Market Watch

[5030]

They will be stuck buying an expensive house and deal with expensive financing.

...Or be doomed to renting for their entire lives. For the last 2 years, I've had zero turnover in tenant's. One couple was gonna buy a piece of land and have their home built but they were unable to come up with the down payment on just the land. The younger set today don't believe in saving money I guess.

 

[drumminj]

Some things went seriously wrong when investors started buying up single family homes as a source of significant returns. Historically, the cost of insurance, utilities, maintenance, and property taxes ate up so much of the return. Illiquidity and high transactional costs also meant single family homes weren't regarded as a good investment.

I suspect there was so much liquidity in the system that it just flowed into residential real estate despite the obvious shortcomings.

All these people who have turned into house flippers kind of reminds me of the people who formed investment clubs prior to the dot.com bubble bursting.

I've thought about this at times and my hypothesis is that there wasn't enough money/liquidity for certain markets to be 'financialized' in the past. Unfortunately, so much money has been printed and leverage allowed that more and more types of 'assets' can be financialized, housing being a recent one.

I don't think that's a good thing. Leverage, especially when financed by a central bank (that can just 'print'/make up money) is bad for society IMO.

 

[2manyrocks]

...Or be doomed to renting for their entire lives. For the last 2 years, I've had zero turnover in tenant's. One couple was gonna buy a piece of land and have their home built but they were unable to come up with the down payment on just the land. The younger set today don't believe in saving money I guess.

They couldn't save it fast enough when home prices were jumping at the rate they jumped during 2020 -2022. It wasn't just one local real estate market. It was nationally, and the explanation for that is primarily low interest rate policy at the hands of the FR (who blamed price inflation on everything but themselves).

I've thought about this at times and my hypothesis is that there wasn't enough money/liquidity for certain markets to be 'financialized' in the past. Unfortunately, so much money has been printed and leverage allowed that more and more types of 'assets' can be financialized, housing being a recent one.

I don't think that's a good thing. Leverage, especially when financed by a central bank (that can just 'print'/make up money) is bad for society IMO.

Too much leverage puts not only individuals at risk, but puts the entire economy at risk. People that own what they have can ride things out better than those who are already stretched to make the next set of monthly payments. Once we start having large groups of people default when things get tighter, that increases the overall risk of defaults and more intervention. The intervention has been like a bad doctor who prescribes more meds instead of treating the underlying illness.

 

[CloverKnollFarms]

I'm just waiting to put my cash to work when people realize they are overextended

 

[D&D]

...Or be doomed to renting for their entire lives. For the last 2 years, I've had zero turnover in tenant's. One couple was gonna buy a piece of land and have their home built but they were unable to come up with the down payment on just the land. The younger set today don't believe in saving money I guess.

I’d be willing to bet they want to, being able to may be the dilemma. When you and the Mrs were starting out things were different. My first house, a little 4 bed, 2 1/2 bath was bought on a handshake and owner financed, 0 down, pay by the 15th of each month. They wanted mid month payments cause their retirement and SS checks hit on the first. My next 2 purchases were under $100K. Today, each one is valued valued at $390k+. Some places today $100K won’t get a 1/4 acre lot.

 

[D&D]

Too much leverage puts not only individuals at risk, but puts the entire economy at risk. People that own what they have can ride things out better than those who are already stretched to make the next set of monthly payments. Once we start having large groups of people default when things get tighter, that increases the overall risk of defaults and more intervention. The intervention has been like a bad doctor who prescribes more meds instead of treating the underlying illness.

The S&L, auto makers and Wall Street bailouts come to mind. Propping up certain businesses while shuttering others during a health emergency.

 

[Yander]

Already starting to happen. FB marketplace is littered with used tractors at good prices. A little over a year ago, in the summer, that was not the case. I ended up buying new because the used stuff was going for nearly new price. Now there are some real deals.

I'm just waiting to put my cash to work when people realize they are overextended

 

[aesanders]

I am in the market for a new tractor and the only two brands I have eliminated are John Deere and Kubota. When I bought my current Deere in 2007, I paid more but felt I got more as it had oodles of tech at the time, plus it was a top brand. It was more expensive, but not the insane amount more expensive as they are today. Now you just get the brand unless you spend far in excess. My top candidates in 2007 were Deere and Kubota. Now they are bottom two, and I haven’t been unhappy with the Deere.

 

[CloverKnollFarms]

I am in the market for a new tractor and the only two brands I have eliminated are John Deere and Kubota. When I bought my current Deere in 2007, I paid more but felt I got more as it had oodles of tech at the time, plus it was a top brand. It was more expensive, but not the insane amount more expensive as they are today. Now you just get the brand unless you spend far in excess. My top candidates in 2007 were Deere and Kubota. Now they are bottom two, and I haven’t been unhappy with the Deere.

You pay a lot more for a stripped down unit, than you pay for a fully optioned tractor from another brand. My tractor has all the options, they were standard, for about $15k less than a comparable unit. That's 50% more than I paid.

 

[ultrarunner]

Those that own a property may not escape unscathed as wildly increasing assessments matching wildly increasing prices are real in most States.

My assessment and taxes tripled over the last 15 years and no way could I hold on if they triple in the next 15 because this translates from 20k now to 60k property tax later.