So when this bubble bursts, we’ll plunge into a depression?
Pippin: What about the Great Recession?
Aragorn: You've already had it.
Pippin: We've had one, yes. What about second Great Recession?
Merry: I don't think he knows about second Great Recession, Pip.
By my count this will be the fifth "once in a lifetime" economic crash in my lifetime.
Yay capitalism!
Yet, somehow the rich get richer, even in "once in a lifetime" economics crashes.
Especially* in "once in a lifetime" economic crashes
You know, if I was a cynic I would say that these "once in a lifetime" crashes might even be designed to wring even more money out of the working classes.
They are an economic crisis to you. To them they are clearance sales.
If you look, historically there was a big crash every ten years or so prior to the great depression. Then a whole bunch of financial reforms and regulations were put into place and we had about forty years of relative stability. And then in the 80's and 90's most of them were thrown out. And fuck me if we aren't back to a regular cadence of crashes.
Something something history doomed something…
Hmmmm… Now what was it that happened in the 80's that sparked all the de-regulation that caused the recessions? If I could just put my finger on it…
When it comes to America, almost everything wrong can be pointed to the actions of one guy between 1980 and 1988.
Roger Stone?
It's very unlikely to see the bubble burst again.
Housing is kind of finate, and land is one of the few things that literally is finite.
08 happened and no one was really ready for it. But now the banks and "investors" just won't slow down buying, because they're competing against each other now and not individuals.
Prices will keep going up for property, but overall sales will continue to decline. Because once a bank/corporation/investment group buys a property, they're fucking keeping it.
Banks don't buy properties, they foreclose on them. They will unload as fast as possible and take a write down.
Big hedge fund and other similar large investors don't hold onto money losers, and they care about maximizing their return. If the spread between rent and sales price is this high, I'd expect some of the ones that bought a while ago to be considering selling and taking their appreciation gains vs holding onto a cash flow that is multiples lower. Plus corporate lending is a completely different animal than homeowner loans and many of these properties will soon be needing to refinance into a much higher rate. Their owners will sell rather than take a huge hit to cash flow. And many of these bought properties 5-10 years ago and did capital upgrades that are now aging. They'll be looking to exit before the next upgrade cycle.
Smaller investors can get pretty badly burned in these markets and may not be able to hold on.
Not saying a crash is inevitable or even likely, but real estate is cyclical and we are almost certainly near the top of our current cycle.
I'd like to subscribe to your newsletter.
For real. Nobody else expresses this point of view and its refreshing
I mean, lots of people do. Just not the ones here on lemmy. But thanks for the compliment!
I'm probably somewhat unique here inasmuch as I'm a real estate agent and landlord and I have made an attempt to get into commercial real estate. But I've also been homeless in my adult life and grew up with very unstable housing, so I get the angst of many people here and don't discount it. Their feelings are completely valid.
I think the two things that people who are concerned about housing prices get wrong consistently are housing supply and the importance of financing.
Left leaning people are forever fighting against landlords and simultaneously yelling about gentrification and development. Here's the thing. Housing was affordable when we let people build densely with relatively few restrictions. Housing today is still most affordable in places where it's easy to build more. If that means the neighborhood character changes, oh well. Anywhere you get liberal people (and I count myself as very left wing) making rules about housing, you limit supply, prices go up. In the immortal words of pogo, we have met the enemy, and he is us. Take a look at Tokyo, the NYT did a great story about it recently, they have no problem destroying old neighborhoods to build more housing. As a result, it's remained shockingly affordable, and has a huge percentage of small businesses because rent is cheap for small non residential spaces, too. We need to stop clinging to our old buildings and allow growth. And I say that as a man who lovingly restored a 175 year old house. It is dumb. There should be 6 families living on the plot I own, but the neighbors would never allow it.
The other thing is financing. Commercial owners have a completely different borrowing structure from owner occupied housing. They don't have 30 year fixed rate low interest loans with low down payments and government programs to help them for x, y and z. Most commercial loans require refinancing every 5, 7, or 10 years. They also cost more than residential loans, both in up front costs and interest. So my personal residence is locked in on a 30 year note at 3%, but my rentals are in the 3.75-6% range and will require me to refinance in a few years at much higher rates. I have one that resets in 18 months. My interest rate is likely to go from 3.75 to 7.75. I owe about 100k on the house. My mortgage payments will go up $4000/year when that happens (on top of a $1000/year insurance hike last month). There's no possible way I can raise my rent enough to cover. So I would be in the hole every month. But the bank won't lend on a property that loses money every month. So either I come up with $100k cash or I sell the house. Sorry tenant, but you're getting kicked out at lease expiration next year because I have to sell the house to py back the lender. If it won't cash flow for me it won't for anyone else, either. So the only possible buyers are home buyers who want to live in it and it needs to be vacant. Yay for a home buyer, sad for my tenant (and for me, now I am out a cash flowing property that I'd prefer to hold). The tenant will yell about greedy landlords when I tell him to get out, but I literally have no option.
