Stock market tips and experiences

[dradernh]

Originally Posted by TboneS54

I'm actively in the market right now. It seems low inventory (mostly due to the golden handcuffs you mention) are what are keeping prices pretty high. The 20 year high rates are making prices drop just a tiny bit. When rates get cut (they won't go down to the 3% range every homeowner has right now), I expect prices to RISE, not fall. More people qualifying, more competition, same low inventory.

I've sold high, hope to find the next house as prices are slowing coming down (it's very sideways right now, but some price cuts) but before rates would be cut and prices shoot up. My criteria for a house is very specific, so I may be waiting a while with such low inventory :/

California is estimated to be 3.5 MILLION units short of what the state's population level demands.

My take is that even if the NIMBYs backed-down (never going to happen) and ADUs were built everywhere possible (that will happen, eventually, now that state law permits it), it would take a very long time (decades?) to get caught up.

Between the cost of buildable land and lots, the present cost of construction materials, and the lack of qualified labor (which builders continually say is their biggest problem), there's a very high price floor under new construction in California.

One thing that helps is that the vast majority of Americans couldn't possibly afford to move to the Golden State. That at least keeps a reliable lid on demand.

[Chick Webb]

Originally Posted by TboneS54

I'm actively in the market right now. It seems low inventory (mostly due to the golden handcuffs you mention) are what are keeping prices pretty high. The 20 year high rates are making prices drop just a tiny bit. When rates get cut (they won't go down to the 3% range every homeowner has right now), I expect prices to RISE, not fall. More people qualifying, more competition, same low inventory.

There is some hope for increased existing home inventory. I heard this morning on CNBC that 1 in 10 listings are due to people having to move because they have been called back into their old offices as bosses have shut down fully remote work.

Homebuilders keep building, of course, because that's what they do as long as they can access capital. But they are juicing the market by buying down mortgages, eating the costs of upgrades, etc., which is gonna squeeze their margins. They always overbuild themselves into a hole in the ground and will hit the wall pretty soon, I think.

But the real key is, of course, jobs. As long as people have 'em they'll stay put. When they start losing them, and are forced to move, that's when we'll see inventories rise. If enough jobs are lost maybe prices will fall, or at least stop going up. And not just for houses, but for other goods and services.

The question is, will enough people lose their jobs that we'll have a proper recession so that we can get back to a growing economy, or are we going to bump along the bottom of a "soft landing" with minimal growth and persistently high inflation? Personally, I'm not a fan of stagflation (look at Europe) and would prefer the Fed have the balls to keep interest rates up long enough to break the back of the jobs market. Yes, that'll mean a lot of pain for a (relatively) small number of people, but it's infinitely preferable than stagflation, which hurts nearly everyone.

[Chick Webb]

Originally Posted by dradernh

Between the cost of buildable land and lots, the present cost of construction materials, and the lack of qualified labor (which builders continually say is their biggest problem), there's a very high price floor under new construction in California.

One thing that helps is that the vast majority of Americans couldn't possibly afford to move to the Golden State. That at least keeps a reliable lid on demand.

You forgot to include the cost of permitting, etc., which is outrageous here. To build a 200 sq ft ADU in my county you'll pay upwards of $50k. That's $250/sq ft! And you'll be tied up by the building department for the better part of a year for the privilege.

The government here (which "the people" - not me - voted for) is going to fix the lack of housing problem... by reducing the population of the state. People are fleeing in droves.

The Golden State has become the Golden-Shower State, IMHO. Since I moved here in 1980 is just one stupid thing after the other and there are few signs of things changing. PG&E is going to start charging you for electricity not on the amount of electricity you use, but on your income. Our $21,000 bottle-of-wine-drinking governor is heading to China to talk climate-change instead of trying to actually do something about the tens of thousands of mentally ill & drug addicted people running amok in our cities that his policies have created.

Wait until that knucklehead is president. Y'all are gonna get a taste of this lunacy.

I could go on, but you get the picture. I'm lucky to live in a lovely little corner of the coast that has largely been spared to date, but it's changing and now even here we're seeing things we've never seen (or wanted to see) before. My wife grew up here and it's going to be tough to get her to go, but eventually we likely will. Otherwise, I'm afraid the state's going to milk us dry while our quality of life just keeps slipping away. Not sure I can do well enough in the market to stay ahead of it.

[ASAP]

Originally Posted by Chick Webb

There is some hope for increased existing home inventory. I heard this morning on CNBC that 1 in 10 listings are due to people having to move because they have been called back into their old offices as bosses have shut down fully remote work.

Homebuilders keep building, of course, because that's what they do as long as they can access capital. But they are juicing the market by buying down mortgages, eating the costs of upgrades, etc., which is gonna squeeze their margins. They always overbuild themselves into a hole in the ground and will hit the wall pretty soon, I think.

