanked off market numbers. My gut says some of that extra downgrade is people realizing they can’t get top tier price (same thing in August) and yanking it off market. And like so many people they will just sit on nit. There is a person in the nation who hasn’t seen housing bouncing back recently. And unless they are forced to move they won’t which is sort of what we have been saying al along. 

That said I still think we see the downturn. Some people will have to sell it’s just not going to approach 08 levels which a 20% or higher number would be.

@John Carbone oddly enough looks like that trend down in August we were discussing continued in September.

This is really surprising,  as it seems "the seller" is able to outsmart the Fed.

IF September is higher than July data for sure we will have a larger downturn. With this kind of liquidity, we may see a flat line or slight adjustment.

Let's see if the same liquidity pattern continues. Too bad I can't monitor this on a weekly basis.

 Lost me here. When you say September higher than JUly your data seems to indicates it not at least for the Bay Area. Are you meaning official sept data? Or the October data next month? I expect it to flat line / stagnate so agreed there.

As to outsmarting the fed not following that either. To me I think a lot of people decided to put their homes up end of spring/beginning of summer. Most people Make a decision like that and it takes time. Regardless of when they made decision they go up in June/July probably at ungodly high asking prices and as market turns they realize they won’t get top dollar. They never wanted/had to move but just wanted top dollar. When they couldn’t get it they yanked it off market. 

Not seeing that as outsmarting the fed but just responding to market realities. People won’t sell if they are going to lose money. Unless they had to. In 08 people were upside down, with ballooning payments, it made sense to walk away in some scenarios. NOw? It just doesn’t. 

Which means your pool of sellers is people moving for work (less likely these days for number of reasons, divorce (not a huge driver), and the 2-3% unemployed folks (since the other 2% have been unemployed). NOt exactly a big pool of people.

[Alex Hochberger]

Quote from @John Carbone:

Quote from @James Hamling:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

I’m not doom and gloom. Just stating facts. Facts don’t care about emotions. Business couldn’t be better right now, doesn’t mean I’m going to run out and buy overpriced crap people like you are trying to dump. Btw, who is Alex j? Someone else that has proven you wrong on your real estate bs mr super realtor?

Those two paragraphs really don’t add up. you aren’t doom and gloom but somehow predicting people with rentals and cash flow are going to go broke? 

This is why i keep coming at your comments despite saying I am expecting 15% nationwide adjustment - planning for it even. Does that suddenly mean we are better off with are money in the bank? Not only losing 8% to inflation but not making you money? 

Sorry but while the deal has to make sense when has that not been true? On top of that why is it you feel people should sit on cash? more importantly you yourself have outlined the tightening of underwriting and yet somehow people are going to magically lose money? 

I just don’t get it. Equity in some respects is paper money as you’ve pointed out but if you are down a bit on paper money (but up overall) and cash flowing strong why would you not keep growing? It may be a joke that realtors say now is the best time to buy BUT there is a kernel of truth in there that the saying stems from - which is simply the reality that you aren’t making money doing nothing (and right now you are losing it).  And it’s very hard to make up strong cash flow, 2 years worth, even if you buy as a house dips. If you aren’t selling in the near term you aren’t losing anything but the cash flow of 2 years + paid down principal for that time. 

So doom and gloom? yeah you pretty much are at this point. 

 To elaborate on your point Michael let game out a couple Twins, call them Ying and Yang. 

These Twins couldn't be more opposite right. And wouldn't ya know it Grandpa passed, leaving each the exact same inheritance, after tax $100k. Now the environment is today, with this roughly 8% interest rate. Ying, he get's really fearful over the impact of this inflation "burn rate" of his money, because he knows even at the best CD at the local bank, 2% means he's loosing about 6% per year. 

So, Ying spent some time researching and ford an REI Realtor, because he knows Real Estate has been the #1 hedge against inflation since before America was, well, America. He sees this is a great "piggy bank" but more importantly, he can use depreciation to reduce the income taxs he pays, the tenant pays down his mortgage, and historically real estate always appreciates over any 8yr+ timespan and since he has no plans to need it in 7yrs or less, he's loving it.

