I Haven't Been This Excited About Going Against The Herd in Years!

[Parsad]

Not a huge fan of perma-bear David Rosenberg, but I thought his recent article was quite funny...and I'm sure he's got even more interesting experiences with Wall Street and Main Street!  Cheers!

David Rosenberg: I haven't been this excited about going against the herd in years | Financial Post

[Gregmal]

This guy is a fool if he thinks we're in a housing bubble in the US...You currently have a generation of "never buy" now wanting to buy. Decade in the making supply constraint after a once in a generation economic reset. Whats the average credit score of people getting mortgages today? How many people do you know with multiple speculative housing projects/investments? Because the heavy majority of the folks Ive heard from are simply dying to get into THEIR OWN primary residence and cant. The 2005 bubble was on the back of 6% mortgages. Today we are at 3%. There's going to be a massive runway for housing based purely on demand, and nothing is stopping it. If we're in a bubble with housing, its top of the first inning.

[tooskinneejs]

A recent article in the WSJ described a large home builder selling an entire community of new homes to a public company and generating twice the profit that they would have made selling them to individuals.  That seems a bit like an investment mania in a world starved for yield.

Maybe everything will stay ok as long as rates stay artificially low for another 10 years and current nominal prices stay put while inflation adjusts them in real terms.  But if rates return to normal levels, all bets are off.  Price to rent ratios don't make any sense compared to historical norms.

[Guest]

I don't know if we're in a housing bubble but I'm pretty sure it's not at the top of the first inning. I'm trying to buy a house and things are insane - it's an even better seller's market than it was in 2006 in my opinion. 

Edited April 15, 2021 by stahleyp

[Gregmal]

Just wait and see. Learn from our Canadian friends. You're just trying to buy yourself a home. Thats basically where everyone is at right now. Wait til everyone and their mother owns 5 condos! Its one of the surest things Ive ever seen in my life. Famous last words, I know. But everything is lined up, from wealth inequality, to yield desperation and insurance companies. The little guy is gonna start seeing wage increases and thats going to set off the powder keg.

[JRM]

It doesn't seem possible, but I think Gregmal is likely correct.  We are in the first stage of a housing demand boom.  Supply is tight in many markets, and millennials are getting out of debt and out of their parents basement.  They are starting to form families, and the next 5 years is likely going to be strong for housing in the US.  Student loan forgiveness will only help to accelerate this trend.

Even if there are a lot of boomers selling to downsize, they still have to live somewhere.  Don't forget, the population of 'kids of boomers' is larger than the population of boomers in the US.

[tooskinneejs]

An article in today's WSJ supports Gregmal's point of view.

https://www.wsj.com/articles/u-s-housing-market-is-nearly-4-million-homes-short-of-buyer-demand-11618484400?mod=hp_featst_pos3

"The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country’s demand, according to a new analysis by mortgage-finance company Freddie Mac."

"“We should have almost four million more housing units if we had kept up with demand the last few years,” Mr. Khater said. “This is what you get when you underbuild for 10 years.”

[SharperDingaan]

Couple of observations ...

For decades the 'mantra' has been 'one house, one family'. Champagne expectations have progressively risen, on a beer budget that buys less and less - even when it is augmented with rental income and parental down-payment help. Obviously, there needs to be change.

Around the world, multi-generation households are commonpace, and they have been resilient for very practical reasons. It is a great deal cheaper to re-model an existing house for multi-generational living (or sell and buy a purpose built), than it is to buy a new one. Mom/dad want grandkids, son/daughter/spouse cover the cost of renovation (mortgage), and improve ability to work (while grand-parents help look after the kids). Housing has a great deal further to run.

RE is built on deal flow. Stay-in-place renovation, versus sell/move-on - seriously reduces total volume, total commission and associated sales revenues. There are also a growing number of blockchain apps, facilitating purchase/sale of partial ownerships in a house - further reducing house sales. As well as apps that facilitate seperation of land value, via a lease of the dwelling for X years. Again, housing has a great deal further to run, despite RE industry bitching every inch of the way.

