Zelman on housing

[ERICOPOLY]

Then there has been another effect...  the stock market.  Take the area around Palo Alto.  People there tend to create a new business and raise equity on the stock market.  They give equity out to the employees.

Suddenly they are not only using their company's present earnings to buy housing, they're also using their share of all of its discounted future cash flows too.

Edited October 21, 2021 by ERICOPOLY

[IceCreamMan]

10 hours ago, Gmthebeau said:

 

Over time housing rises with the rate of inflation due to the fact that its a depreciating asset.  It does have to be maintained/upgraded to even keep up with inflation.  Replacement costs driven by labor costs to build and the building materials themselves cause the prices to rise with inflation.   It sometimes will rise faster due to speculation like the housing bubble we saw due to easy credit.  Now we have super low rates that caused it to rise faster in 2020 and early/mid 2021.  The rise appears to be over, but if not it will mean revert eventually.

Let's not forget about the land, which usually comes with the building. Land is not a depreciating asset.

[Gregmal]

[ERICOPOLY]

Getting back to the supply not being enough to go around... the wages do more closely track inflation for the lower earners but they have tended to exceed inflation for the upper earners.  That's what the whole income inequality argument is about.

Edited October 21, 2021 by ERICOPOLY

[ERICOPOLY]

Here you go.  Enjoy:

 

https://www.trulia.com/p/ca/los-altos/1198-richardson-ave-los-altos-ca-94024--2082671675

 

I grew up close by.  

[LC]

Ask any broker what the 3 most important factors are in home buying: location, location, location.

[Gregmal]

Nah man. 3 things. Inflation, TSLA, and MNRA. Book it. Withstands the rest of time. 100% of the time.

[Gmthebeau]

8 hours ago, IceCreamMan said:

Let's not forget about the land, which usually comes with the building. Land is not a depreciating asset.

 

Absolutely.  The land is what is really valuable in most cases.

[Gmthebeau]

8 hours ago, ERICOPOLY said:

 

So, people are in fact priced out, yet prices still keep going higher despite that.  And there's a reason...

 

My parents can afford pretty much anything in the Bay Area today, because they already live there and have done so since 1970.  Many people who live there have done so for a long time.  Once you are on the roller coaster, you can stay on it no matter how expensive it gets.  Property taxes only climb a max 2% annually due to Proposition 13.

 

So every now and then somebody leaves...  and that opens up a spot for one of the hundreds that are waiting for a house.  Maybe it's dozens waiting, maybe it's hundreds, I don't know.  Point being it's not 2 people bidding on one home.  And it goes to the one with the most money.

 

It's the richest guy at the margin that decides Bay Area home prices.

 

Yes, there are unique cases like this but thats not the norm overall in housing across the vast majority of the US.  In most cases supply meets demand.  If you have overwhelming demand you get more supply via building or people selling their homes at top dollar and moving to a lower cost area.

[Gmthebeau]

8 hours ago, ERICOPOLY said:

Then there has been another effect...  the stock market.  Take the area around Palo Alto.  People there tend to create a new business and raise equity on the stock market.  They give equity out to the employees.

Suddenly they are not only using their company's present earnings to buy housing, they're also using their share of all of its discounted future cash flows too.

 

Agree that that area is unique, but thats not the majority of the US.  Most people think housing is so high because they look at homes that are better than where they live, and ignore all the cheaper less desirable ones.  People are living in those ones too.

[Gmthebeau]

6 hours ago, Gregmal said:

Nah man. 3 things. Inflation, TSLA, and MNRA. Book it. Withstands the rest of time. 100% of the time.

 

Village idiot right here.  Book it and take that to the bank.  I must to talking to one of the Trumps.  Guy posts nothing that makes sense, has any reality to it, or any basis in fact.  When you point it out he goes bonkers like a child.  

Edited October 21, 2021 by Gmthebeau

[Gregmal]

So now the argument has basically devolved into “yea the land is valuable and actually, well, if you eliminate all the desired areas the rest is nothing special”!
 

So I guess just avoid investing in heartland Oklahoma guys and buy meme stocks!
 

We’re certainly getting our $30 CAD subscription costs worth today…
 

Oh man….

[Gmthebeau]

When you can't win on facts you just say gibberish, spin what people, and act like a 3 year old.  Works to become President, why not.

[thepupil]

many threads on housing / RE

 

1. Gregmal expresses aggressive, bullish, extremely confident view, that's likely expressed in real life in slightly more nuanced, maybe slightly less one dimensional  fashion than it is in a message board rant. 

 

2. Pupil: thanks Greg, I agree mostly, though I'd nitpick on a) immaterial nuance number 1 b) immaterial nuance number 2. I'd also point out here's how our view may be wrong. 

 

3. Someone else: expresses more bearish view

 

4. Gregmal to someone else: you're an idiot

 

5. Someone else: no you're an idiot. 

 

6. Pupil : while i mostly agree with Gregmal, I agree with someone else on this point. 

 

7. Gregmal: pupil you're a wimp

 

8. Pupil: Gregmal you're too confident and make so much mor emoney than i do. i hate you!!!

 

9. someone else: you're both idiots

 

10. everyone takes their ball and goes home. 

Edited October 21, 2021 by thepupil

[Gregmal]

LOL @thepupil nailed it. One of the benefits of the internet is there's different ways to generate conversations and elicit the yin and yang that ultimately proves helpful. Throwing a lot of mud at the wall in the NYC revival thread and then @BG2008 posts a beautiful rebuttal on CLPR. Thats shit working. Sometimes it goes off the rails. Other times someone just says something so stupid I dont know how to respond and then bolsters it with "I bought Tesla at $5 a share" or something even dumber. At this point its probably lost it purpose. 

