patrick.net

With how sharply mortgage rates are climbing and how freakishly low they have been, I wonder if the peak and decline will happen faster than in 2006-2007

What if the national price of gas becomes north of $6?

porkchopexpress says

With how sharply mortgage rates are climbing and how freakishly low they have been, I wonder if the peak and decline will happen faster than in 2006-2007

Interest rates weren't the issue in 2007, fraudulent loans were at the core. As long as people can service their mortgages interest rates only matter in terms of demand, i.e. how many can afford to buy. Since inventory has been very low this may stall the sharp rise but not cause a crash. You'd have to see layoffs and higher unemployment (not people quitting the workforce intentionally).

Eman says

I’m looking at history and data for guidance

You might want to consider who the buyers are.

Just looking at lines on graphs to make predictions about the future led some folks to ruin in the late 1920's, the late 1990's (dot.com), and the Real Estate Bubble that burst in 2006-2008.

Folks just looked at data on graphs and whatnot and assumed they had a handle on things.

If there will continue to be low inventory = No Crash.

I came from leftist paradise with private loans of 24% interest rares were common back then. The rates in shop vary any time of the day. Buyer has to ask at counter since there were no price tags on any goods. It doesn't meany anything even if you find one. Some customers get discount based on many factors like frequent customer, skin color, hair style, footwear, odor etc. Now things changed a bit with departmental stores after economic reforms where the price stickers can be found at least for some items. No slave complained. I still remember my dad complained that during Indira Khan (a far left commie dictator) the income tax rates were 97.5% during 1970s.

Hoping this inflation may not go out of control to get into hyper inflation to create something similar to the above.

mell says

porkchopexpress says

You'd have to see layoffs and higher unemployment (not people quitting the workforce intentionally).

Give it a few months

mell says

Interest rates weren't the issue in 2007, fraudulent loans were at the core. As long as people can service their mortgages interest rates only matter in terms of demand, i.e. how many can afford to buy. Since inventory has been very low this may stall the sharp rise but not cause a crash. You'd have to see layoffs and higher unemployment (not people quitting the workforce intentionally).

Good observation mell. In 2006-2007, we had fraudulent loans and the inventory kept building up. This time around, a combination of the low inventory, low interest rates, and some newly minted millionaires, thanks to all the IPO’s after the pandemic, which drove prices to the stratosphere.

In my immediate circle, I know 3 persons whose net worth went up $80-$250MM thanks to HCP, SNOW and Nuvia. A tennis friend did real well with TSLA stocks, and bought a $3.3M house in the midst of the pandemic.

At this point, it seems likes a bunch of the recent purchases are out of panic. Buy now or be priced out forever kind of thing.

B.A.C.A.H. says

Just looking at lines on graphs to make predictions about the future led some folks to ruin in the late 1920's, the late 1990's (dot.com), and the Real Estate Bubble that burst in 2006-2008.

Can you share your experience and some history of what happened? I’m sure the readers would appreciate it.

Yugoslavia experienced massive inflation during the Balkan wars.

I spoke to a Yugoslavian man who said the best time to buy is at the beginning of the inflation cycle. He said inflation will wipe out your mortgage debt. You will literally own the house free and clear within 5 years. All contracts are denominated in your nations currency. Not gold and silver as they once were. The bank cannot refuse a wheelbarrow full of worthless cash, so to speak.

The trick is knowing when that will occur.

Eman says

"In my immediate circle, I know 3 persons whose net worth went up $80-$250MM thanks to HCP, SNOW and Nuvia. A tennis friend did real well with TSLA stocks, and bought a $3.3M house in the midst of the pandemic"


I'm someone who believes there are too many rich people in America who need to get wiped out in order for the system to be healthy. There is too much weight at the top. Too many consumers. Not enough workers. A USD crash will help solve this.

gabbar says

What if the national price of gas becomes north of $6?

Many people need gasoline to drive to their jobs. (Not everyone's working from home).

