Gregmal

Probably depends. A lot of the conventional wisdom ones have dumped big time because the perception is that they rely on volume even though prices haven’t come down much. If price comes down 15%, volume is gonna surge. Which for a builder or a brokerage per say, is something they’d take all day. Additionally, what if prices come down 15% because commodity based inputs have come down? Depending upon how much, most can probably keep similar margins or even improve them. NVR mentioned something like that recently. Costs come down so they can sort of pass that along to the buyer. Sort of lol.

Yea to me crash is probably 30%+ but then also a sustained flatline. Not a dip and then rebound or 15-20% pullback. Some like to trumpet the leverage in housing but that again doesn’t show an understanding of how residential housing works. I bought a new golf club the other day. Was my mental set a) wow I just spent money on what will be a 50-100% loss? Or b) I’m excited to have something? Most homebuyers, think much more like this than the fund analysts in his Excel bubble. Someone signs a lease and if rents plummet the follow week most probably don’t even know or care they just have their place a pay an amount they were fine with. Buying a home is even more like this. If your numbers derisk you enough to qualify for a certain loan amount, the price you pay is fine. In today’s environment, most folks are ecstatic just to be able to buy one. You think they care one iota what the Zillow estimate is a month later? Nope. They just pay their mortgage and live their lives as happy homeowners.

Yea but that age group I don’t think is as dominant(or moneyed up) as the 35-55 crowd. Especially in the money management/ finance world. You’ve got the younger definitely reckless group and the slightly older, scared of their shadow, I wanna be the next Michael Bury group and it creates an interesting dynamic. Both IMO are wrong. Generally I think just evaluating things from a historical context and then applying some logic/deductive reason in terms of how people act/react works best. Or just focus on company or sector fundamentals but I guess a lot of folks wanna be macro traders… There is virtually zero relevant data that supports a housing crash if you define crash the way any rational person would. If folks wanna define crash as prices in some areas maybe pull back to levels from a year or two ago and a slowdown in activity then I mean, they’re free to, but what I’ve found is those folks generally don’t have their money where there mouth is in a meaningful way and are really just looking to capitalize on short term noise. Often their own noise.

The gift with being a rational investor is that since GFC you have this huge percentage of folks who are influenced by or suffering from PTSD due to it. There’s a whole generation of investors who have wild misconceptions about housing, irrational needs to hoard cash, and just a general belief that this sort of thing is always right around the corner. Literally every two years or so since GFC there’s been massive opportunities in the market because these people take over the narrative and scare people for a little bit. Europe in 2H 2011, China in maybe august or so 2016, in between oil and gas contagion, Trump election, then basically “the punch bowl” thing every 6 months since 2017.

The number of low probability events that need to occur for a “forced sale” with housing is insane. And even then, the process takes 6-12 months at least. There are many reasons folks ignored risks leading into GFC, but the underpinnings of the institutional belief that housing only goes up were solid. Obviously this doesn’t mean there won’t be stops and starts such as in the early 90s. But it’s just so hard to get things to a widespread point of distress. What is even more telling now is the same shit that unfolded after COVID is taking place. Where tons of people are cashed up on the sidelines waiting for bargains. Which almost always is a sign that you won’t get them. You get them when no one expects it. But further for a case study on why it’s all about simply weathering the storm, check out what occurred to the values of some of the Citi and Lehman holdings. Or go see what the history of the Howard Hughes company was. Even those “problem assets” really just needed some time. Probably the only rule I’d say is steadfast for someone with housing is don’t be a forced seller.

The benefit of owning is so multifaceted but basically when times are good you do very well with housing and when they aren’t you just kind of bide your time. Especially the average person who simply wants a place to live. The underwriting process for mortgages, at least when lending standards aren’t super loose, virtually assures it. No one who buys right before a theoretical 10% decline in average home sale prices feels much pain. Most are simply living in it and paying their monthly bill, or renting it with the cash flow being largely what drove the underwriting and purchase decision.

