Zelman on housing

[Minseok]

31 minutes ago, Castanza said:

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. 

 

No tax on principle residence here. Its really two things, limited supply, increasing demand. 
 

Main buyers are millennials starting family and immigrants ( mostly graduated international students), premium real estate is single detached. The money source is twofold: sale of previous property that has gained 100% on equity ( plus all your principal payments due to low interest) and savings from salary ( there are many high paying jobs here)

 

And the market dynamic only needs to act on a small fraction of the population and  properties ( as explained by ericopoly) to have a perfect conflux of effects to boost prices.

 

Build prices? Construction and trades, ( overlooking all star real estate brokers) are probably highest paid occupations here. Supply increase is hampered by ever richer tradesmen in shorter supply who go out and buy more homes and cottages at extended prices.

 

In north america I see only two other places which experience similar effects: manhattan and greater san fran, but theyre both more expensive than toronto already!

 

I personally dont think anybody is inflation hedging with houses. We just want some place to have a room for each kid and maybe a small backyard! Are modest dreams not modest anymore?

Edited October 25, 2021 by Minseok

[SharperDingaan]

2 hours ago, Dean said:

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?

 

Direct experience in this ....

 

The fixed rate mortgage will amortize over 25-30 years, but reset every 5 years. The property will have 5 years of appreciation and principal repayments to offset the impact of higher rates at a rate reset - most times, it's not really a problem. To reduce the monthly payment, the mortgagee can also choose to amortise over a longer period - versus the now shorter 20 years.

 

Most mortgages will either be insured or secured against equity at well > 20-25% of the property value, and all are recourse. In the event of collapse, the banker just keeps the properties off the market, and supports inflated property valuations by choosing not to foreclose in quantity.  

 

Doesn't become an issue until short-term mortgage rates get > 10-12%, and the properties are in provinces with foreclosure laws going back to the depression era (very few). Sched-A banks are forced to hold significant reserves against exactly this possibility.

 

Net impact? It'll screw up your day, but otherwise - no big deal.

 

SD 

 

 

Edited October 25, 2021 by SharperDingaan

[Gmthebeau]

On 10/21/2021 at 8:41 AM, Gregmal said:

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

 

LOL.  

 

TSLA up over 11% TODAY.  Hit $1 trillion in market value.

MRNA up over 5% TODAY.

 

You should not talk about things you don't understand.  It's "better to keep your mouth shut and appear stupid than open it and remove all doubt"  Boom!

[Gregmal]

8 minutes ago, Gmthebeau said:

 

LOL.  

 

TSLA up over 11% TODAY.  Hit $1 trillion in market value.

MRNA up over 5% TODAY.

 

You should not talk about things you don't understand.  It's "better to keep your mouth shut and appear stupid than open it and remove all doubt"  Boom!

Huh? LOL You said people buy REITS because they dont get to see price fluctuations and dont want to see mark to market! My goodness! What are you 16?

 

Go away and wait a few more days for your stocks to fluctuate and then come back and boast about having stocks that went up, just like everyone else who's long in a bull market...If you're capable of providing anything of value, go start a thread as @thepupil suggested. Or answer @KJP's question as he alluded to(you dodged it), or, IDK post your performance? Or IDK, go hang on Stocktwits or something. Doesnt bother me either way. Good for some comedy though. 

[Gmthebeau]

On 10/21/2021 at 8:46 AM, ERICOPOLY said:

 

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

 

I am sorry but you guys dont really have any appreciation for history.  San Francisco has grown in line with the rest of the US until the recent high tech boom starting in 2012.  If you think that will last forever great, but history proves otherwise.  I have been talking about long term trends, not todays prices.   https://www.bayareamarketreports.com/trend/3-recessions-2-bubbles-and-a-baby

[Gmthebeau]

6 minutes ago, Gregmal said:

Huh? LOL You said people buy REITS because they dont get to see price fluctuations and dont want to see mark to market! My goodness! What are you 16?

 

Go away and wait a few more days for your stocks to fluctuate and then come back and boast about having stocks that went up, just like everyone else who's long in a bull market...If you're capable of providing anything of value, go start a thread as @thepupil suggested. Or answer @KJP's question as he alluded to(you dodged it), or, IDK post your performance? Or IDK, go hang on Stocktwits or something. Doesnt bother me either way. Good for some comedy though. 

 

Dude, just giving you a taste of your nonsense.  If anyone acts like a 3 year old its you.  You are clueless.  I wont be hanging around here cuz you guys just dig thru the garbage looking for that last puff of a discarded cigar.  You are clueless as the future and the past too for that matter.  Good luck!

