patrick.net

joeyjojojunior says

It's the correct default position until someone can present evidence for why this time will be different, however.

You have it backwards amigo. If you want to rely on history, you must show that there is a historical precedent that matches the current situation.
That is how learning works: (1) empirical evidence, (2) understanding of 1, (3) formulating general principles based on 2.

You are trying to skip (2) and you don't even know if (1) is sufficient.

joeyjojojunior says

Do you acknowledge that there are a lot more than 2 periods of inflation?

War years, a decade, and an isolated year - 2,3,4 periods, whatever (if you call the months "periods" you can have 20) - this is the history on which you base your blind beliefs.

"You have it backwards amigo. If you want to rely on history, you must show that there is a historical precedent that matches the current situation.
That is how learning works: (1) empirical evidence, (2) understanding of 1, (3) formulating general principles based on 2.

You are trying to skip (2) and you don't even know if (1) is sufficient."

Nonsense. I clearly understand the empirical evidence and have formulated a principle based on it. That demand outstripping supply has been the (major) cause of inflation in the United States for the last 200 years. The US economy is still the US economy. So the historical precedent matches.

"War years, a decade, and an isolated year - 2,3,4 periods, whatever (if you call the months "periods" you can have 20) - this is the history on which you base your blind beliefs"

If I call the months periods, there are well over 100. But, no, I call a period a period. Generally at least a year. So there are actually 8 periods. And I like the "blind" beliefs comment--very funny. I "believe" in facts and data. What do you believe in?

joeyjojojunior says

"Yes, rents could rise higher"

And by could--you mean, they pretty much always do.

NuttBoxer says

Yes, rents could rise higher, but never higher than what people can afford, otherwise they go un-rented.

Do you always try to sound right by cherry picking parts of comments instead of the facing the truth of what was said? Or do you just stop reading as soon as you hit something you don't understand?

joeyjojojunior says

Most people are locked into leases too so it's not all that different.

Are you shitting me!? In California the landlord always has to make reasonable effort to re-rent, even if you break lease. Otherwise they are liable for unrented months, not the tenant. Second leases average a year, not THIRTY. Third, even if you do break lease, landlord can't fill the unit, and you do end up paying rent after leaving, it's still NO WHERE CLOSE to the amount you will owe if you try backing out of a mortgage.

Will you stop at no blatant exaggeration in an attempt to sound right!?

joeyjojojunior says

Typically inflation is caused when the demand for goods and services outstrips the supply of said goods and services.

No, in every economic collapse there has always been plenty of available resources. Scarcity is due to unaffordability(mostly), hording, and government manipulation. And we have now gotten closer to root cause than any of these effects. Central bank over-printing of fiat currency is the driver behind every inflation. This is why at some point the cost to produce or transport goods outstrips the return when they are sold. Another effect that leads to your choked supply.

0d2e says

Paying rent is throwing money out the window. How can you even compare it to home ownership?

Because apparently you don't know of another "investment" other than buying a structure that degrades over time, and requires constant maintenance. Which you haven't included in your calculation vs renting, or the additional taxes and interest you're paying(how very convenient). And if those HOA fees ever rise, forget about just moving...

"Do you always try to sound right by cherry picking parts of comments instead of the facing the truth of what was said? Or do you just stop reading as soon as you hit something you don't understand?"

Sorry--didn't mean to. Here, I'll respond to the other part as well.

NuttBoxer says

"Yes, rents could rise higher, but never higher than what people can afford, otherwise they go un-rented."

This is true, but somehow people always manager to afford it. Probably because they'd rather cut elsewhere rather than being homeless.

joeyjojojunior says

This is true, but somehow people always manager to afford it.

WTF... So if I only make $1,000 per month, and rent is $1,000 month, I'm going to just not eat? That reasoning is unfounded, and absurd.

joeyjojojunior says "Typically inflation is caused when the demand for goods and services outstrips the supply of said goods and services."

Nuttboxer says, "No, in every economic collapse there has always been plenty of available resources. Scarcity is due to unaffordability(mostly), hording, and government manipulation. And we have now gotten closer to root cause than any of these effects. Central bank over-printing of fiat currency is the driver behind every inflation. This is why at some point the cost to produce or transport goods outstrips the return when they are sold. Another effect that leads to your choked supply."

