patrick.net

Zak says

SunnyvaleCA says

but people who bought 3 years ago or more have a fairly big equity cushion even if they only put 10% down

Do they?

The avg homeowner is probably in the best situation historically speaking. Shit ton of equity, locked in low rates + inflation. It all comes down to monthly payments. Nobody in their right mind gives up on their low, locked in rates and leaves homeownership voluntarily. I would never pay more monthly to RENT and make someone else rich because I speculate my housevalue will lose 50-60%. My mortgages on all my houses (primary + investments) are all significantly lower than market rents. Most homeowners are in the same boat.

Back in 2008 people - who shouldnt have bought a house in the first place - were forced to sell
Today, owners - who should own - are only selling to buy another house

NuttBoxer says

DooDahMan gives some of the worst financial advise I've ever read. I'd speculate it's a Logan clone account

NuttBoxer doesnt own a house himself but claimed he's somehow winning by renting in California long term. Giant LOL.
I asked him about specifics, what type of house, area etc. He never answered me and blocked me simply for asking. He also claimed I am Logan Motashami (which was a great compliment but far from true). Now DooDaMan is Logan M in NuttBoxer's mind. Somehow the word "Nutcase" comes to mind..... :p

If you wonder who Logan M is....he's a housing data analyst and financial writer.
https://loganmohtashami.com/

I don't have a huge dog in this fight, although I do own real estate, it's no longer my primary store of "wealth".

I have this one question, when was the last time the housing market followed the 3-4x median income rule?

I honestly can't remember when that was still valid, maybe the early 90s?

NuttBoxer says

DooDahMan gives some of the worst financial advise I've ever read. I'd speculate it's a Logan clone account, as his original account has the record for ignore's, and reaches no one on this site anymore.

hmmm

insightful observation.

guys i know passionate topic.

but housing in a long run will not go down unless there is major catastrophe like tornado or war. with 8% inflation, which is probably closer to 20%, price of everything going up, that means price per square foot to build is going up, that means labor cost is going up, its not gonna get cheaper. housing like stock market, work on compound interest almost. that's just how it works out.

i didnt used to understand this in the past well, but i do now. i still prefer stocks over housing as investment, no property tax costs, dealing with renters, or stupid communist laws... i hear nightmare stories from friend landlords who rent places out.

DooDahMan says

NuttBoxer says

DooDahMan gives some of the worst financial advise I've ever read

Doo Dah Man isn't concerned - you are still working and hoping to have a decent retirement etc.

As for Logan's advice - might be time for you to pay attention, he has a stellar track record, is a multimillionaire and has some great street creds. And yourself ?

I think I can answer that one for Nuttboxer:

Doesnt own a house > nothing to show for
Tells himself that he is winning by renting in California long term
Labels everyone who has a bullish outlook on housing as Logan Motashami
Never responds to specific questions
Talks about the upcoming economic collapse since (years?)

FortWayneAsNancyPelosiHaircut says

with 8% inflation, which is probably closer to 20%, price of everything going up, that means price per square foot to build is going up, that means labor cost is going up, its not gonna get cheaper. housing like stock market, work on compound interest almost. that's just how it works out.

This.

Builders are all about margins. they couldn't care less if there is a housing shortage and an affordability issue. They care to run a business and make money: Margins.
Costs goes up, buyers pay more. simple as that.

Bitcoin says

My mortgages on all my houses (primary + investments) are all significantly lower than market rents. Most homeowners are in the same boat.

. That's probably true, but not for silicon valley! On the other hand, silicon valley is hardly a stand-in for any other part of the country.

I think your synopsis is correct for much of the country. Hopefully that's true so that the coming crash of the entire economy will be only a moderate downturn for the responsible and semi-responsible new homeowners.

Bitcoin says

I think I can answer that one for Nuttboxer:

Doesnt own a house > nothing to show for
Tells himself that he is winning by renting in California long term
Labels everyone who has a bullish outlook on housing as Logan Motashami
Never responds to specific questions
Talks about the upcoming economic collapse since (years?)

Dude, you took an experimental vaccine, made fun of people that warned you against it, had a negative reaction, came here for help, got it, and then got a booster.

You're the last person anybody should listen to for advice.