Paying for gasoline, whatever the cost, is imperative to keeping their jobs. They will spend less on something else, like every kind of discretionary travel (can you say, "airline flights"?), restaurants, new clothes, entertainment, food, and housing (housing being the last thing to cut because it's difficult to cut housing cost). Fancy upgrades to the house, and home maintenance, will be deferred.

Last time gasoline spike so much so fast, in the summer of 2008, when folks ran out of spending to cut (and credit cards to run up the balances on), they quit paying mortgages. We know what happened next.

Eman says

Can you share your experience and some history of what happened? I’m sure the readers would appreciate it.

Sorry I wasn't around in 1929, but I read a lot of history.

I know so many folks who lost a bunch when dot.com collapsed. A former colleague of mine told me recently that his portfolio is still less than it was in 1999. So many folks. Because they connected the dots about the past to predict the future. They were wrong.

And I know so many folks in the Bay Area and Central Valley who lost homes in the Real Estate Bubble. They lost their residence homes, and their investment homes acquired on house- of-cards financing collapsed. Some of them, before they lost those investment properties, were cock-sure of what they were doing, based on "history". Some relatives mocked me a bit when I didn't want to partner with them. Because it was all on debt.

My coworker lost her home in Gilroy early in the crisis. She gave me her cat because they couldn't take him where they fled to. I had the cat for 13 years before he passed away.

B.A.C.A.H. says

What kinds of people are the buyers?

Eman says

I don’t know what kinds of people are the buyers, and I don’t really care.

Eman says

At this point, it seems likes a bunch of the recent purchases are out of panic. Buy now or be priced out forever kind of thing.

Looks like you answered my question about the buyers.

Looking at this chart, it’s freaking nuts. In 2013, I predicted that the HPI for the Bay Area would peak around 230-235. Justme “saved my post for posterity”. It’s at 349 now. 🤯

B.A.C.A.H. says

A former colleague of mine told me recently that his portfolio is still less than it was in 1999.

How is this even possible?

WineHorror1 says

If there will continue to be low inventory = No Crash.

Although it’s been happening more, I still can’t fathom why some people won’t cash in their Los Angeles area lotto ticket. We’re talking 1500 sq ft 3bd/2ba post ww2 cracker boxes selling at $800k min up to about 1.6 million depending on location and condition. 2,000 sq ft homes it’s more like $1 million up to 2 million.

Crime is without a doubt the worst it’s been in 20 years, despite what the liars and deceivers are the LA Slimes say. It there any doubt why those evildoers moved their headquarters from downtown LA to El Segundo? Filthy horrible people work for that company…the absolute worst of educated humanity. The crime has spread to the suburbs too. The modest city I live in is trying nobly to stave off the crime, but I see it. They had to take extraordinary unconstitutional measures to keep the riots and associated crime out, but they are losing the battle. Already there’s been an influx of drug addicts and smash and grabs and I’m guessing it will get worse unless the City of LA actually starts enforcing the law and corrupt George Gascon gets recalled.

The streets and homeless everywhere in LA area remains a filthy public health mess.

And oh, state taxes and sales, gas, etc. higher than elsewhere. And the public schools are garbage, even the highly rated ones. I’ve never seen so many people moving to a home school situation.

And let’s not forget the recent state law passed forcing all cities to rezone, opening the door for multiplexes and apartment buildings in current sfr suburbs.

I remain in astonishment at people not taking their cash and going and living a life of luxury in a better part of the country. I can retire in less than a decade and can’t see anyway Id stay. If I had that same lotto ticket, I’d already be gone.

Booger says

B.A.C.A.H. says

A former colleague of mine told me recently that his portfolio is still less than it was in 1999.

How is this even possible?

Because here in Silicon Valley, folks were just as cock-sure about their "recent history" gains in their dot.com stocks as some Real Estate cheerleaders are about Bay Area house prices.

The same inlaws who mocked and belittled me for not joining their Casey Serin-ish real estate stuff had mocked me years earlier for not buying in to their stock investing club.

Tech stocks like world.com and JSDU and so many others collapsed to a fraction of their values, taking down the NASDAQ with them. Folks like the former colleague I mentioned panicked and sold at the bottom, locking in their losses. They were battle scarred and shied away from stocks after that.