Not just RE industry bitching either. For many people, RE is a time-honored better investment than buying individual stocks/index funds; as partial ownership interests and long-term leases become more readily available - young money flows out of capital markets and into RE. Progess.

Point? Housing has a long way to run, but if you insist upon last century approaches - welcome to your ulcer.

The Times They Are A Changing - Bob Dylan  

SD     

Edited April 15, 2021 by SharperDingaan

[Castanza]

What’s everyone’s opinion on the best new real estate areas (decade view)? 
 

Hard to ignore the Sun Belt.

Boise seems like an interesting area. I know a guy who just paid 400k for an 800/sqft house 10-15 minutes from downtown....personally thought that was insane but what do I know. 

[Gregmal]

I was watching Yellowstone the other day; first series/show in ages Ive actually gotten into....naturally the sheer beauty of the setting led me to looking at RE in that area and around nearby places in MT, WY, and ID. The prices are as breathtaking as the views. 

[Guest]

10 hours ago, Gregmal said:

Just wait and see. Learn from our Canadian friends. You're just trying to buy yourself a home. Thats basically where everyone is at right now. Wait til everyone and their mother owns 5 condos! Its one of the surest things Ive ever seen in my life. Famous last words, I know. But everything is lined up, from wealth inequality, to yield desperation and insurance companies. The little guy is gonna start seeing wage increases and thats going to set off the powder keg.

Well, I wouldn't bet against you, Greg. So you might be right.

[Spekulatius]

The Rocky mountain states are all great in their own way and would be my favorites. I love CO, Northern AZ, OR and in Canada Lake Okonaga and I am sure WY and others are great in their own way. The beauty of those areas is unmatched.

On the east coast, NC would be my favorite (Asheville area). NH is also underappreciated and I like where I live (MA , close to NH border). I don't know FLA well but it is probably my least favorite state of those I visited (Orlando area, Tampa). I am sure other areas are nice ,especially for boating, but the weather for 9 month is just too brutal, imo.

 

I have lived in Germany, CA, NY (Long Island)  and now MA for perspective.

 

In terms of pricing, I think real estate in the US as whole is still undervalued. there may be pockets of exuberance in some areas, but for example in the  East coast, houses in many areas still have to crack their 2007 peak values 13/14 years later. So it is hardly a bubble. If you want to see what a bubble looks like Canada, Australia and NZ are much better examples.

Edited April 15, 2021 by Spekulatius

[fareastwarriors]

3 hours ago, JRM said:

It doesn't seem possible, but I think Gregmal is likely correct.  We are in the first stage of a housing demand boom.  Supply is tight in many markets, and millennials are getting out of debt and out of their parents basement.  They are starting to form families, and the next 5 years is likely going to be strong for housing in the US.  Student loan forgiveness will only help to accelerate this trend.

Even if there are a lot of boomers selling to downsize, they still have to live somewhere.  Don't forget, the population of 'kids of boomers' is larger than the population of boomers in the US.

Yes many millennials have high student loans but we also work high paying jobs. So many of my millennials friends are working  in tech/biotech/healthcare. Some of them do hold 100ks loans but the majority of them is also making 100k+ in income right out of college. 

 

I worked in finance and thought I made pretty decent money before I got out. My friends make so much more in tech, even the younger ones right out of college... dam them! But I got more houses than them so  !

 

 

 

 

Edited April 15, 2021 by fareastwarriors

[JRM]

19 minutes ago, fareastwarriors said:

Yes many millennials have high student loans but we also work high paying jobs. So many of my millennials friends are working  in tech/biotech/healthcare. Some of them do hold 100ks loans but the majority of them is also making 100k+ in income right out of college. 

 

The millennial you are describing is the exception, not the norm.  I am also technically a millennial and have been a homeowner for 12 years.  I know most people in our demographic have not had the same experience.

[TwoCitiesCapital]

27 minutes ago, JRM said:

The millennial you are describing is the exception, not the norm.  I am also technically a millennial and have been a homeowner for 12 years.  I know most people in our demographic have not had the same experience.