I figured that's where you were trying to go. It's the FED!! Hate to break it to you, but inflation existed long before the Federal Reserve. Certainly printing money can cause inflation. But it's far from the only mechanism. And, regardless, printing money causes demand to outstrip supply, which causes inflation.

"WTF... So if I only make $1,000 per month, and rent is $1,000 month, I'm going to just not eat? That reasoning is unfounded, and absurd."

Is eating the only other thing you spend money on?

wtf is right--look at the last 100 years of rent prices and then overlay it against 100 years of inflation. You'll find they match pretty damn close.

Joe Jr, it seems like you and I have different standards for logic and reason.

"Joe Jr, it seems like you and I have different standards for logic and reason."

Yep, it sure does.

joeyjojojunior says

Hate to break it to you, but inflation existed long before the Federal Reserve.

Hate to break it to YOU, the context of my comment was not the Federal Reserve.

NuttBoxer says

Central bank over-printing of fiat currency is the driver behind every inflation.

Or did you not know banking existed long before the Monster from Jekyll Island ever got off the ground.

joeyjojojunior says

And, regardless, printing money causes demand to outstrip supply, which causes inflation.

But which comes first? Well let's look at the order of your sentence...

joeyjojojunior says

wtf is right--look at the last 100 years of rent prices and then overlay it against 100 years of inflation. You'll find they match pretty damn close.

I've already proven this point irrelevant, and grossly irresponsible in a collapsing economy. Let me make it even clearer how wrong you are. The most I've ever paid for rent in San Diego, a notoriously expensive market, is $1850. Before that I was paying $1450, before that even less. We've never lived in an apartment, and my current rent is at least $300 under anything else that was comparable to our current house. I've never had to waste money for downpayment, never had to pay property taxes, PMI, or ANY repairs, never been forced to deal with bad neighbors longer than I wanted to, never had pay more than I could afford, because if the rent is raised, I just find a cheaper place. If food prices go up, find a cheaper place. Get laid off, cheaper place. I've had my time and my money all to myself to spend/invest in whatever I wanted, not tied into a house I bought for way more than it was worth. We aren't even in the worst of it, and I'm already ahead.

NuttBoxer says

We aren't even in the worst of it, and I'm already ahead.

way ahead of having $200k+ if you had bought in 2012?

"But which comes first? Well let's look at the order of your sentence..."

OK--I see you are not comprehending the point here. Printing money is one of many mechanisms that can cause demand to outstrip supply, leading to inflation. It is not the only one.

"I've already proven this point irrelevant, and grossly irresponsible in a collapsing economy"

Yep. Nobody is saying that house prices and rents are guaranteed to go up. Just that they have followed inflation for the last 100 years. If inflation in negative (recession or depression) then rents and housing price changes will also likely be negative.

"Let me make it even clearer how wrong you are. The most I've ever paid for rent in San Diego, a notoriously expensive market, is $1850. Before that I was paying $1450, before that even less"

Nope--that doesn't make me wrong in the slightest. Data on San Diego rents is freely available:

http://www.deptofnumbers.com/rent/california/san-diego/

and they have been rising since 2011. You anecdotal story does not disprove actual data.

Renting has advantages that you clearly prefer. But that doesn't mean it's an economically wise decision--it just means you value non-economic advantages of renting. Which is fine.

landtof says

way ahead of having $200k+ if you had bought in 2012?

yes.

joeyjojojunior says

It is not the only one.

Yet in all your posts(10+), you've failed to mention a single root driver to the contrary...

joeyjojojunior says

and they have been rising since 2011. You anecdotal story does not disprove actual data.

Renting has advantages that you clearly prefer. But that doesn't mean it's an economically wise decision--it just means you value non-economic advantages of renting. Which is fine.

I hear lots of conjecture, but see no evidence to support it. I guess I should just take your word over my experience and numbers...

"Yet in all your posts(10+), you've failed to mention a single root driver to the contrary..."

Actually I have. Post 41:

"You can import inflation. The US could default on it's bonds" But there are many other possibilities. Logan's favorite, demographics can be inflationary. Reducing inequality would be hugely inflationary right now.