Now Yang, he tends to get his "news" from who ever is trending on You Tube. He thinks everything is just about to crash and is just sitting on the cash in the bank, very proud to let everyone know exactly whats there but, no real plan for any use it seems. 

Now let's fast forward 10 years. 

The median home price is now $500k, a bottle of coke is $4, a gallon of gas is $10, and average rents are now $3,200. 

Ying is, well he's loving life. He bought 2 properties with the $100k and yeah, that first year kinda sucked because he was clearing a whole $425 per month in the pocket after covering all expenses including his Professional PM. But end of year that CPA was right, it made about $8,400 difference so that was nice. But then in year 2 he had to replace a couple appliances and things started to feel sucky with how the home prices dipped about 7% from when he closed, but then end of yr 2 he had a vacancy which Ying thought suked, until his PM had a new qualified tenant in just 10 days and at a 10% rent increase. That made a big difference in the net Ying got per month. And that trend kept happening, year by year, those rents kept ticking up a bit, and as his units averaged a vacancy every 2/3 yrs, well now he's putting a bit over $2k in his pocket every month PLUS he just found out he's got over $300k in equity! Holly cow, $300k and $2k in pocket every month, Ying is thinking how does life get any better, 100% worth that first year and the second!

Now Yang..... oh poor Yang. He kept that cash in the bank, earning his whole 1%. Turns out some life events happened and Yang needed a new car, so he high 5'd himself saying "i got this covered" and went to the dealership. But that's when it hit him, back when he deposited that $100k, he could get a truck, a really nice, decent truck with that $100k, but also could get a burger and fries for under $10 and now, yeah good luck as it's about $20. And as the truck sales person laughed over the $100k budget for a nice new truck, they stepped out as they took poor Yang on a tour of the "bargain" lot, because that's all that $105k would cover. That nice new truck, starts at $145k. 

Money at work CRUSHES money at rest, to a MASSIVE degree when best empowered by this beautiful thing called "Compounded Returns", or better known as Real Estate Investment. 

 Even just 24 months sitting the sideline watching, COSTS a person 24 potential rent payments, 24 tenant payments on your mortgage, 2 years of depreciation, and 2 years of inflation mitigation.     A short term fluctuation in median home prices means NOTHING, literally NOTHING, because your not selling that property in the next year or two are you? No, it's a PERFORMING Asset. And As the Great Recession proved, in math, that even if there is a GREAT RECESSION level event, all you have to do is NOT SELL for 7 years and you will never loose a penny, and actually, you'll make a whole bunch of $$$$. Because you were making $ the whole time you waited and now have nothing but opportunity for equity. 

Yang decides to not go on YouTube, and instead talks to someone unbiased with a 5th grade calculator in his pocket. This person tells him, almost everything your brother is doing is right, the depreciation, inflation projection etc, but it’s clear to see housing is overpriced now. He shows him that 2 percent risk free is not the best he can get. He tells Yang only grandmas and realtors with no financial background even mention CD’s. He gets advised to put 10k now in IBONDS at almost 10 percent, and then another 10k in January (10k per calendar year, even more if yang is married and he can have his spouse do it too for 40K) but let’s assume he’s not married. 2K interest in 12 months, he takes the other 80k and chops it up with 40K in a 1 year treasury at 4.25 percent that will yield him $1700, and then the other 40K in a AAA bond yielding 8 percent earning him $3,200 a year. His total return on 100k is (3200+1700+2000) $6900 for a 6.9 percent return, over 3x better than what the realtor told his brother he could get. After the 12 months real estate drops 15 percent in value. That 500k house his brother bought last year is now only worth 425k and because conditions are softer now the seller will even pay his closing costs ($12,750 savings), and that starving realtor who represented his brother last year will even give Yang a 2 percent buyer rebate on commission for a cool $8500 in yangs pocket at closing. Since the home is only 425k now, Yang only needs to put down 85k for 20 percent down. So by waiting a year Yang now has his same house as his brother on the same block but let’s see how their numbers compare.

