The cost of borrowing is going up.
But hang in there. As vaccine deaths accelerate, there will be oversupply of housing stock and prices will plummet making home prices even cheaper. You may be interested in reading .
It isn't that the value of property falls, it's that it was over-assessed and then adjusted to a value closer to reality. The main difference between tulip bulbs and real estate is that real estate has an actual intrinsic value. So bubbles still happen, but there is a bottom price for land and there is none for tulip bulbs.
So bubbles still happen, but there is a bottom price for land and there is none for tulip bulbs.
ZH premium comment right there.
The S&L problem happened because:
Regan cut the inspection agency's budget so they couldn't keep tabs on S&Ls S&Ls were allowed to invest in risky and speculative investments, and Banks didn't devalue their assets when they fell, making it look like they were worth more than they actually were.
The 2008 crash happened because:
House prices started to get stupid Banks gave loans on properties to people who couldn't afford them, or made loans that had no chance of being paid (balloon notes) Banks packaged these bad investments up, had a ratings agency mark them A+ and it worked until the bottom of the pyramid didn't pay.
Right now:
House and commercial prices are getting stupid Banks are loaning money for institutions to buy these inflated homes (and commercial properties) These inflated assets are being used to fuel other loans by using the assets as collateral (A good percentage of houses are company owned, some state as high as 1 in 7) Right now the market is really (for the housing market) liquid, meaning you can convert your property to cash, probably for a profit. Prices go up, ability of borrowers to pay or sell goes down, feedback loop, liquidity vanishes and eventually it crashes.
The housing market falls when the current bubble pops. They don't fall because the land is "worth" less, it's because everything about the loan and buying process has popped.
That's the executive summary's executive summary. There are a lot of good articles out there, I'd suggest just searching the terms and you'll find it. There's also this post https://archive.ph/LjpyD which talks about the current problem in depth.
You can't convert your house to profit unless you don't plan to live indoors anymore. Sure, I can sell my house for over a million today, but that means nothing when I have to spend that much to replace it. In fact, I come out behind because my property taxes will go from being based on a $500,000 value to a $1,000,000 value.
Wealth locked up in a primary residence is about as illiquid as assets get. The only feasible way to leverage that wealth is to take out some kind of loan (refi or HELOC), which actually decreases your net worth.
YOU can't, but a corporate entity that owns a number of houses probably can, especially if the rents have been subsidizing any payments necessary to maintain the properties.
For us plebs, it's usually a zero sum game unless we die and leave it to someone else.
There are a lot of good articles out there
Did a cursory search but it's hard to tell these days whats genuine and whats part of the filter bubble. Thanks for the quick run down though, SB.
This seems to be a decent perspective on the S&L problem:
At least, what I remember of it. That was a long time ago.
That reddit link was legit an interesting read. It's a rare day I'm surprised by anything.
re "with overbuilding in multifamily, condominium type residences and in commercial real estate"
That's not what is going on today. We have problems getting building materials. As long as dems keep the supply chain screwed up, the high home prices can continue as there is no supply to meet demand when you can't get the windows you need to finish the house https://www.builderonline.com/builder-100/meeting-demand-the-2022-builder-100-next-100_o
As long as existing homes are being scooped up by Vanguard and Black Rock (I think it was mainly those 2) and others, and as long as people need a place to live/rent, the real estate won't collapse. Biden and the dems won't let oil prices fall either.
As long as existing homes are being scooped up by Vanguard and Black Rock (I think it was mainly those 2) and others, and as long as people need a place to live/rent, the real estate won't collapse. Biden and the dems won't let oil prices fall either.
This is what I figured. Anyone saying "oil will crash" is selling you something, or genuinely doesn't understand the basics.
We also have a problem with migration, all those niggers coming in legally and illegally are buying places to live. Housing prices will always go up with more people coming in.
Easy, no sane or smart person gets a mortgage right before a recession starts since you'd just be giving the down payment and monthly ones to the bank as rent. So demand with rising inflation is not to be expected.
(post is archived)