All Forum Posts by: John Carbone

I'm curious to know which markets are UP YOY on STR with a large data set, not just a random lake house.

Of course they did and now the regulations are so tight you need to be in the same dwelling as your guests to rent them.

 I’d much rather invest in an unregulated market and let it crash and burn with bad products and then everyone will be afraid to invest in them again. That’s where the real money is made, not because someone adds stricter and stricter regulations eventually leading to your own demise. 

 For a town with only 10k population it sure gets a lot of headlines….

An 8 percent increase in international travel since 2019…a far cry from “everyone” 

 There are pages of articles on this…..homebuilders don’t care about carry costs, they are building in their subdivisions and cranking them out and selling (trying) asap. Lumber prices have collapsed post Covid and other supply chain issues have been resolved, there are MASSIVE profit margins in new construction right now

https://www.investopedia.com/one-third-of-homes-for-sale-are...


And rentals are coming quickly…

https://citymonitor.ai/environment/housing/apartment-constru...

Yeah it’s not an easy thing to accomplish from the fed since they left interest rates too low for too long to finance the covid giveaway money for sitting at home.

Higher rates will slowly lead to more job loses/higher unemployment. Just Friday we finally saw the number tick up from 3.5 to 3.8 percent. It’s a slow process, but each month that passes with elevated interest rates like we have the economy gets squeezed harder. With higher unemployment, you get the pullback in rents due to demand softening. Humans are adaptable if need be, it’s not their choice to live with parents or roomates but it happens when economic conditions require it. This happened during 2008-2012 the college graduates then were the butt of jokes for still living with their parents. We have a housing shortage based on convenience and it’s essentially a first world problem.

also, there are many developments going on across the country to bring more rentals onto the market. Vacant high rise office buildings are being converted to apartments at a very cheap entry point for developers and many people are living in RVs right now across the country and that number is constantly going up. all of this puts downward pressure on housing rentals at the entry level point.

home builders are also building at record levels right now to meet the demand that’s out there with 2 year teaser rates to keep the payments low. They are building these as cheap as possible to keep costs low to get sales. 

on the single family home front, investors are pulling back drastically on home purchases to rent out. 

https://www.redfin.com/news/investor-home-purchases-drop-q2-...

we essentially have a “have” and the “have nots” economy now. Those who bought with sub 4 percent mortgages are in the “have” camp and those who do not have those favorable terms are the “have nots” life isn’t fair sometimes but it is what it is. Essentially if you listened to Dave Ramseys advice you have shot yourself in the foot twice and you are probably set back a decade or more in wealth. 

Trying to fight the math won’t change the outcome. Either wages need to rise astronomically, which data suggests it’s falling ….or asset prices need to fall….or the fed needs to go back to rate cuts and risk inflation spiraling out of control to keep asset prices elevated long term. 

 
https://fortune.com/2023/08/29/salaries-raises-new-hires-dec...

I’m not selling my holdings because my interest rates average mid 3s. 

Good points, and if you factor in declining revenues on top, it’s a nice recipe for a Molotov cocktail on the sales prices. That being said, there are still some late comers paying the higher multiples, but the herd is being thinned out as there are fewer and fewer buyers at current asking prices. 

I hear this argument all the time from people but it is a loaded answer. What was the asset price of your parents home when they bought and what was their household salary? The old timers I talk to usually have a story of “I made 20k a year and my house was 60k”, now you talk to younger kids who don’t already own a house and they are making 60-70k in a decent job but they are needing to pay 500k+ and they are spending half of household income on shelter. I’m sure you know what needs to happen in the long run to get things to equilibrium. 

ever since the fed started raising rates the market has been predicting a stop and rate cuts since we were at a 3-4 percent fed funds, now we are nearing 6 percent and no guidance on cuts, but the “market” still doesn’t believe it. It’s the belief that rates will go back lower that is keeping asset prices higher. If we had 22 percent mortgages like your parents did (even 6-8 percent) and the duration was known to be several years of it, asset prices would collapse 50 percent in both stocks and real estate. 

Notice how in every cycle the cost to own dips down to at or below the cost to rent. Cost to buy right now is parabolic relative to cost to rent. So either rents go much higher, which if that happens, the fed will keep raising rates because they are fighting inflation and shelter is their biggest culprit right now.