Heres another good one to watch in real time, just listed today. https://www.zillow.com/homedetails/439-Montigo-Ave-N-Santa-Rosa-Beach-FL-32459/67187460_zpid/ $300k in 2014. $700k YE 2020. Will almost certainly see some price cuts. But either way should easily sell at a big premium to last sale. Folks can focus on what they wanna focus on. Housing has almost always been about regional markets. Trends that have existed and been prevalent will simply continue on. It doesnt take a rocket scientist to see that there is still a massive housing shortage and somehow the Fed thinks pricing the fringe people out solves it....Builders are in better shape and will just slow things down, which is ironic because the only answer to the supply/demand equation is to build more. Unlike in 2004, folks just want a home to live in, rather than to speculate on and flip for a profit in 6 months. And that, to the real, normal, non hedge fund dork doing Excel models on imaginary home equity +/-'s that trigger margin call like selling/supply of existing homes occurring, is not a financial venture. Either way, I dont feel any different than I have for years. The rent/buy equation is really just gonna see saw back and forth, upward, with each taking turns being the "value prop" relative to the other. So just be long both and shift weighting.

Yea I try not to ever get too dismissive but it doesnt take more than like 3 seconds to write off housing bears as either having some sort of bullshit agenda for personal reasons, or simply not understanding the market when they make these claims. GFC was largely caused by 3-4 things. Fraud. Variable rate loans. And people not being able to afford the houses they were buying. Maybe add in overbuilding but really that was a product of the first 3 things. Today? No fraud. 95% fixed rate loans most with tons of equity. Oh and add in that rates were also HIGHER back during the GFC....so yea. I think you're already starting to see the narratives change. Now the "plummet" is 10-15% and it "could happen" if things materially get worse LOL. Thats hardly anything but a hiccup.

https://www.zillow.com/homedetails/145-Paradise-By-The-Sea-Blvd-Inlet-Beach-FL-32461/121166810_zpid/ This gem too. Will be interesting to see what it sells at but will be another example of price cut = bearish...back to huge premium to..a year or two ago. Its hard to find anything in that area that isnt at least 3-4x pre covid. Southern Florida is for the most part maybe double. Although a few areas have really picked up. Wellington I was looking at but its gotten pretty obnoxious.

I'm looking to move and also generally just check stuff out cuz it interests me and South Florida, at least the good areas inventory is still stupid tight. Prices arent off much, if at all. North by St Johns I like too and thats given in very modestly, but still hardly anything that screams DEAL. And in the JOE areas you still need to pay through the nose or put down a deposit with a builder and wait 18-24 months. I probably want the housing market to come down more than anyone. Haven't seen it, at least where I wanna live. Where I do live in NJ....more supply has come to market, inventory still probably 25% below pre covid but up about 40% from the lows. Prices are probably off peak by 5% but still way up compared to a few years ago.

https://www.zillow.com/homedetails/10-Scout-Ln-Inlet-Beach-FL-32461/108591651_zpid/ Here's one but I dont think thats the one I saw. Sold below ask!

LOL yea I'll try to find it.

Actually pretty sure it was Coral Gables. Not Walton.

Will try to. Was in one of the million Zillow emails I get daily a few weeks ago. Didnt strike me as that odd. Higher end within a block or two from beach in Walton has definitely gotten bumps like that.

Nothing material. Its a newer home. Less than 10 years old.

Yea mortgage brokers and real estate agents are having a really tough time. Agents especially for about the past 18 month and mortgage folks been about 12 months now. Contrary to popular wisdom, even throughout a good portion of last year, they weren't really making money because there wasn't volume. However one shouldn't feel bad for them, especially the mortgage brokers....they made absolutely obscene money from June 2020 through fall 2021 on the combination of sales and refis. Have friends who made more money in a few weeks than they had in entire years previously. Anyway, easier to just own the thing everyone wants....the property itself.