yang 425k purchase price 7 percent mortgage (assuming same rates for both and 85k dp ) with a $2,262 mortgage, with money in the bank of ($6900 in returns over last year, 15k dp savings, 12.75k from closing costs saved since paid by seller due to buyers market, and 8.5k from his realtor James as a rebate since he needs food money to survive) for a grand total of $43,150 with a house!

ying looks over his documents from last year to compare, and he sees he paid 515k with 20 percent down, his rei super realtor told him to just roll the closing costs into the loan and finance it since a tenant will be paying it anyway, so he paid 103k down (took 3K from his savings) with a 412k mortgage at 7 percent for a monthly payment of $2,741 with only 14K in equity.

after year 1 it looks like this:

yang:
43k cash in bank
$2,262 mortgage
85k in equity

ying:
immaterial amount of principle paid and rent
$2,741 mortgage 
15k in equity 

for next 30 years, Yang will be profiting $479 more than his brother, and Yang is halfway to buying a 2nd home. Yang then follows his realtors advice to talk with the accountant and he gets all the same benefits his brother is getting.

All by waiting a year for prices to only drop 15 percent (he didn’t want to time the bottom) he has over 100k in cash/equity than his brother now with almost $500 bucks more a month forever than his brother. He takes that $500 every month and pays his truck payment on a 6 month old truck that got repod from ironically him and his brothers realtor who couldn’t make the payments on it.  

yang is set for some serious profits going forward and ying is going to have to wait 7 years to see anything material, which by then Yang will have several cash flowing properties and that nice truck! 

Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.

That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.

Alternative scenarios: inflation has largely peaked and is now running at 3%-4% (YoY will show high another 8 months because prior inflation is baked in). Rents and housing prices stay flat in nominal terms.

Also, if prices stay nominally flat for two years (which is effectively a 10%-15% correction given inflation rates), but interest rates are higher, then Ying is much better off with his lower mortgage rate, 2 years of PITI paid, and a good rate.

Yes you are better off timing the market perfectly. Waiting for prices to "only drop 15%" and calling that not timing the bottom is a little silly. A 15% nominal correction is certainly plausible, but making that the conservative case in an 8% inflation environment is absurd.

[James Hamling]

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

housing is overvalued by every metric right now. For me to buy something right now, I would need to have a return of capital <18 months. There are also AAA bonds that are yielding close to 9 percent now that are liquid. Cash flow is better with a lower rate…you have more room for error with a low rate. If you are buying with a 7 percent rate right now, property dependent, you will not be in a better spot a year from now had you parked that cash in tbills or AAA credit. The deals will be much better next year. 

 One thing that I learned over time is... "overvalued" is very very relative and subjective. You talk to someone from Alabama and they will say Bay Area homes are ridiculously overvalued, while someone from Taiwan will say what the hell why Bay Area housing is so affordable.

I am actually more interested, based on data, which factor drives price up and down. In Stock I know it's all about liquidity, not those PE ratio/inflation BUlls*t :-) :-) so after researching real estate so far, it seems..........liquidity is the highest factor affecting home price, rather than valuation itself.  

I'm extremely amazed by how supply growth reduced so much in this month of September (that it was killing the previous record of average supply declines).

 September data is out? You could see a 4 month drop July to August but where are you seeing sept?

 Twin Cities just came out 10/12. A "catastrophic" (yes, I am being sarcastic) 4.8% median price increase. I expected a slight pull-back actually, of -3/4%, not an incline. And expected volume to drop off a bit more then what it did. This is Y.O.Y. data so it's vs the bananas '21' market that was record shattering.     It appears from the data the market is saying $325k is "the new normal" for what an "average" home should be priced. In 2019 it was "A New Record" when they hit $280k, many were shocked then and decided to sit the sideline "waiting for prices to come back down".