B.A.C.A.H. says

Eman says

Can you share your experience and some history of what happened? I’m sure the readers would appreciate it.

Sorry I wasn't around in 1929, but I read a lot of history.

I know so many folks who lost a bunch when dot.com collapsed. A former colleague of mine told me recently that his portfolio is still less than it was in 1999. So many folks. Because they connected the dots about the past to predict the future. They were wrong.

And I know so many folks in the Bay Area and Central Valley who lost homes in the Real Estate Bubble. They lost their residence homes, and their investment homes acquired on house- of-cards financing collapsed. Some of them, before they lost those investment properties, were cock-sure of what they were doing, based on "history". Some relatives mocked me a bit when I didn't want to partner with them. Because it was all on debt.

My coworke...

Sounds like your colleagues and coworkers bought based on speculation rather than fundamentals.

The buyers this time around couldn’t get fraudulent loans like they did during the housing bubble years. Regardless, an economic downturn will result in lay-offs, which would cause the next housing correction. I’m not smart enough to know how deep the next correction will be, but I’ll be ready to buy more assets when the numbers pencil out. The Bay Area has always bounced back after an economic downturn. There’s no reason to believe it wouldn’t after the upcoming downturn.

FuckTheMainstreamMedia says

Although it’s been happening more, I still can’t fathom why some people won’t cash in their Los Angeles area lotto ticket. We’re talking 1500 sq ft 3bd/2ba post ww2 cracker boxes selling at $800k min up to about 1.6 million depending on location and condition. 2,000 sq ft homes it’s more like $1 million up to 2 million.

This is cheap compared to Bay Area prices. 😂😂😂

For us, we won’t sell and move because of family.

FuckTheMainstreamMedia says

the public schools are garbage, even the highly rated ones.

FTMM, have you spent time in LA area public classrooms recently? How many different schools? Which grades? What did you see?

FarmersWon says

Hindoos are funny slave creatures.

My business partner is Indian. He came to the US for college and did well for himself. Funny when I mentioned his last name, people said “he’s from the cast of loan sharks.” I guess Indians can tell where you’re from by your last name.

FuckTheMainstreamMedia says

I remain in astonishment at people not taking their cash and going and living a life of luxury in a better part of the country

For some of us, our families live nearby. Not just nuclear family, but extended family across generations.

Those of us who stay to be near family have different values than those you cite about taking cash and living in luxury.

FarmersWon says

Soon Bay area will have 3-4 servants coming to your home everyday doing various kinds of work from these slum areas.

The gap between the rich and poor is getting wider by the day in the Bay Area. So much for the progressive BS the left has been selling to the poor all these years.

B.A.C.A.H. says

For some of us, our families live nearby. Not just nuclear family, but extended family across generations.

Those of us who stay to be near family have different values than those you cite about taking cash and living in luxury.

Personally, I see you and I have a lot of similarities. We value our family and friends. We value our time, our kids and our community. The difference is you have always been a W2 employee while I knew I wanted to work for myself since I was young.

You remind me of one of my besties a lot. He works for the Federal Reserve. He’s very risk averse. He reminded me to “stress test” my portfolio all the time as he saw someone who was worth over $200MM went BK during the housing crash.

He has been watching me growing my real estate portfolio all these years and finally jumped in. He’s in contract to buy 13 units in SF. He’s $350k short to take down the deal. I told him I’ll back him up. Go for it. Although I didn’t have any details on the deal, I was willing to back him up because of his personality. 😂

During time of crisis, we know who are our true friends. 13 units for $3.6M in SF is cheap IMO. One of the building is a trophy asset on a recognizable street I heard.

Eman says

The difference is you have always been a W2 employee while I knew I wanted to work for myself

I did like patrick. Saved and invested so I could retire early.