 

Threads done here as far as I'm concerned. Time and the good ole P/L will tell who's right. And I dont think you're a wimp pupil. I'd just lever you 3:1!

[Gmthebeau]

I am pretty new here and see the quality content I have been missing out on.   A club of clowns digging thru the trash to find that last cigar butt or to afraid or don't understand how to invest in the future.  Someone to wants to invest heavily in real estate because they dont scream out daily prices like the stock market.  They feel its safer.  Buffett pointed this out too years ago.  Even Buffett stopped digging thru the trash decades ago.  You guys are hilarious.  Bye.

[Gregmal]

Most REITs trade publicly and have daily prices the same as any of your meme stocks. 

[ERICOPOLY]

1 hour ago, Gmthebeau said:

 

Agree that that area is unique, but thats not the majority of the US. 

 

I agree that the less desirable places have no bidding wars, or at least unremarkable ones.

Edited October 21, 2021 by ERICOPOLY

[thepupil]

31 minutes ago, Gmthebeau said:

I am pretty new here and see the quality content I have been missing out on.   A club of clowns digging thru the trash to find that last cigar butt or to afraid or don't understand how to invest in the future.  Someone to wants to invest heavily in real estate because they dont scream out daily prices like the stock market.  They feel its safer.  Buffett pointed this out too years ago.  Even Buffett stopped digging thru the trash decades ago.  You guys are hilarious.  Bye.

 

there are a wide variety of styles and posters on this board. some post about #neversell amazing companies like Constellation, some post about crappy NAV / RE holding companies, some post about hongkong net nets, some post about canadian energy companies, some post about blue chip tech companies,  banks, options on banks etc . 

 

you can choose to contribute/engage with what floats your boat. 

 

what companies/investments do you like? why? Are they discussed here? if not, start a thread, if you dislike the discussion or derive no value from it, move on. 

 

 

[LC]

On 10/19/2021 at 10:14 AM, Gregmal said:

As Ive said a million times, why wouldnt our housing market follow some similar trajectory to Canada, especially now that the underwriting process isnt Wild West style like in 2000-2006. 

 

Question here to the Canadian folks on the board. The US at least in my narrow experience is seeing a lot of Multifamily being built and coming on the market, particularly in tier 2 destination cities. I think this is the main factor which could ease buying frenzies. 

 

Did a similar phenomenon occur in the big canadian cities? 

[Castanza]

What the hell is up with Canada's housing market? I talked with my brother in law the other day who told me they are going to sell their vacation rental in Sauble Beach. They bought the lot for 200k in 2016/17. Not sure what it cost to build but I wouldn't imagine more than 200-250k. A lot of the work was done by themselves (and me). He said they were listing it for 799k?! I honestly don't believe that but I don't know much about Canadian real estate. Are people flooding into housing to hedge inflation? 

 

https://www.remax.ca/on/south-bruce-peninsula-real-estate/617-third-ave-n-wp_id305399172-lst

[SharperDingaan]

No dog in this, but a few observations ....

 

Sauble Beach: More retirees, greater ability to WFH, and just more wealth. Sell your place in Toronto for 1M++. pay 800K to buy in Georgian Bay (Sauble Beach), and you will still pocket 500K ++, plus have a materially lower cost of living. More liquidity than you and the mrs could possibly spend in your remaining lifetime.

 

Multi-family: Much of the big city in-fill housing, and the 1M++ housing is multi-generational, 'one family'. Same idea as the MURB; but each generation with its own floor in the same house, versus a string of smaller units next to each other. While still very new, de-fi platforms have also simplified the ownership process - buildings no longer owned as thousands of little units, but as 2-4 units owned by different family members.

 

The de-fi thing is just an automation of some traditional european ownership practices. Holiday hotels traditionally split into 20, 5% ownership units that also require the owner to be present 1 week/year.

 

Its just not common practice in the US.

 

SD

 

 

 

[Minseok]

1 hour ago, Castanza said:

What the hell is up with Canada's housing market? I talked with my brother in law the other day who told me they are going to sell their vacation rental in Sauble Beach. They bought the lot for 200k in 2016/17. Not sure what it cost to build but I wouldn't imagine more than 200-250k. A lot of the work was done by themselves (and me). He said they were listing it for 799k?! I honestly don't believe that but I don't know much about Canadian real estate. Are people flooding into housing to hedge inflation? 

 

https://www.remax.ca/on/south-bruce-peninsula-real-estate/617-third-ave-n-wp_id305399172-lst

You better believe it, I am based in toronto and have the opposite problem looking at US home prices “you mean you can get a 3000 sqft home for less than $2 million???”

[E. Nashton]

For the folks in Canada where we can't lock in rates for 25-30 years...what happens to housing in long-run inflationary times. I, of course, understand that real estate is an inflation hedge and should do well in inflationary times. But with prices already quite high in places like GTA (Toronto) and if rates were to rise significantly, how does that intersect with housing prices during inflationary times? Anyone that has studied this or has first hand experience...I would appreciate your thoughts. Or this is one of those ...no one knows?

Edited October 25, 2021 by Dean

[Castanza]

3 hours ago, Minseok said:

You better believe it, I am based in toronto and have the opposite problem looking at US home prices “you mean you can get a 3000 sqft home for less than $2 million???”

Still insane! You're talking 75-100% profit pre tax on a house in a few years. I guess I don't know the build cost, but as I said it couldn't have been ridiculous.