[Carlos Ptriawan]

Quote from @James Hamling:

 Twin Cities just came out 10/12. A "catastrophic" (yes, I am being sarcastic) 4.8% median price increase. I expected a slight pull-back actually, of -3/4%, not an incline. And expected volume to drop off a bit more then what it did. This is Y.O.Y. data so it's vs the bananas '21' market that was record shattering.     It appears from the data the market is saying $325k is "the new normal" for what an "average" home should be priced. In 2019 it was "A New Record" when they hit $280k, many were shocked then and decided to sit the sideline "waiting for prices to come back down".

This is a fantastic data point. But why we can't see it on a monthly basis, James ?
Your market is good as a gauge for a healthy market that has very little 'bubble'.

I

[Carlos Ptriawan]

Quote from @Alex Hochberger:

Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.

That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.

Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.

While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed. 

Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.

In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.

[Carlos Ptriawan]

Quote from @Michael Wooldridge:

 Lost me here. When you say September higher than JUly your data seems to indicates it not at least for the Bay Area. Are you meaning official sept data? Or the October data next month? I expect it to flat line / stagnate so agreed there.

As to outsmarting the fed not following that either. To me I think a lot of people decided to put their homes up end of spring/beginning of summer. Most people Make a decision like that and it takes time. Regardless of when they made decision they go up in June/July probably at ungodly high asking prices and as market turns they realize they won’t get top dollar. They never wanted/had to move but just wanted top dollar. When they couldn’t get it they yanked it off market. 

Not seeing that as outsmarting the fed but just responding to market realities. People won’t sell if they are going to lose money. Unless they had to. In 08 people were upside down, with ballooning payments, it made sense to walk away in some scenarios. NOw? It just doesn’t. 

Which means your pool of sellers is people moving for work (less likely these days for number of reasons, divorce (not a huge driver), and the 2-3% unemployed folks (since the other 2% have been unemployed). NOt exactly a big pool of people.

This is not complicated. It has nothing to do with bay area. We know there's a seasonality factor in housing inventory. If we truly believe there's a crash, an inventory in September 2022 SHOULD/MUST be higher than July/August 2022, but it is not. Starting in August/September, there's even reduced home for sale, maybe that house is already converted to rental property. 

As the effect of that action, the price is re-adjusted and moved back to top the top 5% median. I checked Zillow sold listing in many markets and price-wise, it's stabilized. There's no longer downturn like in the April-May timeframe. This is pretty fascinating as the market could go against Fed policy.

Relatively, market is "up" between April-May-June compare to August-September. I thought before, it would be the other way around.

[Greg R.]

Quote from @James Hamling:

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

 Twin Cities just came out 10/12. A "catastrophic" (yes, I am being sarcastic) 4.8% median price increase. I expected a slight pull-back actually, of -3/4%, not an incline. And expected volume to drop off a bit more then what it did. This is Y.O.Y. data so it's vs the bananas '21' market that was record shattering.     It appears from the data the market is saying $325k is "the new normal" for what an "average" home should be priced. In 2019 it was "A New Record" when they hit $280k, many were shocked then and decided to sit the sideline "waiting for prices to come back down".

@James Hamling  

Wait... so in 2019 the median home price was 280k, and right now it's 325k?

That would mean that prices only increased 16% through the bubble, which is not indictive of the kind of raises we saw in other parts of the country. Not sure what's average in your area, but in general 3-5% annual appreciation is pretty common. What you've seen is definitely accelerated but not to the the level of other markets. 

For instance, in San Diego 2019 median home price was 673k. At the peak of the bubble in May 2022 it was 912k, which represents a 35% increase. This is more than double the rate of increase you experienced in your market. 

[Carlos Ptriawan]

This is housing inventory between 7 days moving average vs 90 days,it's reflected clearly there's been no more new supply since August. This dude makes a job analyzing trends very easily.

[Alex Hochberger]

Quote from @Carlos Ptriawan:

Quote from @Alex Hochberger:

Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.