[Gregmal]

Just now, Gmthebeau said:

 

Dude, just giving you a taste of your nonsense.  If anyone acts like a 3 year old its you.  You are clueless.  I wont be hanging around here cuz you guys just dig thru the garbage looking for that last puff of a discarded cigar.  You are clueless as the future and the past too for that matter.  Good luck!

Eh I mean I post pretty transparently, regularly, everyone here knows it....even just mid last week posted $50k purchase of CLPR calls that are already up 40% in a few days and for me its just like .....eh, cool. Stocks and their derivatives move around. Its just how things work. Any given day you could probably find a few things doing well. And then Mr Housing Historian after his hiatus comes rushing back in to post and boast about how no one understands 300 year housing patterns or MEME stocks and he's a self proclaimed bossman cuz his TSLA and MRNA are up today......LOLOL

[thepupil]

24 minutes ago, Gmthebeau said:

 

I am sorry but you guys dont really have any appreciation for history.  San Francisco has grown in line with the rest of the US until the recent high tech boom starting in 2012.  If you think that will last forever great, but history proves otherwise.  I have been talking about long term trends, not todays prices.   https://www.bayareamarketreports.com/trend/3-recessions-2-bubbles-and-a-baby

 

I repeat my prior feedback. There are plenty of companies discussed on this board. Not all of them engage in buggy whip manufacturing or own real estate.

 

You appear to be inclined to invest in high growth companies of the future. For ones where you have insights to share, please feel free to do so. 

 

You also appear bearish of real estate. there are numerous real estate (long) idea threads. Please feel free to share your thoughts regarding their intrinsic values and your rebuttals to the echo chamber / bull cacophony that can sometimes occur when Greg, BG, RealAssets, and I form a circle and start moving our arms up and down.

 

there are numerous types of investors on this board. high quality posts on the companies of the future would be welcome. high quality denigration of ideas is also welcome. have at it. 

 

Edited October 25, 2021 by thepupil

[ERICOPOLY]

28 minutes ago, Gmthebeau said:

 

I am sorry but you guys dont really have any appreciation for history.  

Totally!  My parents paid $55,000 for their Los Altos Hills home in 1970.  I grew up in that home and they are still there. 

 

I just can't appreciate it.  Hahaha.

Edited October 25, 2021 by ERICOPOLY

[ERICOPOLY]

Zillow says it's now $5.1m 

 

Just like the rest of the US, up 95x since 1970.

Edited October 25, 2021 by ERICOPOLY

[cubsfan]

43 minutes ago, Gmthebeau said:

 

Dude, just giving you a taste of your nonsense.  If anyone acts like a 3 year old its you.  You are clueless.  I wont be hanging around here cuz you guys just dig thru the garbage looking for that last puff of a discarded cigar.  You are clueless as the future and the past too for that matter.  Good luck!

 

I think you might be pretty new here - and that's fine. Hate to see you get off on the wrong foot.

 

Just a thought for you: Gregmal has helped a lot of people here make a lot of money - that I can personally  attest.. So trash him if you like. Especially if it makes you feel better. Most of us won't fall for it.

 

But here's another idea for you: listen to what the dude says. Dig deep to understand his thinking - and you might actually make a lot of money as well. He's been very generous with his thinking. Even with dummies like me.

 

And like Pupil says - high quality contrarian opinions are always welcome.

Edited October 25, 2021 by cubsfan

[DooDiligence]

1 hour ago, Gmthebeau said:

 

LOL.  

 

TSLA up over 11% TODAY.  Hit $1 trillion in market value.

MRNA up over 5% TODAY.

 

You should not talk about things you don't understand.  It's "better to keep your mouth shut and appear stupid than open it and remove all doubt"  Boom!

 

You should follow your own advice.

 

[E. Nashton]

I'm newish to the board so I don't feel I have a place to get involved. But I am a long-term lurker of the board ...and can say without a doubt... @Gregmal has made me money. Do I agree with everything he says or recommends? No...I don't agree 100% with anyone ever (just ask my wife!). But do I think about his thinking process/rationale even when I disagree? YEP. 

[LounginMKL]

[Libs]

2 hours ago, ERICOPOLY said:

Totally!  My parents paid $55,000 for their Los Altos Hills home in 1970.  I grew up in that home and they are still there. 

 

I just can't appreciate it.  Hahaha.