A slight difference between Patrick's path and mine was that my partner and I bought our home in San Jose. We bought it over 30 years ago while still in our 20's. My reasoning for doing that is I wanted to own our residence with no mortgage before age 60, for a measure of our own personal "rent control" in old age. It was never about being an investment. For some years at the beginning, when the PITI plus maintenance exceeded what it would cost to rent the place, it was even a "mal-investment", as those costs above the owners equivalent rent were like an "ownership premium". Of course, Proposition 13 has helped a lot.

Over time, the "ownership premium" shifted to an "ownership discount", before the mortgage was paid off. That was the goal, to secure a place to live. It was never about being an "investment". That f*ckthemainstreammedia guy remarked in his comment his astonishment folks like me (and my partner) don't "take the cash". But we never viewed it that way, as an investment. More like, sunk capital. I still don't keep the house on our balance sheet.

Booger says

B.A.C.A.H. says

A former colleague of mine told me recently that his portfolio is still less than it was in 1999.

How is this even possible?

.

You have to be pretty unlucky and/or unmotivated to change stocks, but if you held those tech stocks that went to the moon and then crashed hard and never recovered like Sun or Cisco and never traded them for anything else it's possible.

FuckTheMainstreamMedia says

WineHorror1 says

If there will continue to be low inventory = No Crash.

Although it’s been happening more, I still can’t fathom why some people won’t cash in their Los Angeles area lotto ticket. We’re talking 1500 sq ft 3bd/2ba post ww2 cracker boxes selling at $800k min up to about 1.6 million depending on location and condition. 2,000 sq ft homes it’s more like $1 million up to 2 million.

Crime is without a doubt the worst it’s been in 20 years, despite what the liars and deceivers are the LA Slimes say. It there any doubt why those evildoers moved their headquarters from downtown LA to El Segundo? Filthy horrible people work for that company…the absolute worst of educated humanity. The crime has spread to the suburbs too. The modest city I live in is trying nobly to stave off the crime, but I see it. They had to take extraordinary unconstitutional measures to keep the riots and associ...

Have to agree with this and extend it to the bay area. The bay area is divided between the renters which mainly rent shacks in shitty hoods for a lot of money, some with money rent good shacks in good hoods for even much more money, but those are usually transients. If you want to own the good hoods are taken and you have to pay millions if one ever becomes available. But for those in the good or worsening hoods the trend is likely going to get worse as crime and funk spreads and schools go woke. Not saying prices are coming down anytime soon, but you need to move further into the country to escape the funk. If you're landlord in those areas you're fine, but if you live there I'd be vigilant. SF is a mere shadow of its former self, so is LA and many other cities in the SF bay or LA area. You must vote against progressives further destroying these naturally beautiful areas. Or sell and buy all cash outside of CA and never look back. Even SV is no guarantee as the tech drain continues and is largely supported by a few big tech monopolies. Hope the SF funk never reaches beautiful wine country ;) I'll always have a special connection to the bay area and am rooting for its recovery, but they need to kick out the marxists.

B.A.C.A.H. says

FuckTheMainstreamMedia says

I remain in astonishment at people not taking their cash and going and living a life of luxury in a better part of the country

For some of us, our families live nearby. Not just nuclear family, but extended family across generations.

Those of us who stay to be near family have different values than those you cite about taking cash and living in luxury.

I’m not in a dissimilar situation. But I’m saying California has not just become drastically worse, but the downtrend will continue. I cited conditions that are making this so.

My extended family fled some years ago. My wife’s has a huge extended family. Some ridiculously hanging on. But two entire parents/adult kids/grandkids already made an exodus. One from a blue collar part of LA to a really nice suburb in Phoenix…that one the parents sold, all three then early adult children made the move, and now the grandchildren are mostly adults, some with their own kids. All mortgage their homes and have good jobs. Even with those same jobs in LA, they would be lower middle class at best.

The second segment it was the adult kids that led the way…to Texas…none could afford homes here…all have very nice cookie cutter places outside San Antonio. The parents will be joining them soon.

So it is possible. I’d argue it’s extremely simple considering money and standard of living. Don’t take offense. It’s just my opinion. I grew up in California and have lived here my whole life. The place I live now, I used to call it maybe the nicest place to live in the entire nation. I can no longer say that. It’s a shithole and larger parts of LA and SF are genuinely unlivable.