Bitcoin says

It all comes down to monthly payments. Nobody in their right mind gives up on their low, locked in rates and leaves homeownership voluntarily.

That's why I think "this time is different" compared to the 2008 crash. In 2004 through 2008 rates were going down and people were taking money out of their house with a refinancing that also decreased their monthly payment (because of lower rates and because of re-extending the mortgage to 30 years). And a lot of people were refinancing with ARMs.

Nowadays I think people are getting 30 year fixed instead of ARMs because the rates are so low for the 30. While housing prices have surged in the last 1 to 2 years, that's a small window for people to use their house as an ATM. And now that window has closed, as refinancing now means trading in a 3.25% mortgage for a 5.25% mortgage, which would massively increase payments.

I'm sure some people took cash out of their homes in the last 2 years, but those people probably aren't the ones that just bought. Those people would be the ones who have owned for a decade, and taking out 50% of the equity still leaves them with enormous equity.

Big recession coming. Job losses coming. Prices will fall. It’s that simple when the Fed aggressively contracts the bloated economy they built.

Inflation in the economy makes it harder for people to afford houses, not easier.

richwicks says

Bitcoin says

I think I can answer that one for Nuttboxer:

Doesnt own a house > nothing to show for
Tells himself that he is winning by renting in California long term
Labels everyone who has a bullish outlook on housing as Logan Motashami
Never responds to specific questions
Talks about the upcoming economic collapse since (years?)

Dude, you took an experimental vaccine, made fun of people that warned you against it, had a negative reaction, came here for help, got it, and then got a booster.

You're the last person anybody should listen to for advice.

Harsh but true.

DooDahMan says

Then you would speculate wrong - if he ever came back here which is extremely unlikely (about the same as seeing Dan8267 again) - he would use his real name as he did in the past - Logan is the real deal like him or not.

Well now I'm certain it's you. Logan(you) started posting under Save Ukraine, everyone who's been on the site recently knows this. Patrick doesn't ban too often, but sneaking around the ignore by creating a second account, better hope he doesn't catch on.

DooDahMan says

Doo Dah Man isn't concerned - you are still working and hoping to have a decent retirement etc.

Retirement is a concept made up by bankers trying to bilk people out of the best years of their life. I've always made a habit of enjoying life now, with no plans on retiring, just transitioning to work I enjoy more.

DooDahMan says

As for Logan's advice - might be time for you to pay attention, he has a stellar track record, is a multimillionaire and has some great street creds. And yourself ?

Yet you still frequent this tiny sub. If you add up all your assets vs your liabilities, where do you end up? If the economy crashes tomorrow, wiping out all assets that derive their value solely from inflated federal dollars, what will you have left? No need to answer, the questions are just for you.

porkchopexpress says

It’s that simple when the Fed aggressively contracts the bloated economy they built.

Federal Reserve deflated once in the early 20th century, but they're scared shitless to ever do it again. They'd be unloading both barrels straight through the back of their head. Not saying it won't happen, just that they don't want it, but are powerless to stop it.

porkchopexpress says

richwicks says

Bitcoin says

I think I can answer that one for Nuttboxer:

Doesnt own a house > nothing to show for
Tells himself that he is winning by renting in California long term
Labels everyone who has a bullish outlook on housing as Logan Motashami
Never responds to specific questions
Talks about the upcoming economic collapse since (years?)

Dude, you took an experimental vaccine, made fun of people that warned you against it, had a negative reaction, came here for help, got it, and then got a booster.

You're the last person anybody should listen to for advice.

Harsh but true.

That reminds me. Gotta put a reminder on my calendar, in a few month its time for my next booster!

NuttBoxer says

DooDahMan says

Then you would speculate wrong - if he ever came back here which is extremely unlikely (about the same as seeing Dan8267 again) - he would use his real name as he did in the past - Logan is the real deal like him or not.

Well now I'm certain it's you. Logan(you) started posting under Save Ukraine, everyone who's been on the site recently knows this. Patrick doesn't ban too often, but sneaking around the ignore by creating a second account, better hope he doesn't catch on.