Same thing with how all big developments look the same now. All driven by lenders. They won't lend to a developer who wants to take on mom and pop businesses and quirky startups. The building is valued as a multiple of its rents, and so all the money chases national credit tenants or strong local chains that have proven they can oy high rents, and lenders all want to see recognizable name brands in those ground floor retail spaces. Developers hands are tied. Lots of developers would love to do something different but nothing different can get financed.
I could keep going but the text wall is long enough and my thumbs are tired.
Banks don’t buy properties, they foreclose on them.
Lol
https://www.cnn.com/2021/08/02/business/family-homes-wall-street/index.html
Yep!
It's not just good, it's great depression. -Just a thought - Gnarls Barkley
Bubble? Home prices are down 5.5% YoY in the US, rates are just at 20yr highs.
Way ahead of you
No need to stress about that decision when you could never afford a home anyway.
I once thought that too but you never know, life is funny sometimes
I pay a ridiculously high amount for rent. An equivalent mortgage a decade ago would have put me in a very large property. I pay much more for rent than anyone I know who owns. But I cant afford a house 🤷🏻♂️
I couldn't have bought my home without help from family for the down payment. That said, if interest rates didn't make the monthly payments so high, there are some programs that will give you a grant for the down payment, for example ones that encourage people to move to more rural areas.
Where are these mythical rantals that cost 1600/ mo?
Already permanently lived in 😎 that's the fun part.
You can still get ~1000/mo in a decent apartment in an urban area in Ohio.
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I mean, why not? 🤷♂️
Everywhere has problems, Ohio gets too much shit for … literally no reason lol
If the urban area you are talking about is specifically the east side of Cleveland, or near parsons in Columbus then maybe. But as it stands right now in the cleveland area specifically (can’t speak about another place) you’ll struggle to find anything that’s upkept for less than 1300 right now.
At least that’s my experience
I don't rent anymore, but I have friends in decent places outside of Akron and Columbus paying about $1000. Also $1300 is still better than this "mythical" $1600.
I've got 1500 myself, they're real
Depends on the area but 1600 a month is about 19200 per year, which assuming a 5% increase year over year (not exactly realistic but worse case scenario) equates to around 678,800 after 20 years. Depending on the quality of home you're renting, that could be anywhere from half a million to over 2 million for a 20 year mortgage.
Going to vary wildly by where you are living but overall, seems renting is the cheaper solution, and the caveat of whether or not that home will be worth what you paid for it in 20 years if you decided to sell it. And of course, not considering property taxes.
Jesse
Our mortgage is under $1000 a month. For a three bedroom house. Granted, we don't live in the most desirable city, but it's in a really nice, low-crime neighborhood which is close to a bunch of stores and the mall.
I don't even want to know what rentals cost around here.
Ya, for those of us lucky enough to have been in a position to buy when the market was down, it's great. People looking to buy a house today are fucked. We bought our home at the end of 2011. We paid $150k for a ~1250sq.ft. home, on about half an acre of land and the local school district is well rated. It's a more rural area, with the local economy linked to several area US DoD installations. We refinanced the loan and pulled some money out to re-do the roof and windows and now sit at 3.5% APR. The end result is a monthly mortgage payment of ~$950/month.
Our house now appraises for ~$340k. While some of that movement is likely related to finishing the basement and adding 500sq.ft. of living space and an extra bathroom, most of it has just been market movement. Given today's interest rates, payments would be north of $2000/month. While we could probably make that work, it would make saving any money difficult.
Given current conditions, I think the article is right. Rent for now and hope the housing market corrects.
That sounds like a dream. I just bought a $550k house with $130k down and pay $3500 a month. Rates are absolutely ridiculous. At the same time, I don't think it's cheaper to rent at the moment.
We got it 8 years ago, that's why.
I see! So rent has to increase to close the gap, right? RIGHT?!
bunches of places to rent that are pretty cheap (rural areas, far away from large cities) but most of those places dont have a lot of jobs or a high standard of living. if you can swing a 100% remote wfh gig then it doesnt matter.
There’s other factors too, such as children, schooling, internet connectivity, social circle, relatives, weather, etc.
thats true - I suppose it depends on many different factors
It matters if you'd prefer to not be surrounded by a bunch of dangerous, toothless conservative dipshits, though.
This will never solve
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