B.A.C.A.H. says

FuckTheMainstreamMedia says

the public schools are garbage, even the highly rated ones.

FTMM, have you spent time in LA area public classrooms recently? How many different schools? Which grades? What did you see?

My stepdaughter was in high school up until a couple years ago.

Common core math is crap. No two ways about it.
Additionally there are a number of online parent groups…I wouldn’t be sending my small children to school to learn about another kids two daddies or any of the other bullshit that seeps in.

LAUSD curriculum is fairly easy to find and the board of education meetings are on public access station here.

But I’m familiar with that because of three separate family friends whom all home school and all would otherwise be attending LAUSD schools. The part I find most insidious in the social sciences stuff, particularly the diversity and equity fictional content.

Is there a point at all to your question?

FuckTheMainstreamMedia says

B.A.C.A.H. says

FuckTheMainstreamMedia says

I remain in astonishment at people not taking their cash and going and living a life of luxury in a better part of the country

For some of us, our families live nearby. Not just nuclear family, but extended family across generations.

Those of us who stay to be near family have different values than those you cite about taking cash and living in luxury.

I’m not in a dissimilar situation. But I’m saying California has not just become drastically worse, but the downtrend will continue. I cited conditions that are making this so.

My extended family fled some years ago. My wife’s has a huge extended family. Some ridiculously hanging on. But two entire parents/adult kids/grandkids already made an exodus. One from a blue collar part of LA to a really nice s...

Agree on SF (except for high end hoods with private security) and LA but there are still plenty of very beautiful places in CA where everything is mostly intact. And the climate is among the best in the country if not the best.

mell says

there are still plenty of very beautiful places in CA where everything is mostly intact. And the climate is among the best in the country if not the best.

Sounds like a great haven for the homeless while our government will take care of them. What’s not to like?

Eman says

Sounds like a great haven for the homeless while our government will take care of them. What’s not to like?

If I had $1k to my name and became an addict to some drug, CA is literally the only place I'd buy a one way ticket to in the lower 48. Not joking. As an outsider in the midwest this is literally a thing for people I've known or knew that fell on hard times. Hop on a Greyhound and go to CA. And it won't stop unless CA stops pandering to the homeless and will continue to get worse as you've mention the wealth gap.

Chicago has its fair share of homeless, but not remotely near what I've witnessed in CA. And we have "nice" homeless people for the most part if that makes sense. They tend to hide under the radar and not make huge tents cities like in LA. Though we have winter here, so staying out of the element lends to finding shelter which is harder to see the homelessness of the city.

I don't know what government can do about it. If you go cold turkey and cut off resources seems like crime would hockey stick. CA is in a touch spot with it. I don't think that ever changes.

FuckTheMainstreamMedia says

Is there a point at all to your question?

No point. Sometimes I've heard (not just on this blog) people complain about the schools without any first hand knowledge. My youngest kid finished grade 12 in 2013 so I've been out of it for a while.

WookieMan says

I don't know what government can do about it. If you go cold turkey and cut off resources seems like crime would hockey stick.

Without jobs that provide enough $$ to feed, cloth and house the average person it will not end. People have realize that we cannot sustain an economy where a smaller and smaller % of people have/make most of the $$.

Also, I'd bet most new wealth is being created by putting others out of work.

WineHorror1 says

Without jobs that provide enough $$ to feed, cloth and house the average person it will not end. People have realize that we cannot sustain an economy where a smaller and smaller % of people have/make most of the $$.

I get the sentiment, but I still believe that it's up to the person to make money. It's not the jobs available. There are plenty of jobs you can make $15-20/hr and get hired in a week with minimal skills. The problem is motivation because there are so many safety nets to catch you if you don't want to work. Once those are created they're hard to claw back. So there's an endless cycle of laziness.