+1 This is basically just true of big cities. I moved to NYC after graduating in 2011 and this was true. Tons of people my age with 6-figure student loans and 6 figure jobs.

Now that I've moved back to the Midwest, seems to me that most AREN'T in the situation of 6-figure loans or 6-figure jobs and are probably more like ~50k type jobs w/ 20k type student loans. Maybe there is something to this "millennials" are buying all of the houses trend, but I'm not yet seeing it. Most people my age (32) and younger are still renting. That's here AND in NYC btw. 

Even me - the only reason I purchased here was because I couldn't find a rental I wanted, but there were several nice properties for sale. Had the properties been for rent instead, I would have happily rented. 

Edited April 15, 2021 by TwoCitiesCapital

[fareastwarriors]

Just now, TwoCitiesCapital said:

+1 This is basically just true of big cities. I moved to NYC after graduating in 2011 and this was true. Tons of people my age with 6-figure student loans and 6 figure jobs.

Now that I've moved back to the Midwest, seems to me that most AREN'T in the situation of 6-figure loans or 6-figure jobs and are probably more like ~50k type jobs w/ 20k type student loans. Maybe there is something to this "millennials" are buying all of the houses trend, but I'm not yet seeing it. Most people my age (32) and younger are still renting.

Even me - the only reason I purchased here was because I couldn't find a rental I wanted, but there were several nice properties for sale. Had the properties been for rent instead, I would have happily rented. 

 

Who's buying all the houses in the suburbs and smaller tier 2/3 cities? Millennials in their mid-late 30s? Gen X'ers in their early 40s?

[sethatk]

I'm in the Florida panhandle. I bought my current house in Aug 2019 and the market here is insane, I paid around $109 per sq ft and they are now going for $180 plus. Realtors are not even put signs up and houses are under contract before pictures upload to Zillow. 

[Gamecock-YT]

As a thought exercise, what would we need to see for this to be a late inning housing bubble? I admit I'm not a housing expert, by any means. (Generation Rent, baby!)

 

I would guess either an increase in supply that puts the stock of houses for sale back to a more 'normal' level.

Or a decrease in demand. What could cause that? Higher interest rates? Suddenly ARMs (do people still do ARMs?) start re-setting at the higher rates. People can't afford the new payment?

 

A cursory glance at /r/realestateinvesting/ has topics such as:

I’m a student. Can I afford to buy property?

Anywhere not experiencing housing boom?

First year in review - 3 properties in Spokane, WA

Happy to announce that I'm graduating from tenant to landlord. What mistakes did you guys make as a young investor on your first property?

Buying a house hoping for appreciation (as I can't find cash flow deals) vs alternate investments ?

 

 

 

 

[Castanza]

1 hour ago, Spekulatius said:

The Rocky mountain states are all great in their own way and would be my favorites. I love CO, Northern AZ, OR and in Canada Lake Okonaga and I am sure WY and others are great in their own way. The beauty of those areas is unmatched.

On the east coast, NC would be my favorite (Asheville area). NH is also underappreciated and I like where I live (MA , close to NH border). I don't know FLA well but it is probably my least favorite state of those I visited (Orlando area, Tampa). I am sure other areas are nice ,especially for boating, but the weather for 9 month is just too brutal, imo.

 

I have lived in Germany, CA, NY (Long Island)  and now MA for perspective.

 

In terms of pricing, I think real estate in the US as whole is still undervalued. there may be pockets of exuberance in some areas, but for example in the  East coast, houses in many areas still have to crack their 2007 peak values 13/14 years later. So it is hardly a bubble. If you want to see what a bubble looks like Canada, Australia and NZ are much better examples.

Depends on the area when it comes to undervalued. The US as a whole is nowhere close to running out of space and as a result there are simply a lot of areas with little real estate value. I think you can still find some old ads of all these "mountain vista" type developments from out west that never came to fruition. The way to play the whole market is to identify growth areas (obviously). And then try to capitalize on urban sprawl. Boise is attempting to become the next Austin which peaked my interest.  