That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.

Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.

While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed. 

Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.

In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.

A few wall street adages:

Saying 1:

Bulls make money.

Bears make money.

Hogs get slaughtered.

Trying to time Ibonds exactly and teh housing market exactly is being a hog.

Move your capital to the asset class you think will give you the best return right now. Distribute your capital in a way that gives you the portfolio you desire.

Gaming out scenarios makes sense, but nobody KNOWS what the market is going to do, we're all predicting/guessing.

Saying 2:

Never fight the Fed.

The Fed is open that they are aiming for a housing correction. A correction is a 10% - 19.9% reduction. Nominal prices appear to be down 6% from peak. Inflation is up 8% in that time. That's a 14% correction. Expecting another 15%-30% from here "a crash" is NOT what the Fed is aiming for. That means the Fed will likely reverse course if that is happening.

Could prices drop another 15%? Of course. Could they stay flat? Also of course. Allocate your capital appropriately. But assuming you're going to time a market perfectly is crazy. Assuming you are going to time two markets perfectly is insane.

[James Hamling]

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

 Twin Cities just came out 10/12. A "catastrophic" (yes, I am being sarcastic) 4.8% median price increase. I expected a slight pull-back actually, of -3/4%, not an incline. And expected volume to drop off a bit more then what it did. This is Y.O.Y. data so it's vs the bananas '21' market that was record shattering.     It appears from the data the market is saying $325k is "the new normal" for what an "average" home should be priced. In 2019 it was "A New Record" when they hit $280k, many were shocked then and decided to sit the sideline "waiting for prices to come back down".

This is a fantastic data point. But why we can't see it on a monthly basis, James ?
Your market is good as a gauge for a healthy market that has very little 'bubble'.

I

 Let me know what your looking to see and i will dig in to pull the data and chart it out. 

[Carlos Ptriawan]

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

 Twin Cities just came out 10/12. A "catastrophic" (yes, I am being sarcastic) 4.8% median price increase. I expected a slight pull-back actually, of -3/4%, not an incline. And expected volume to drop off a bit more then what it did. This is Y.O.Y. data so it's vs the bananas '21' market that was record shattering.     It appears from the data the market is saying $325k is "the new normal" for what an "average" home should be priced. In 2019 it was "A New Record" when they hit $280k, many were shocked then and decided to sit the sideline "waiting for prices to come back down".

This is a fantastic data point. But why we can't see it on a monthly basis, James ?
Your market is good as a gauge for a healthy market that has very little 'bubble'.

I

 Let me know what your looking to see and i will dig in to pull the data and chart it out. 

please send me a new listing, active inventory month-to-month from Jan to Sep.

[Carlos Ptriawan]

Quote from @Alex Hochberger:

Quote from @Carlos Ptriawan:

Quote from @Alex Hochberger:

Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.

That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.

Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.

While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed. 

Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.

In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.

A few wall street adages:

Saying 1:

Bulls make money.

Bears make money.

Hogs get slaughtered.

Trying to time Ibonds exactly and teh housing market exactly is being a hog.

The I bond saving has 9% interest rate, there's no need even to time it. The window to purchase is every 6 months if I remember.

[Carlos Ptriawan]

This is perhaps because you don't work for an investment firm. All these investment firms make money by predicting and timing the market. There's nothing wrong with that. 90% they make huge amount of money, 10% lost.

[Michael Wooldridge]

Quote from @James Hamling:

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

Quote from @Michael Wooldridge:

Quote from @John Carbone:

housing is overvalued by every metric right now. For me to buy something right now, I would need to have a return of capital <18 months. There are also AAA bonds that are yielding close to 9 percent now that are liquid. Cash flow is better with a lower rate…you have more room for error with a low rate. If you are buying with a 7 percent rate right now, property dependent, you will not be in a better spot a year from now had you parked that cash in tbills or AAA credit. The deals will be much better next year. 