I personally think we should just dump minimum wage laws altogether. Dump public sector unions. Private sector unions are a choice and don't hit my pocketbook, so whatever on that front. You work for what YOU are worth. A homeless guy might be able to get a $2/hr job, still be homeless, but learn a skill and eventually grow into making $15-20/hr or more. Socialize with non-homeless. The college or bust and you're a loser mentality is toxic.

WookieMan says

WineHorror1 says

Without jobs that provide enough $$ to feed, cloth and house the average person it will not end. People have realize that we cannot sustain an economy where a smaller and smaller % of people have/make most of the $$.

I get the sentiment, but I still believe that it's up to the person to make money. It's not the jobs available. There are plenty of jobs you can make $15-20/hr and get hired in a week with minimal skills. The problem is motivation because there are so many safety nets to catch you if you don't want to work. Once those are created they're hard to claw back. So there's an endless cycle of laziness.

I personally think we should just dump minimum wage laws altogether. Dump public sector unions. Private sector unions are a choice and don't hit my pocketbook, so whatever on that front. You work for what YOU are worth. A homeless guy might be able to get a $...

A lot of truth there. Here's a thought...we're a long way from past generations that could pick themselves up by their bootstraps. I'm no Libfuk but, my parents generation literally walked out of HS graduation, got jobs, started families and bought homes. That ain't being done today. Something has changed. Things like rules, regulations, monopolistic practices, government bailing out TBTF etc etc. My father's father, during the depression, literally started his own bakery inside his house. Sold his bread door to door. Let's see if anyone could do that today. No way Jose. I still say government and corporations cause most of these problems.

WineHorror1 says

I'm no Libfuk but, my parents generation literally walked out of HS graduation, got jobs, started families and bought homes. That ain't being done today.

I don't think you are a libfuk at all. We've talked. I think younger people are lazy though today. I struggle with my own kids. It pisses me off. I don't want to be my dad though. Absent and physically/verbally abusive yet successful for the most part.

Most kids are spoiled though now. They are good friends now, but my neighbors had Juniors and Seniors in high school and they were visiting colleges they hadn't even applied for or been accepted to. Why? The game has changed from when I was a kid and I'm a young(ish) Patnetter. Kids just assume mom and dad will pay the way and make it happen now.

My wife and I were working when we were 14-15. I bagged groceries. In college I built signs that many here have probably seen. My wife waitressed and did other odd jobs. We're talking late 90's early 2000's, so not some folklore type shit from the 50's. If you want it, the jobs are there to make good money. We were pulling $30/hr between the two of us in our college years, which is great around 2001.

We bought our first property when we were 22 with no mommy and daddy help. My wife is the greatest thing that happened to me along with my dad's bullshit rough love. I was a country club kid that was forced to work because of him. I'm fortunate enough be able to take a break at this point. 3 years deep in being able to take a break from real full time work at 38. Not bragging, just if you're not working a job by 15-16, you're likely going to be a loser. By the time you 30 you've already got 15 years of experience of something under your belt. You're employable somewhere.

WookieMan says

I think younger people are lazy though today. I struggle with my own kids. It pisses me off.

A lot of this has to do with society as a whole imo. People don't heat with wood any more so no stacking and cutting wood as chores. Fewer kids grow up with yards to mow. HOAs provide "maintenance free" amenities. A kids biggest chore is taking out the trash, cleaning their room etc. Here's something you may not know either...foreign work programs. My HOA only hires foreign lifeguards for the summer. Years ago, I was in Myrtle Beach and ate at a friend's restaurant. She told me all of the wait staff there were foreign exchange. This is quite fucked up. I'm not pooh poohing. No matter a person's situation, you've got to overcome. But, let's be honest, shit is fucked up for some generations. They're being thrown under the bus. Hell, my own father gives my nephews "advice" about buying a large tract of land. The oldest is 21 and works at a damn kennel. There are opportunities though. A cousin and her husband stopped by a couple weeks ago. Her husband told my 18 year old nephew that if he went to community College and got an associates degree in automation technology(?) he could get a job immediately paying between $65k - $70k per year. Shockingly, he said he wasn't interested. He works at Walmart. Some people though, right?