[thepupil]

33 minutes ago, sethatk said:

I'm in the Florida panhandle. I bought my current house in Aug 2019 and the market here is insane, I paid around $109 per sq ft and they are now going for $180 plus. Realtors are not even put signs up and houses are under contract before pictures upload to Zillow. 

you probably have people moving from other areas of the country marveling at how cheap things are at $180 / foot.

my house has gone from $500 / foot to $600 / foot since 2019 and there was recently an eyepopping sale nearby  that went for $400K over ask / $800 / foot.

that feels like a bubble, but I guess someone really wanted this 90 year old house w/ a very unique for the area separate 6 car garage (which can be converted to a guest house). 

https://www.redfin.com/DC/Washington/6130-Utah-Ave-NW-20015/home/9994389?utm_source=ios_share&utm_medium=share&utm_campaign=copy_link&utm_nooverride=1&utm_content=link

Edited April 15, 2021 by thepupil

[Gregmal]

20 hours ago, sethatk said:

I'm in the Florida panhandle. I bought my current house in Aug 2019 and the market here is insane, I paid around $109 per sq ft and they are now going for $180 plus. Realtors are not even put signs up and houses are under contract before pictures upload to Zillow. 

Man, I'd love to own 170,000 acres in the panhandle if thats the case. 

[SharperDingaan]

It's not just 'cheap' house relative to what you are used to - it's the monthly cost of living as well.

Pre WFH the aspiration was always 'live in the big city'. Lower COL in the burbs just wasn't on the radar, the conversation was all about the relative cost of housing vs the 'city', and the 'cost/length of commute'. Today, the mover saves on BOTH the transportation AND the COL - and sees just how much of a cash savings that actually is. Often the result is more space, a better environment for kids, and mom being able to reduce hours/stay at home - 'cause the savings are on-par/or-more than mom brought home net of all the costs of child-care and working. Mom can still work if she wishes to, and it is a much better quality of life for the family as a whole.

Yeah, but post Covid everybody will go back to the office? Bosses might prefer it, but recent workforce surveys indicate that modified WFH is here to stay. The small towns simply gentrify and become more attactivre places to live - pulling in more buyers, new development, and better infrastucture. Everybody wins.

SD

  

Edited April 16, 2021 by SharperDingaan

[sethatk]

2 hours ago, Gregmal said:

Man, I'd love to own 170,000 acres in the panhandle if thats the case. 

Yeah, I'm sitting on some raw land right now. Everything around it is being developed. 

[TwoCitiesCapital]

On 4/15/2021 at 1:12 PM, fareastwarriors said:

 

Who's buying all the houses in the suburbs and smaller tier 2/3 cities? Millennials in their mid-late 30s? Gen X'ers in their early 40s?

It's tough for me to say because I don't have the data, but it's just questionable to me the argument that millennials are the buyers when I literally went to college in the South, worked in the Northeast, and now live in the Midwest and none of the millennials I know in any of those three locations are buying. I get that it's anecdotal, but it's a very fair cross-section across geography and affordability. 

I think the recent surge has more to do with demographics of ALL ages leaving cities for more lax restrictions in the suburbs and smaller cities. Why pay $3,500-4,000/month for rent in NYC if everything is closed and you don't get any of the benefits when you can pay the same $2,500/month for 4x the space in St. Louis, still make high wages from your NYC company, and have way laxer covid restrictions (or more space to be locked up in). This isn't millennial math - it's everyone math. 

 

[Nomad]

On 4/15/2021 at 1:12 PM, fareastwarriors said:

 

Who's buying all the houses in the suburbs and smaller tier 2/3 cities? Millennials in their mid-late 30s? Gen X'ers in their early 40s?

The question that interests me even more is: Who are the sellers?

And what are they doing after they sell? Moving to apartments, condos, assisted living? Staying in a different primary residence after selling off their second houses, etc.? Where are they putting the proceeds - more real estate? Or "STONKS" that seem to be fashionable these days?