Short sellers are almost always pieces of shit. Exception maybe for the ones who don’t publicly mouth off trying to manipulate share prices but those are rare. Seems they’re all on their twitters or podcasts doing the same shit.

Its finally aligned and has enough cash coming in that should allow them to significantly reduce the denominator while earnings explode. Good risk/reward.

Its a very common theme in how parts of the market are presented today. Cherry pick the recent low point, and declare a move to be euphoria or some kind of evidence of the market being crazy. Perhaps the stock never should have sold off in the first place? KRUS is definitely on the expensive side and I'd certainly prefer to take more than a tracker at much lower prices, but you pay for growth. People sold off the stock on what? Gas prices, rates, consumer spending headlines and all of those issues where flat out wrong and not meaningful to this business. Just saw the same thing with AIV. Why did it sell off? Turns out people were just dumb and the market was wrong as usual.

Its a consumer discretionary 100%. Trading barely above where it was to begin the year despite blowing the doors off in every aspect. But of course people sold it down along with everything else in the market just cuz rates or whatever, shorted the shit out of the stock, and now when we rebound and "OMG its up so much". Definitely worth doing some work on. Their concept and general niche is very under appreciated.

More Fairfax

That UAN trade was probably the best trade ever posted in an actionable way on this site. Not the "I bought it at 5 and now its at 100" stuff you see from people. Done in real time and seemed to payoff massively in a way others could have followed.

So also its kind of a blend of what others have said too. I dont try to time the market THAT MUCH. A little bit here and there. But its more about knowing the values and trading characteristics of what you own and then reacting to the volatility of them. There's obviously going to be overlap with buying lower and selling higher(if you're any good at it) and where "the market" is so I guess you could make the case theres a timing element to it, but its not mutually exclusive. Ideally you want things that dont always correlate so you have the ability to recycle capital.

Yea you have to have a variety of Petri dishes to properly gauge things like consensus and sentiment. You also have to appreciate the inputs for what they are. Going to Stocktwits and seeing meme stock euphoria is nothing abnormal given what Stocktwits is. But if volume of activity and certain tickers more dominant than normal? What about CNBC headlines? Twitter is harder to follow but same thing. Whats everyone constantly talking about. How extreme are predictions? You want to essentially want to be like Bruce Lee...be water. Its all potentially relevant and at the same time potentially irrelevant. In the bigger picture though it should generally be clear. Q2 you had basically every possible marker in the world for sentiment saying just buy anything purely on a shift. You also have to know yourself. Feel the market, acknowledge that what you feel is largely what everyone else is feeling, then step back, and recall things like "every time I've felt like this....such and such tends to happen", or "if this is how everyone is feeling, do I want to be on this side of things?". On margin, I dont get why theres such wild misconceptions around it. If you are reckless or dont know what you're doing, sure. But otherwise, it baffles me why everyone thinks if you have 10-20% margin you're gonna get a margin call LOL. Ultimately it has to be about what your mindset is but to me I have no clue how people hold cash other than to avoid compounding the majority of the time so that they can say the avoided short term paper losses once in a while. If its simply about having the ability to buy when things get cheap, again, Interactive brokers solves this problem. Ive had 30%+ margin and buying power somehow greater than the entire value of my account after 20% market declines. If you're not lazy, just manage it. Its also really a test of how good you are at valuing a company, assessing its trading mechanisms, and managing risk. If I look at Berkshire, at $300 you can underwrite to a $200 decline and if its starts getting somewhat there, IE 260s you can start thinking about more aggressive hedging options. But your real capital at risk isnt $300 a share. And its not even $150. This is simply where paper pusher excel models and the real world differ. If I owned Berkshire, FRP Holdings, Alico, and MSG Sports, I'd sleep like a baby at like 250-300% long.

It’s similar just not as good as the setup with Berkshire a couple years ago when Buffett finally stopped worrying about bagging elephants and instead started buying back stock.