What is this guy smoking. I changed my name to Save_Ukraine....not DooDaMan. And I was also labeled as Logan by Nuttboxer. This is so stupid....as soon as you show people how wrong they are about their crash fantasies they start labeling you or distract and talk about their vaccine-conspiracy-bullcrap. Hilarious.....Mostly its coming from people who dont even own a house yet....and believe it or not....they are adults! (at least on paper).

SunnyvaleCA says

That's why I think "this time is different" compared to the 2008 crash

Interesting. Your data point is "I think" ?

Here:

https://www.newyorkfed.org/microeconomics/hhdc

There is a slightly better view than "I think". Housing debt is 1.25 TRILLION higher than peak 2008 bubble, and household non housing debt is almost double the 2008 peak, 1.72 TRILLION higher.

You are correct in one thing, in that inflation adjusted, the housing debt is lower than "peak financial system ending catastrophe precipice".

But you will also note that in 2008, interest rates were not at 0 percent, with mortgages at 3% 30yr or 2% 15 year. So the fed lowering interest rates could take the pressure off overleveraged mortgages by offering lower interest rate refis.

Well, I guess we dried out that sponge didn't we? If the fed tries to lower rates, the market will go batshit insane, and voters will probably castrate the democratic party permanently. I almost guarantee you a housing bloodbath is coming. It sounds like a bunch of the housing was soaked up by REIT's with "free money" from the FED. If those REIT's and big money managers start taking a huge hit on all that housing inventory they gorged on, do you think they will ride losses down and down? Or will they try to dump their under-performing "assets" back onto the open market?

The fed is "unwinding" their asset purchase program. My guess is a huge portion of that is shitty yielding 2% bonds from these REIT's. So when dumping these assets onto the open market, you can expect the fed to take HUGE losses, as no one will touch those REIT bonds for anything less than 6 or 8 % yield. This will soak up cash. But even at 8% REIT yield bonds, the bonds will start defaulting. They simply won't be able earn the rents to make the bond payments. Then what happens if huge REIT defaults start putting housing tranches onto the market to satisfy the bond debts? A flood of housing for sale into a cash buyer only market with all the liquidity drying up, and further asset unwinding dumping cash soaking bonds into the market? I say cash buyer only market, because with interest rates heading up to 6 or 7 or 8%, who is going to take out a million dollar mortgage on a 3 bedroom house, with no foreseeable appreciation, and inventory starting to build?

The banks hands may be clean of mortgage debt, but now that banks can invest as well as take deposits (since they don't have to lend anymore, freddie mac and fannie mae just pay them commission), how much do you want to bet that banks have invested in REITs ? Here we go again! You were right, it wasn't credit default swaps, it was REIT leverage this time! (maybe.. this is a bit of speculation). Its something.. 100% sure. And sure as shit, they will be in trouble and "need" another bailout. I guaran-fuckin-tee it. It will be systemic and "no one could have seen this coming".

The fed will meet with treasury, and they will try to cook up some package. But this time we are fucked. Inflation is riding at 9% reported, more like 13% real, and interest rates ate what... A quarter pct.. maybe .75 after the next fed meeting? I shit you not, I will not be the least bit surprised when then next words we hear are the equivalent of "oh fuck" from the government. It will sound like this:

"Due to the dire nature of this unforeseeable crisis precipitated by the global crisis and supply chain disruption from this Russian Ukrain war, we are forced to Nationalize the following banks."

If the people don't fully riot immediately, the very next thing will be:
"We are initiating the following price controls in the face of the foreign inflation influences wracking our economy."

Then its either war with China to distract us from the shit bomb, or again, the people actually say fuck you government, and basically throw everyone out.


I give us about 12 months until the interest rate increase have pushed the edge case housing inventory into the red zone. The early tremors of price declines are already here in all the off metro areas.

Example: Tulsa, Ok. 500+ places for sale including big farms. Price cuts of 100k to 1M + in the past 90 days. Even the 160k 3bed houses have 5k$ price cuts. Here it comes!

NuttBoxer says

If the economy crashes tomorrow, wiping out all assets that derive their value solely from inflated federal dollars, what will you have left?

bawahahahah, yeah! Hey Crash Bro's, guess what? the economy is going to crash and houses and stocks will go to zero! ZERO !!! ZEEEROOO!!!

You will have nothing left! ZEERRRO!!