But the real key is, of course, jobs. As long as people have 'em they'll stay put. When they start losing them, and are forced to move, that's when we'll see inventories rise. If enough jobs are lost maybe prices will fall, or at least stop going up. And not just for houses, but for other goods and services.

The question is, will enough people lose their jobs that we'll have a proper recession so that we can get back to a growing economy, or are we going to bump along the bottom of a "soft landing" with minimal growth and persistently high inflation? Personally, I'm not a fan of stagflation (look at Europe) and would prefer the Fed have the balls to keep interest rates up long enough to break the back of the jobs market. Yes, that'll mean a lot of pain for a (relatively) small number of people, but it's infinitely preferable than stagflation, which hurts nearly everyone.

We're pretty much at a full blown housing crisis at this point that I see 0 resolution for... at least not in the near term (10 years). We are now paying for the sins since the end of the great recession.

And yes, I agree... there would be a ton of pain but this soft landing bullshit is just prolonging the pain and creating further problems. Jack the rate up to 10% and stop with the liquidity bullshit that the fed has been going back and forth on... QE came right back as soon as those banks started to fail. There are simply too many problems right now out there that NEED to be rightsized that sadly only killing demand and a recession can fix.

[chassis]

Setting aside interest rates and liquidity, what is the supply of dwellings relative to total population?

In the end, people need a place to sleep every night, agree?

What is the aggregate (nationwide) situation in this regard?

[TboneS54]

Originally Posted by chassis

Setting aside interest rates and liquidity, what is the supply of dwellings relative to total population?

In the end, people need a place to sleep every night, agree?

What is the aggregate (nationwide) situation in this regard?

Judging by the amount of cars parked on the streets, everyone's living in one house (3+ generations).

[bagekko]

There was a laughable story I read this week that said housing prices were being kept high for two reasons; 1 from from separating boomers, empty nesters who now realize they don't want to be together anymore and now 1 of them needs a new place to live, 2 from boomers/gen x who have adult children living with them and they want them out.

Originally Posted by chassis

Setting aside interest rates and liquidity, what is the supply of dwellings relative to total population?

In the end, people need a place to sleep every night, agree?

What is the aggregate (nationwide) situation in this regard?

[Chick Webb]

Originally Posted by chassis

Setting aside interest rates and liquidity, what is the supply of dwellings relative to total population?

In the end, people need a place to sleep every night, agree?

What is the aggregate (nationwide) situation in this regard?

I don't pretend to be an expert in this area, but it's "household formation" that drives demand from what I understand. That can come from a variety of sources, the 30 yr old who finally moves out of mom & dad's basement, the college grad who just got their first job in Scranton, people getting married, etc. And, one big one these days that nobody wants to acknowledge - immigration. As in thousands of "family units" coming across the border every month. They have to live somewhere and every single one of them is competing against those already here.

I wonder, though, how relevant the "nationwide" part of your question is chassis. Isn't housing a uniquely local issue? What, for instance, does it matter to that grad moving to Scranton what the the price of an apartment in Miami is? And when mass migration to, say NYC, occurs local leaders immediately start talking about moving them to somewhere where there's housing available, like upstate NY. In other words, another locale. Here in CA it's become hyper-local, with neighborhoods in small cities like Santa Cruz fighthing each other over development; this being CA, fighting to keep it out of their own, of course. And, personally, I don't give a rat's ass what the cost of a house in upstate NY is, cuz aint' a snowball's chance in hell I'm moving there.

[dradernh]

Originally Posted by chassis

Setting aside interest rates and liquidity, what is the supply of dwellings relative to total population?

It's been flat in this country for decades.

From this week's issue of The Economist:

[chassis]

Originally Posted by dradernh

It's been flat in this country for decades.

From this week's issue of The Economist:

Interesting, thanks. Relatively narrow range, and the U.S. is somewhere near the median. The housing market in France is getting looser, meaning supply is increasing relative to the population. The U.S. aggregate supply is increasing evidenced by the flat rate per 100, but the U.S. housing market is not getting meaningfully looser (or tighter).

The question arises as to what is the optimal housing stock to population ratio.

[tgrundke]

Housing will get sorted, but it's going to take time. During the financial crisis the top came in 2007, the bottom didn't hit until early 2012. 5 years.

Current market is not the same dynamic, but my point is that these things take time to play out.

Lots of variables in the mix: the short term rental market is starting to unwind, especially in popular areas like Florida, Sierras, Montanta. This will add inventory, especially if people become distressed. Boomer retirements/downsizing/dying will free up inventory.

That ~10% of the market that *has* to sell (death/divorce/etc.) will have to adjust to what the market will bear. This will put pressure on others. In terms of inventory: there's plenty of it. The problem is affordability, and the fact that investors (including moms and pops) bought up tons of inventory to then rent out.