 One thing that I learned over time is... "overvalued" is very very relative and subjective. You talk to someone from Alabama and they will say Bay Area homes are ridiculously overvalued, while someone from Taiwan will say what the hell why Bay Area housing is so affordable.

I am actually more interested, based on data, which factor drives price up and down. In Stock I know it's all about liquidity, not those PE ratio/inflation BUlls*t :-) :-) so after researching real estate so far, it seems..........liquidity is the highest factor affecting home price, rather than valuation itself.  

I'm extremely amazed by how supply growth reduced so much in this month of September (that it was killing the previous record of average supply declines).

 September data is out? You could see a 4 month drop July to August but where are you seeing sept?

 Twin Cities just came out 10/12. A "catastrophic" (yes, I am being sarcastic) 4.8% median price increase. I expected a slight pull-back actually, of -3/4%, not an incline. And expected volume to drop off a bit more then what it did. This is Y.O.Y. data so it's vs the bananas '21' market that was record shattering.     It appears from the data the market is saying $325k is "the new normal" for what an "average" home should be priced. In 2019 it was "A New Record" when they hit $280k, many were shocked then and decided to sit the sideline "waiting for prices to come back down".

 So that 1,000% makes sense to me. Simple truth wages and job growth is strong. Everybody is focused on inflation but real wages has gone up a lot and I'm in the tech and talent market - with all the boomers retiring that trend is going to continue. So when you start talking about homes that are below the median i.e. Twin Cities it's not surrpising to me. It's one of the reasons why I don't think Florida will drop too much because as much as it's gone up it's not too crazy above the median.

Now what is above the median? The west coast hence the big drop. Anyway job markets are going to remain strong and the bottom end of the market below 500k will be fine, up to $1.2 million some shifts and it's likely between 1.75 million and 5 million we see the most shifts. Time will tell of course but I know where wages and talent is at and it's better than people realize despite all the factors going on.

[James Hamling]

Quote from @Alex Hochberger:

Quote from @Carlos Ptriawan:

Quote from @Alex Hochberger:

Yes. If one person times the bond market fantastically and then the housing market by 15%, they will start out about 25% ahead and do well.

That said, attempting to catch a falling knife and time the market is seen as generally foolhardy.

Yea one big mistake that I see from any newbie investors is whatever the asset class is they only see from short-term price movement, valuation,etc.

While the actual bullish market is created when there's economic growth. The economic growth is pre-mediated by Fed. 

Ultra-long cycle bullish investment is created when economic growth is moved from a negative move back past zero.

In 2022 we know now it's negative economic growth, 2023 too perhaps. We will see if 2024 has positive economic growth.

A few wall street adages:

Saying 1:

Bulls make money.

Bears make money.

Hogs get slaughtered.

Trying to time Ibonds exactly and teh housing market exactly is being a hog.

Move your capital to the asset class you think will give you the best return right now. Distribute your capital in a way that gives you the portfolio you desire.

Gaming out scenarios makes sense, but nobody KNOWS what the market is going to do, we're all predicting/guessing.

Saying 2:

Never fight the Fed.

The Fed is open that they are aiming for a housing correction. A correction is a 10% - 19.9% reduction. Nominal prices appear to be down 6% from peak. Inflation is up 8% in that time. That's a 14% correction. Expecting another 15%-30% from here "a crash" is NOT what the Fed is aiming for. That means the Fed will likely reverse course if that is happening.

Could prices drop another 15%? Of course. Could they stay flat? Also of course. Allocate your capital appropriately. But assuming you're going to time a market perfectly is crazy. Assuming you are going to time two markets perfectly is insane.

 Timing the market is a fools errand. Time IN the market is an investors journey. 

If curious of proof, 2008. Thousands upon thousands across the entire globe, in assorted markets from NY too Taipei, Ireland, Tokyo and beyond, of the great masses roughly 8 people timed the market. Hundreds of thousands missing it, 8 nailing it.     Your odd's of picking the winning Powerball are greater then of timing the market.