Real Estate Crash thread

[ncskier]

Do you think those assumptions don't carry over to other investments? I touched on it earlier but companies go bankrupt, lose market share, impacted cash flow, and are subject to market volatility also. In fact, I think those risks are much higher outside of real estate vs buying real estate.

No investment is perfect, but for the average Joe, real estate is still the sweet spot in terms of risk/reward for anyone with limited capital.

For the record Fidelity would be happy to lend my 300k to trade with if I gave them 30k. However, trading on margin is not my game. Leverage in real estate is not different except I can hit the sell button in minutes and not pay 6% commission and be caught in an illiquid asset like real estate. I would contend the average Joe is better off living below their means, investing for 30-40 years in a low cost index fund and then spending their gains in old age. At normal rates of inflation, single family in most desirable areas seem to have too many carrying costs such as property tax, HOA dues and maintenance. no thanks.

[liv2ski]

I have known more people gain wealth from real estate than stocks, as real estate is a leveraged investment, which very few normal Joe's will try to do with stocks. I have suggested to my kids that you need at least your own place paid off before retirement. If you don't want to do rentals then invest in a low load S&P 500 fund and when the market tanks put as much as you can into it and hope history repeats itself.

[Core Shot]

Commercial ain’t all bad. Less daily hassle with tenants, but vacancy can be a bitch

Plus, 20 year mortgage pays off before you know it for some real passive income.
But you must choose wisely. Location and use are critical

[ncskier]

Well hopefully each method works for all involved. As they say past performance is no indication of future performance.


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[wooley12]

I hear that too. Perhaps home ownership levels retreating to those in the 60's is a good thing? Why? For who?

[Benny Profane]

Well hopefully each method works for all involved. As they say past performance is no indication of future performance.


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Yup.

I was watching Fareed Zakaria two Sundays ago, and had a smart guy from Morgan Stanley on with some great charts. Basically, in the last fifty years, what was hot one decade was nothing to minus, the next (which certainly is a warning for today's stock markets). But, bottom line, I have my money in a low cost Vanguard fund, just one, split of stocks and bonds, that has averaged 6.5 % over the last forty years. Survived '08 better than most. Last year was 18%. I barely look at it anymore. Zero bother. Now, I did mention that I regret not buying a ski condo way back and renting it, considering it retirement savings, because I'd have it today , but, hindsight is 20/20. I did miss a ton of worries in all that time.

I'll bet you there are millions of landlords who either got ruined in 08, or are still hanging on, underwater, with crappy tenants, roofs going, foundations cracking, hoping, praying for another housing bubble to save them.

[AdironRider]

For the record Fidelity would be happy to lend my 300k to trade with if I gave them 30k. However, trading on margin is not my game. Leverage in real estate is not different except I can hit the sell button in minutes and not pay 6% commission and be caught in an illiquid asset like real estate. I would contend the average Joe is better off living below their means, investing for 30-40 years in a low cost index fund and then spending their gains in old age. At normal rates of inflation, single family in most desirable areas seem to have too many carrying costs such as property tax, HOA dues and maintenance. no thanks.

As I am sure you really know, the overlap between swing traders on margin and the average land lord is pretty miniscule. To be fair though, a large part of my argument is for the approachability to the average guy, not that real estate is bar none the best venue to invest in existence.

And Benny, you act like stocks stocks didn't take a 50% haircut in 08/09. There are millions who took a bath there also. I'd bet even more sold out at the bottom also.

[Mazderati]

Too many scenarios to generalize.

[Ted Striker]

Absolutely.

[Benny Profane]

As I am sure you really know, the overlap between swing traders on margin and the average land lord is pretty miniscule. To be fair though, a large part of my argument is for the approachability to the average guy, not that real estate is bar none the best venue to invest in existence.

And Benny, you act like stocks stocks didn't take a 50% haircut in 08/09. There are millions who took a bath there also. I'd bet even more sold out at the bottom also.

Jezuz, dude, they are up like over 300% and more since then, still going up. The only people who took that bath did the very common stupid thing - they sold low, probably after they bought high.

I think you've seen the heyday of RE. Sure, not certain markets, but, even around me, one of the richest places in the world, it pretty much sucks as an "investment" since the crash. A lot of people are still underwater from that time, especially if you include HELOC loans, which a lot of studies don't. Lord knows trillions were sucked out of all that fictional equity before everything went south.

Boomers built this market, and Boomers are taking it to their graves, one house at a time, and it will take a few decades for the bubble valuations to settle down to real market values, because of that. Thank low interest rates and easing for saving the housing market from total disaster. Even so, you tell me how a lot of housing valuations make any sense when the house ownership rate of millennial is like 4%. 4%! I posted that above. When I was about 30, with the rest of my generation, it was about 30% for Boomers. That shit will not end well, but, as I said, it will take time. Old people, in general, don't move.

[Benny Profane]

They have no wealth. They have 1.6 trillion dollars of debt.

Don't even start if you're calling Bitcoin wealth.

[Core Shot]

Boomers built this market, and Boomers are taking it to their graves, one house at a time, and it will take a few decades for the bubble valuations to settle down to real market values, because of that. Thank low interest rates and easing for saving the housing market from total disaster. Even so, you tell me how a lot of housing valuations make any sense when the house ownership rate of millennial is like 4%. 4%! I posted that above. When I was about 30, with the rest of my generation, it was about 30% for Boomers. That shit will not end well, but, as I said, it will take time. Old people, in general, don't move.