Funny you mention that. We sold our house in that same area, also in 1970, for $40,000 and moved to a small town in Nebraska. $40K was a fortune to us. (The house we bought in Nebraska cost $9,000..... and our neighbors later teased us for overpaying).

 

I believe that house we sold is now worth $5MM. D'oh!

[ERICOPOLY]

1 hour ago, Libs said:

Funny you mention that. We sold our house in that same area, also in 1970, for $40,000 and moved to a small town in Nebraska. $40K was a fortune to us. (The house we bought in Nebraska cost $9,000..... and our neighbors later teased us for overpaying).

 

I believe that house we sold is now worth $5MM. D'oh!

 

$55k was a fortune to them too.  They were stretched with interest rates at 9% and it took them years to fully furnish it.

 

But then my father just paid the mortgage off a few years early because he was annoyed by the monthly payment and inflation had made the mortgage payment trivial by the 1990s.

[ERICOPOLY]

Briefly I went to school with the kids of Marcus, Millichap, Peery, and Arrillaga.  Some people made a crushing amount of money.

[LearningMachine]

15 hours ago, ERICOPOLY said:

They were stretched with interest rates at 9%.

I'm curious roughly what LTV they took the mortgage at, and roughly what percentage of their income they were paying?  Was it around LTV of 80%, and paying about half their income? 

 

[ERICOPOLY]

8 hours ago, LearningMachine said:

I'm curious roughly what LTV they took the mortgage at, and roughly what percentage of their income they were paying?  Was it around LTV of 80%, and paying about half their income? 

 

 

I don't recall the LTV or income percentage.  I believe it was maximum loan they qualified for and I believe they had down payment help from family.  Newly married, he was a new engineer (HP) and she was an RN (Stanford).

 

 

[Gregmal]

Some of the best advice I have taken personally, and also heard so many people swear by, is to really reach on your first home. If you're of average or better intellect with corresponding job prospects...go to that point where you're internally like "ehhhh I could do it but eh...its gonna be close/tight"....If you're under 40, and especially 30...pull the trigger. 5-10 years from now you'll either need a bigger house anyway, or if you bought the right one, be totally in the drivers seat, and with a huge equity cushion even if prices go nowhere. And in either event, if you're half successful on your career path, what was a lot of money to you then, at 25 or 35, most definitely shouldn't be a lot of money to you 10 years later in your life/career. 

[ERICOPOLY]

16 hours ago, Gregmal said:

5-10 years from now you'll either need a bigger house anyway, or if you bought the right one, be totally in the drivers seat

 

And they did need a bigger house in that timeframe but they had an acre so my father built the extension that added 3 bedrooms.  He drew his own plans and framed it all himself and also he did the electrical, floors, finish work and roofing.  He used contractors for the windows, drywall, and foundation.

Edited October 27, 2021 by ERICOPOLY

[KJP]

On 10/20/2021 at 1:11 PM, KJP said:

 

Based on the charts in my prior post, the deviation above zero in changes in real housing prices appears to have begun in the US in 1975 and in the UK sometime around 1960.  So we appear to have 50+ year trends away from zero real housing price growth.  So, are those data series inaccurate in some way?  If not, why haven't the forces you note already asserted themselves?

 

Regarding replacement costs, note that the US housing prices appear to have decoupled from inflation around the same time (roughly 1975) as the peak in US construction labor productivity, and have continued to head in opposite directions (real housing prices up; labor productivity down or perhaps flat):  https://noahpinion.substack.com/p/what-happened-to-construction-productivity

 

Here's another source documenting a clear rising trend in US real housing prices since 1975:  https://calculatedrisk.substack.com/p/real-house-prices-price-to-rent-ratio-897

 

The very long-term (centuries in one instance) pre-1975 charts I posted earlier show a different picture -- zero long-term real housing price increases with oscillations above and below zero over shorter period of time, and the amplitude of the oscillations were must lower than the movement away from zero we have now (and had in 2006).  So, for people who believe the longer-term chart is the signal and the post-1975 chart a temporary aberration that will correct, what changed in 1975?  And why will the dynamics reverse and cause the trend line to go the other way to get us back to zero real long-term housing price increases?

[ERICOPOLY]

OMG people:

 

https://www.brookings.edu/essay/the-history-of-womens-work-and-wages-and-how-it-has-created-success-for-us-all/

[ERICOPOLY]

Two incomes.

[ERICOPOLY]

If women's participation in the workforce went back to 1974 levels and never came back again...  and if the 1974 pay gap between men and women returned... and if we went back to 1973's laws where men were required to cosign for women in order for a woman to apply for credit...

 

What would that do to housing prices?