The longer people look at housing as an investment opportunity versus a place to live, the longer it will take for the bubble to deflate. This isn't that dissimilar to higher education or to the previous financial bust in '08: you've got herd mentality that has driven money into an asset class, and outside of a major crisis, this time wont be a big bbang, but a slow deflation.

We're seeing similar in higher education, as enrollment rates are dropping, schools are consolidating/closing, and students are electing to attend more affordable options. Took 80 years to build the educational complex, it ain't collapsing overnight. Housing will be similar - the unwind will take time.

[chassis]

Originally Posted by tgrundke

Housing will get sorted, but it's going to take time. During the financial crisis the top came in 2007, the bottom didn't hit until early 2012. 5 years.

Current market is not the same dynamic, but my point is that these things take time to play out.

Lots of variables in the mix: the short term rental market is starting to unwind, especially in popular areas like Florida, Sierras, Montanta. This will add inventory, especially if people become distressed. Boomer retirements/downsizing/dying will free up inventory.

That ~10% of the market that *has* to sell (death/divorce/etc.) will have to adjust to what the market will bear. This will put pressure on others. In terms of inventory: there's plenty of it. The problem is affordability, and the fact that investors (including moms and pops) bought up tons of inventory to then rent out.

The longer people look at housing as an investment opportunity versus a place to live, the longer it will take for the bubble to deflate. This isn't that dissimilar to higher education or to the previous financial bust in '08: you've got herd mentality that has driven money into an asset class, and outside of a major crisis, this time wont be a big bbang, but a slow deflation.

We're seeing similar in higher education, as enrollment rates are dropping, schools are consolidating/closing, and students are electing to attend more affordable options. Took 80 years to build the educational complex, it ain't collapsing overnight. Housing will be similar - the unwind will take time.

Excellent post.

[dradernh]

Originally Posted by chassis

The question arises as to what is the optimal housing stock to population ratio.

Perhaps it's one where home prices and rents are in a range that Americans in a given region feel they can afford.

[tgrundke]

Originally Posted by dradernh

Perhaps it's one where home prices and rents are in a range that Americans in a given region feel they can afford.

Part of the problem is that we've become a nation of people who don't move. At one point, this population would migrate for better opportunities, housing, religious tolerance, etc.

Truth is, you want affordable housing? There's plenty in Tulsa, OK. Detroit. Cleveland. Indiana. Arkansas.

Problem is: nobody wants to go there. So, in many ways, this is the same story told decade after decade.

[chassis]

Originally Posted by tgrundke

Part of the problem is that we've become a nation of people who don't move. At one point, this population would migrate for better opportunities, housing, religious tolerance, etc.

Got data?

[dradernh]

Originally Posted by chassis

Got data?

It's been reported regularly for some time now that Americans' rate of moving has been trending down. The US Census Bureau has the raw data in tabular form; except in bits and pieces, however, it can take some time to find a useful chart or graph. There's one below.

I did come across one interesting tidbit while searching: renters move much more frequently than do homeowners. No surprise there, I suppose.

Declining Rates of Domestic Migration within the U.S. (1970-2019)

Source: https://www.thepolicycircle.org/mini...etween-states/

[chassis]

Originally Posted by dradernh

It's been reported regularly for some time now that Americans' rate of moving has been trending down. The US Census Bureau has the raw data in tabular form; except in bits and pieces, however, it can take some time to find a useful chart or graph. There's one below.

I did come across one interesting tidbit while searching: renters move much more frequently than do homeowners. No surprise there, I suppose.

Declining Rates of Domestic Migration within the U.S. (1970-2019)

Source: https://www.thepolicycircle.org/mini...etween-states/

Thanks for the data. It doesn't paint a picture of a burning platform in my view. What is the takeaway in the data in your view?

What is the problem you referred to a few posts ago?

Domestic migration is a relative concept, therefore problematic. Domestic migration can refer to migration between regions, states, counties, townships, etc. You mentioned states and cities a while back so are you talking about a state-based definition, or something else?

[ASAP]

Originally Posted by tgrundke

Housing will get sorted, but it's going to take time. During the financial crisis the top came in 2007, the bottom didn't hit until early 2012. 5 years.

Current market is not the same dynamic, but my point is that these things take time to play out.

Lots of variables in the mix: the short term rental market is starting to unwind, especially in popular areas like Florida, Sierras, Montanta. This will add inventory, especially if people become distressed. Boomer retirements/downsizing/dying will free up inventory.

That ~10% of the market that *has* to sell (death/divorce/etc.) will have to adjust to what the market will bear. This will put pressure on others. In terms of inventory: there's plenty of it. The problem is affordability, and the fact that investors (including moms and pops) bought up tons of inventory to then rent out.