This is my concern.
Took money out of the market to do a long term luxury real estate flip.
Wondering who my buyers are and thinking I should exit sooner rather than later.

[schuss]

You mean super?
https://www.hellosuper.com/pricing

Bitcoin isn't dead, but crypto is a pain in the ass to deal with and a lot can be broken soon by quantum computing methods or brute Force state actors

[rideit]

However, unlike digital assets, everyone needs to eat, sleep, fuck and shit somewhere.

[skaredshtles]

younger gens are gobbling up digital real estate

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[Benny Profane]

Free cash flow favors the young though, he that earns wins & older gen earnings are predicated on credit expansion via USD. Younger gens have the grand asset - forward earnings power. They'll dictate the winner to a large degree.

There's a grand-scale generational battle taking place where younger gens are gobbling up digital real estate & shying away from physical. Whoever comes out on top of the ideological war wins the keys to generational wealth transfer (or retention).

Oh, I get it, it's a whole new digital world. It's different this time! Where have I heard that before?

The Boomers built most of their wealth laddering up their RE holdings. They invented the "starter home". Remember that? My parents bought a house and stayed in it until the end, like everyone they knew. The Boomers turned it into a trading market. That's gone. Can't trade if no new money is entering, and moving to fictional assets like Bitcoin. If there is any money there. I say there is much more debt than cash.

[Benny Profane]

The allure of RE as a form of alchemy will vanish. Question is when and how quickly. I'm still trying to figure out how GenY owns such a little % of RE, but the fact ownership is suppressed to the degree it is does not bode well for the argument that the next generation *must buy* boomer RE. What if their bid is 60% lower and they'd rather rent & stay mobile, invest in digital assets/stocks/bonds? How do you make a market in that hypothetical without a complete inversion of the aforementioned dynamic?

Well, yeah, that was my point above. But, Boomers aren't selling because, well, where are they going to go. They'll die in place over twenty years, and maybe one child will move in, or, if more than one sibling, they'll just cash out at whatever is offered, and, ouila, market value.

[liv2ski]

The allure of RE as a form of alchemy will vanish. Question is when and how quickly. I'm still trying to figure out how GenY owns such a little % of RE, but the fact ownership is suppressed to the degree it is does not bode well for the argument that the next generation *must buy* boomer RE. What if their bid is 60% lower and they'd rather rent & stay mobile, invest in digital assets/stocks/bonds? How do you make a market in that hypothetical without a complete inversion of the aforementioned dynamic?

If you say so, it is absolutely nutz to rent forever. Talk about a waste of money. My kids are in their early 30's. Oldest owns a duplex with the bank and is in a solid situation. Youngest lives at home, saving money to likely buy this year. The Fed will always prop up asset prices. Home values are not tanking anytime soon. If your area has an appreciation issue, move. Location, location, location.

[El Chupacabra]

However, unlike digital assets, everyone needs to eat, sleep, fuck and shit somewhere.

#vanlife

[goldenboy]

I love this thread, equal parts spot-on sage advice combined with "huh, people really think that?"

[MakersTeleMark]

98765

per-square-foot figure was just more than $3,000 per square foot for a half-duplex in Vail Village. The other half of that duplex sold for just more than $2,900 per square foot.while a two-bedroom condo in Vail might be priced around $900,000, a similar unit in Beaver Creek could be $600,000 or $700,000

[Kevo]

If you say so, it is absolutely nutz to rent forever. Talk about a waste of money. My kids are in their early 30's. Oldest owns a duplex with the bank and is in a solid situation. Youngest lives at home, saving money to likely buy this year. The Fed will always prop up asset prices. Home values are not tanking anytime soon. If your area has an appreciation issue, move. Location, location, location.

I was pretty sure that your kids were like mid 20s at the latest. Weren't they like just in college?

Maybe I'm just having trouble keeping TGR member bios straight between you and Hutash? He's the California vet, you're the California mortgage guy? Did both you and Hutash have kids go to school in Montana?

In other news, your kids and I are the same age. I know plenty of millennials who own houses. I'd say most of my friends own at least one house.

[Foggy_Goggles]

I know plenty of millennials who own houses. I'd say most of my friends own at least one house.

The only perspective you have is your own. This is some special shit. Values of real estate with go up and it will go down, just like any other asset class. Whether you are bullish long term is a bit of a different issue. It is not a commodity product. The answer is usually it depends.

One thing that I think is currently overlooked a bit in popular locations is now much the cost of new construction is driving the value of used homes. The 2x4s in your home are literally appreciating. Lumber is expensive, labor is really expensive, and bureaucracy is stupid expensive.

[Foggy_Goggles]

One thing to ponder - if your statements on cost inputs are correct, how is there "no inflation?" Because I see the same thing - cost inputs to a regular life are going up quickly yet I'm told regularly that inflation doesn't exist. Either the economist or the merchant is lying.

Quit bringing economics and your theory out how the "imputed rents" concept systematically misses the real rate of inflation into the layperson real estate thread. That does not make for good cocktail take...well actually is does but those that understand it don't care.

The economic system is complex. Even if it cost them thousands, how many people understand MBS, ABS, securitization, how AIG functioned? Point been, for better or worse, too many people make too much money ignoring reality. At the personal finance level, it is hard to do anything other than throw your hands up, try to make a small pile while the gettings good and not walk around with the weight of the world on your shoulders.

[liv2ski]

One thing to ponder - if your statements on cost inputs are correct, how is there "no inflation?" Either the economist or the merchant is lying.

The BLS are a bunch of fucking liars. I buy everything for the family and I can assure you there is plenty of inflation.