Zak says

Then its either war with China to distract us from the shit bomb, or again, the people actually say fuck you government, and basically throw everyone out.

I am thinking there may be a Republican win in November 2022 with them taking over the House, at least. That is one way for the public to think there is a response to their pleas or desires just like in November 1994.

.

DooDahMan says

On a side note you do not have to attempt to show anyone anything - just show up here, not be a "regular" and the conspiracies about you take off

So true!

Zak says

Even the 160k 3bed houses have 5k$ price cuts. Here it comes!

A reduction in ASKING price means jack shiat. Remember, we have/had the hottest market on record.....lowest days on the market, lowest inventory. Now we finally go into a cool-off phase and people get excited about a reduction in asking price.

Remember the taper tantrum in 2018 when the FED raised rates? Same thing, demand went down, sales went down, reduction in asking prices. everyone came out telling us about the huuuuuge upcoming crash. You know why those people that called for the biggie dont remember 2018? It goes without saying.

NuttBoxer says

Retirement is a concept made up by bankers trying to bilk people out of the best years of their life. I've always made a habit of enjoying life now, with no plans on retiring, just transitioning to work I enjoy more.

This is a very healthy attitude. Is it really work if you enjoy it so much? That's always been the question I've asked myself.

DooDahMan says

NuttBoxer says

Well now I'm certain it's you.

Someone needs to send Logan M a message showing him how every single non-perma-bear on this website is being abeled LOGAN now!

NuttBoxer says

DooDahMan gives some of the worst financial advise I've ever read. I'd speculate it's a Logan clone account,

It sounded reasonable till I looked up Logan Mohtashami. Looks like Logan has a lot of stuff going on, maybe too busy to make up and post from phoney stuff here.

Fascinating, I found a podcast site where Logan is the guest interviewee. The podcast is dated December 20, 2021 with title "Logan Mohtshami on his 2022 Forecast". You can listen or read the transcript.

Here's a paste from the transcript (December 20, 2021):

Logan Mohtashami: So there are a lot of factors that can actually send bond yields lower next year. And if that happens, we’re going to have mortgages — mortgage rates — under 3%. And we’re going into the spring season with inventory near all-time lows, and then mortgage rates this low again. So, I think that’s the main thing I want to talk about in terms of the 10-year yield. Until that level cracks, we don’t talk about a 4% mortgage, right? Even this year, with all the talk about growth, inflation, and the Fed, the 10-year yield is exactly where it should be. So, kind of think about mortgage rates in ranges, not targeting a nominal mortgage rate level.

Something I learned as a result of the Great Recession: banks don’t carry residential mortgages on their books…they sell as mortgage backed securities. So if the Fed crashes housing with raising rates, the banks are insulated. This makes me think the Fed is less nervous because the banks will be safe unlike last time.

porkchopexpress says

banks don’t carry residential mortgages on their books

Yes, as far as selling mortgages which get placed in mortgage backed securities (MBS). The Federal Reserve has bought about $7 trillion in MBS since 2009.

From Investopedia: " What's the Relationship Between MBS and a Bank?
Essentially, the mortgage-backed security turns the bank into an intermediary between the homebuyer and the investment industry. A bank can grant mortgages to its customers and then sell them at a discount for inclusion in an MBS. The bank records the sale as a plus on its balance sheet and loses nothing if the homebuyer defaults sometime down the road. "

.

porkchopexpress says

This makes me think the Fed is less nervous because the banks will be safe unlike last time.

What banks went under? As far as I can tell, only the ones they planned to sacrifice. I was a Washington Mutual customer, closed my account before they went under. I remember clearly their management saying JP Morgan had forced their acquisition, despite other banks including Morgan, being in worse financial shape.

rent isnt going down, just saying guys.

i still want to sell my house in CA, but kind of considering just renting it out to pay mortgage and lets face it... in 10 years it'll be worth a lot more.

I bought my house for $160k in 2010, my mortgage was supposed to go until 2040. How ever I paid it off in just 10 years. My Mortgage was $1500 a month, actually more with rising taxes, and an out of control insurance market, that raises rates with impunity because they can. But I'll stick with $1500 a month. But as you'll see later it should be more.
Now I count that $1500 a month I'm not paying in Mortgage as Rental income I'm paying myself. Over the remaining 20 years, I'll be paying myself $360,000. My house will be paying me more than double than I paid for it. But if you factor to rent my house in today's market, I should really be calculating $3500 to $4500 a month.