The longer people look at housing as an investment opportunity versus a place to live, the longer it will take for the bubble to deflate. This isn't that dissimilar to higher education or to the previous financial bust in '08: you've got herd mentality that has driven money into an asset class, and outside of a major crisis, this time wont be a big bbang, but a slow deflation.

We're seeing similar in higher education, as enrollment rates are dropping, schools are consolidating/closing, and students are electing to attend more affordable options. Took 80 years to build the educational complex, it ain't collapsing overnight. Housing will be similar - the unwind will take time.

These are all good points and true but we are in a way different dynamic now than ever before. The largest run up ever in housing prices happened in the past 3 years and wage growth hasn't remotely followed. In order to reset things back, we would need to have a at least a 30% correction and a return to lower rates. There is absolutely 0 chance this happens unless we have a full blown recession and mass unemployment. I predict the next 5-10 years will be a mix of stagflation and a further class divide... I have no idea how anyone could help solve this at this point. We've never had 10 years of artificially low rates and such a small supply of housing... also the white collar labor market is horrible right now. The fed will just continue to play games on lagging indicators to save Wall Street while we will all pay the brunt of it in the form of inflation.

[ASAP]

Originally Posted by dradernh

It's been reported regularly for some time now that Americans' rate of moving has been trending down. The US Census Bureau has the raw data in tabular form; except in bits and pieces, however, it can take some time to find a useful chart or graph. There's one below.

I did come across one interesting tidbit while searching: renters move much more frequently than do homeowners. No surprise there, I suppose.

Declining Rates of Domestic Migration within the U.S. (1970-2019)

Source: https://www.thepolicycircle.org/mini...etween-states/

On the whole, with better tech and more local opportunities available... migration should in theory be decreasing... an increase in migration from region to region means areas local to you are probably lacking opportunities... we are so advanced now, people shouldn't have to move every few years to gain opportunities... i feel this was kind of more of the way of the olden days.

[tgrundke]

Originally Posted by ASAP

These are all good points and true but we are in a way different dynamic now than ever before. The largest run up ever in housing prices happened in the past 3 years and wage growth hasn't remotely followed. In order to reset things back, we would need to have a at least a 30% correction and a return to lower rates. There is absolutely 0 chance this happens unless we have a full blown recession and mass unemployment. I predict the next 5-10 years will be a mix of stagflation and a further class divide... I have no idea how anyone could help solve this at this point. We've never had 10 years of artificially low rates and such a small supply of housing... also the white collar labor market is horrible right now. The fed will just continue to play games on lagging indicators to save Wall Street while we will all pay the brunt of it in the form of inflation.

Correct on much of this. The runup the last three years isn't limited to houses, it has impacted the cost of everything. Add in another $4TN in excess liquidity and we've got a veritable dumpster fire.

I'm on the side of: housing prices will decline before interest rates are cut significantly. We're on the other side of the interest rate cycle for the foreseeable future - rates will stay elevated. Energy prices, labor shortages, reshoring/nearshoring, societal change in attitudes toward work, lowered birth rates, climate initiatives, government debt interest...all inflationary.

Unlike the last 40 years' deflationary opportunities (automation, offshoring, cheap energy), we're now scaling a wall of inflationary pressures.

We've got 20 years of financial decisions based upon artificially low (or zero) interest rates. It's going to take time for this to correct, and all that assumes no major black swan events occur.

[tgrundke]

Originally Posted by ASAP

On the whole, with better tech and more local opportunities available... migration should in theory be decreasing... an increase in migration from region to region means areas local to you are probably lacking opportunities... we are so advanced now, people shouldn't have to move every few years to gain opportunities... i feel this was kind of more of the way of the olden days.

People didn't move just for work, but quality of life issues: the mass migration out of cities into the suburbs starting in 1945 was borne out of a desire to move away from noise, pollution, crime. When affordable suburban homes became available, those returning GIs packed their bags and moved on out in record numbers.

If anything, migration patterns during the pandemic reinforce this: the mass migrations of people out of places like New York, Illinois, California into places like Idaho, Texas, Montana, Carolinas and Florida were for quality of life issues.

[ASAP]

Originally Posted by tgrundke

People didn't move just for work, but quality of life issues: the mass migration out of cities into the suburbs starting in 1945 was borne out of a desire to move away from noise, pollution, crime. When affordable suburban homes became available, those returning GIs packed their bags and moved on out in record numbers.

If anything, migration patterns during the pandemic reinforce this: the mass migrations of people out of places like New York, Illinois, California into places like Idaho, Texas, Montana, Carolinas and Florida were for quality of life issues.

Yes... and this is exactly why i dont see people moving back to cities for jobs in flocks like they used to... it makes less sense than it used to and people realize how much they hate cities unless they absolutely need to be there.