"I hear lots of conjecture, but see no evidence to support it. I guess I should just take your word over my experience and numbers"

Reading isn't your strong suit, huh? I had a link for you with the data in the post your just quoted. Here it is again:

http://www.deptofnumbers.com/rent/california/san-diego/

joeyjojojunior says

Nope--that doesn't make me wrong in the slightest. Data on San Diego rents is freely available:

http://www.deptofnumbers.com/rent/california/san-diego/

and they have been rising since 2011. You anecdotal story does not disprove actual data.

Department of numbers is a great resource. Thanks for sharing.

So one specific data point from a random guy on the internet doesn't change the overall trend? Interesting... Haha

San Diego near the beach is nice, but unfortunately, it is in California.

The only thing we can do with our existing Cities that have run out of space is tear shit down and rebuild larger and more units.
Though I got to warn you, when you buy inflated property rip it down to build new property. IT adds a 300% markup to the final result.

More Cities is the only sensible answer. Everyone knows it, but don't want it, because it will drive the price of their shithole down. If your neighbors had other options to move away to new hip budding towns and communities that were built, and planned with the businesses that employ and serve them. Your $550K shit hole would be back to $120K and the Greedy Bastards knows it.

The new deal did just what I propose as a result America had a boom economy cheap housing and cheap food for 80 years as a result.

We build new cities. Move to a new city we build before the population in your market know and you will get out while your existing house is high.

Find 1000+ acres that is 45 min from your area and we will arrange a deal where you also get your house we build for you at a substantial discount while everyone else pays the going price. Action has its rewards.

Santa Cruz RE is weird. Everything sells right away at fool's gold prices, while the foreclosures are increasing.

Latest reports I read today are showing significant decreases in offers, increasing inventories and fewer showings for San Diego.

PrivilegedtobeWhite says

rando says

What would it cost you to rent the same thing long term?

There's no doubt that renting is cheaper than buying. If I were to buy a $900K home here, my guess is that it would rent for $3,500-$3,800 / month.

So did you buy or rent? That $900K home would easily be worth $1,025,000, at roughly 8% compounded appreciation in the last 18 months. That is an average of $7,000 per month. Take off the tax benefits, and you will see it would have been much better o buy.
The rent vs buy calculators are only as good as the information you put in. 30 years ago the same calculator would show it's better to rent in San Francisco, and buy in Detroit. It would be a total disaster. Nothing has changed today. The next 30 years will show Coastal California to be much more profitable to buy even though the calculators will show otherwise.

Malcolm says

Latest reports I read today are showing significant decreases in offers, increasing inventories and fewer showings for San Diego.

Yes, the numbers do show that. The anecdotal information and observations I see from the zip codes I follow in So Cal show July will be worse than June. The worst case is a looming pause in housing before the insanity caused by a housing shortage continues.
Didn't you sell your home last October expecting prices to crash? Are you glad?

Strategist says

Yes, the numbers do show that. The anecdotal information and observations I see from the zip codes I follow in So Cal show July will be worse than June. The worst case is a looming pause in housing before the insanity caused by a housing shortage continues.
Didn't you sell your home last October expecting prices to crash? Are you glad?

Hi there, I just noticed this. I don't check in very often. Yes, I am extremely happen that I sold when I did. In my opinion I called the top within months. I was thinking of this thread yesterday because I read an article that sales are down 20% year over year for August in San Diego. The article concedes price decreases for all the reasons we cite, high interest rates, overpriced houses that aren't supported by wages despite low unemployment etc. I am still confident in year over year price declines. I am not predicting another meltdown, but especially for the expensive homes $550 and above (you guys in the bay area will laugh at me when I say an expensive home is $550K), I do foresee 30 to 50 percent corrections.

I'm not particularly bearish on nationwide housing, I just know what I see here. I rarely see anything moving for more that $400 a foot in my area, unless it is a killer horse property or has some other unique feature. I saw a situation of two identical houses on the same street with a 30% difference in price just because of a canyon verses a regular street view.

Not a scientific survey by any means, but I receive Redfin updates on properties on the market in areas of interest, and at least by that criteria, the number of homes in San Diego, Encinitas in particular, that they have been sending me has increased dramatically over the last few months. It appears that folks are bailing, but that the homes are staying on the market longer.