That's $840,000 my house is going to give me almost a million dollars even if the value of my house loses value, it still paid me $840,000 free and clear.
This isn't counting the increase in value that it's worth since buying it, I know is the opposite scenario than the original inquiry. Regardless no matter how much you paid for it and how much it's worth then or now, pay it off is the best thing you could do. Especially if it's losing value.

Tenpoundbass says

no matter how much you paid for it and how much it's worth then or now, pay it off is the best thing you could do.

+1,000.

FortWayneAsNancyPelosiHaircut says

rent isnt going down, just saying guys.

i still want to sell my house in CA, but kind of considering just renting it out to pay mortgage and lets face it... in 10 years it'll be worth a lot more.

The only risk I see in that is California sucks for landlords. You're only one CDC emergency away from losing rental income for 2 years.

HeadSet says

Tenpoundbass says

no matter how much you paid for it and how much it's worth then or now, pay it off is the best thing you could do.

+1,000.

And why is that? The lender gives you a 2.75% rate (my primary), inflation runs at 8.5%. Why would I use my cash to pay off the mortgage? my PITI is enormously lower than the rent would be for the house.

Paying off the mortgage means i allocate my cash to something that gives me little return or benefit. Instead I can invest the money and be ahead long term. For instance....these huge stock market correction is a fantastic buying opportunity.

Bitcoin says

Paying off the mortgage means i allocate my cash to something that gives me little return or benefit. Instead I can invest the money and be ahead long term. For instance....these huge stock market correction is a fantastic buying opportunity.

You're not factoring in Rent inflation you wouldn't be paying.
Inflation wont write you a check like not having to pay a huge monthly expense like Rent or Mortgage.
To realize the savings you calculate the remaining payments you would have made to the banks over the time left that you paid off.
That will add to a hell of a lot more than some 8% unrealized saving/earning potential.
With inflation you either buy or you don't, you can't consider buys you didn't make as income. Unless your doing so to avoid or offset your outflow.

When your house is paid off just think of all of the money you're not putting toward your mortgage, you'll have to play with on investment opportunities.
Doubling up your mortgage every month for the next 5 years, will pay off your house.
That might not be doable for people in a Jumbo mortgage, but those swinging a little piddly $225 or less Mortgage, pay the damn thing off.
Especially when you consider people with far worse off economic position than yourself is having to cough up $3500 or more in this economy to pay Rent.
$3500 would be about two mortgage payments for your average Burbdale median mortgage. $3500 is nuts, that rents are anywhere near that but they are.
So paying that $3500 now puts you in a better spot in 5 years.

The Democrats want to tax unrealized income. I wonder if people who paid off their houses would be taxed one day by the Evil Libs as rental income?

I see what you are saying: pay off your mortgage and you will have basically a pay raise because now you are not paying x amount for the mortgage going forward.
Plus, think about what you are actually paying for your house (interest over the lifetime of the loan). You might pay twice than the purchase price considering the interest you pay off to the bank.

I understand all that. What I am hung up on is this:
Lets say I have a few hundred K and have to decide, do I pay off the mortgage or do i invest it.
If you pay it off, you have opportunity costs of x amt of cash * expected return per year.
Since my locked in rate is below 3% and inflation is so high, dont I get ahead by investing the cash in the market conservatively (say index funds) because the return on investing in the SP500 historically speaking is much higher than 3%.

I would eventually like being in the position to have the capital to invest in business or assets. I'll never throw my money at this crooked market.
My buddy that just jumped in the market last month, is now singing the blues. He thought GAFAM or FAANG was a sure bet.

Tenpoundbass says

I would eventually like being in the position to have the capital to invest in business or assets. I'll never throw my money at this crooked market.

Okay, from that perspective I understand your strategy. Bascially, " i dont care what others tell me the stock market will make, i play it safe and pay off my house"

I guess, in my case, its like If I dont believe that the stock market will make me signficantly more than 2.75% annually than I am fucked long term because all of my retirement is in stocks and some is in crypto.