Here is a scenario that should help the rent/price discussion. In the 90s you could rent a house in San Diego for about $1,000/month. My first house was 1200 sf and I rented it out for about $1,000/mo when I bought another house. In 2005 that house was worth $440K, but still renting for about $1,200/month. Nowadays $500-$600K will get you that type of starter home. These homes, like my recent N County property may rent for $2,000. I would never try to rent a property out for that amount again, there are very few renters locally who actually qualify. Part of why I sold when I did was the rental market seemed really shady, but even if we believe that the economy is even better and people really can pay $2,000/mo to rent a small 3 bedroom, the numbers are way out of alignment.

1995 starter home $110K rents for $1,000/mo
2005 starter home $450K renting for $1,200/mo
2018 starter home $550K renting for $2,000/mo

So what I considered a normal market when I started investing is a lot different now. Prices are basically 5 times higher to generate two times the rent. Rising interest rates hurt even more and are removing any upside potential, meaning 0 for a present value of speculative increases. How can anyone say they aren't being overbought?

The only explanation was falling interest rates, but investors ignore borrowing costs in rental analysis, so the cap rate, basically the return on the purchase price, is minuscule compared to what it historically was. To buy for an investment is unattractive right now, especially if borrowing. My strategy is to wait for the dream home which has a uniquely rentable part and try to hit the market at that sweet-spot of a heavily discounted price. Those deals are becoming very common, I can show $215/ft all day long on 2,500 sf and up.

MisterLefty says

Not a scientific survey by any means, but I receive Redfin updates on properties on the market in areas of interest, and at least by that criteria, the number of homes in San Diego, Encinitas in particular, that they have been sending me has increased dramatically over the last few months. It appears that folks are bailing, but that the homes are staying on the market longer.

Not scientific on its own, but more articles are making similar observations. What people miss is that growing inventory. That is what causes a crash when the sales are forced somehow. Until then we just merrily report rising median home prices because that is only measuring what actually is selling. That measure doesn't measure if those sales are actually bargains and my observation is that in general the houses that are selling are discounted expensive homes and a few overpriced starter homes.

Malcolm says

So what I considered a normal market when I started investing is a lot different now... How can anyone say they aren't being overbought?

The biggest new variable is government bailouts, by whatever name. Fed ZIRP, the threat of NIRP, loan modifications at the federal and state levels: a vast array of extremely powerful interests use government policy to prop up RE prices. Even when bankers were caught committing RICO violations, forging signatures on documents, they were allowed to settle for loan modifications that propped up RE prices. What happened once might happen again: RE prices have been dramatically manipulated, and remain so. The word "overbought" applies to markets, but IDK to what extent RE is even a market at this point.

Malcolm says

1995 starter home $110K rents for $1,000/mo
2005 starter home $450K renting for $1,200/mo
2018 starter home $550K renting for $2,000/mo

The 1995 starter home would be $300,000, with rent at $1,200
The 2015 starter home $550,000 would rent for $2500 today.

Malcolm says

Hi there, I just noticed this. I don't check in very often. Yes, I am extremely happen that I sold when I did. In my opinion I called the top within months.

You sold in October 2017, and we have been hitting new highs ever since. The San Diego County median hit another record high at $579,750 last month.
So when and where is the top you called?

Strategist says

You sold in October 2017, and we have been hitting new highs ever since. The San Diego County median hit another record high at $579,750 last month.
So when and where is the top you called?

I haven't seen any sales in my area that make me question my decision. I did extremely well and wouldn't have a problem if someone after me made a little money. Time will tell. All I know is that more than one article and news-report have said people are not getting what they did a year ago.

Hey, I just checked.The average rent for a 2 bedroom apartment in San Diego County is $2,341. A 3 bedroom house would obviously rent for a lot more.
Where the hell do you get your $2,000 monthly rent for a median priced 3 bedroom house?

https://www.rentjungle.com/average-rent-in-san-diego-rent-trends/
As of August 2018, average rent for an apartment in San Diego, CA is $2177 which is a 2.94% increase from last year when the average rent was $2113 , and a 0.83% decrease from last month when the average rent was $2195.

One bedroom apartments in San Diego rent for $1920 a month on average (a 6.25% increase from last year) and two bedroom apartment rents average $2341 (a 3.5% increase from last year).

Strategist says

Hey, I just checked.The average rent for a 2 bedroom apartment in San Diego County is $2,341. A 3 bedroom house would obviously rent for a lot more.
Where the hell do you get your $2,000 monthly rent for a median priced 3 bedroom house?

North County.