Real Estate Crash thread

[Benny Profane]

I just read this thing from Scott Galloway which explains, using his own experience as an indicator, why the housing market and our economy in general is stuck. He went to UCLA and barely made it out.

"Some data on why unremarkables have become an endangered species. I’ll use my background as context:

The acceptance rate at UCLA has gone from 42% (1989) to 12% (2019). Put another way, it’s 3 times as difficult to be a Bruin.

In 1992, the annual tuition at Haas was $1,500, and upon graduating I received an offer from a consulting firm at $90,000/year. A degree ROI of 60. Haas tuition in 2020 is $62,000, and the median starting salary of a Haas grad is $140,000, yielding a degree ROI of 2 (97% decline).

There were nearly twice as many new companies formed each day during the Carter administration vs. now. We are living in an era of non-innovation as a feckless DOJ/FTC and media enable monopoly abuse.

My first house in San Francisco (Potrero Hill) cost $285,000, two years post-grad school (1994). Our household income was $210,000. A house/income of 1.36. The average house in San Francisco now costs $1.6 million, and a married couple (both MBAs, two years post-Haas) could make around $320,000 combined, yielding a ratio of 5. So, housing is almost 4x the cost.

In 1997 we purchased a home in Noe Valley (next-door to where the Zuck lives now … no joke) for $760,000 and sold it 2 years later for $1.2 million. I used the gain to move to NYC, start an e-commerce incubator (Brand Farm), and purchase stock in Nike, Oracle, Apple, and disk drive firm Iomega.

My tax rate on the proceeds from the sale of L2 was approximately 20%. I’m a Florida resident (no state income tax), and Obama passed Section 1202, which exempts the first $10 million in proceeds.

In sum, unremarkable kids no longer have access to remarkable opportunities. Today, I would not be admitted to a good school, wouldn’t be able to start a business due to crushing student loan debt, wouldn’t be able to buy a house, invest in stocks, or start a business. My professional life, and economic fortune, would foot to who I was/am — unremarkable. "

[ncskier]

I just read this thing from Scott Galloway which explains, using his own experience as an indicator, why the housing market and our economy in general is stuck. He went to UCLA and barely made it out.

"Some data on why unremarkables have become an endangered species. I’ll use my background as context:

The acceptance rate at UCLA has gone from 42% (1989) to 12% (2019). Put another way, it’s 3 times as difficult to be a Bruin.

In 1992, the annual tuition at Haas was $1,500, and upon graduating I received an offer from a consulting firm at $90,000/year. A degree ROI of 60. Haas tuition in 2020 is $62,000, and the median starting salary of a Haas grad is $140,000, yielding a degree ROI of 2 (97% decline).

There were nearly twice as many new companies formed each day during the Carter administration vs. now. We are living in an era of non-innovation as a feckless DOJ/FTC and media enable monopoly abuse.

My first house in San Francisco (Potrero Hill) cost $285,000, two years post-grad school (1994). Our household income was $210,000. A house/income of 1.36. The average house in San Francisco now costs $1.6 million, and a married couple (both MBAs, two years post-Haas) could make around $320,000 combined, yielding a ratio of 5. So, housing is almost 4x the cost.

In 1997 we purchased a home in Noe Valley (next-door to where the Zuck lives now … no joke) for $760,000 and sold it 2 years later for $1.2 million. I used the gain to move to NYC, start an e-commerce incubator (Brand Farm), and purchase stock in Nike, Oracle, Apple, and disk drive firm Iomega.

My tax rate on the proceeds from the sale of L2 was approximately 20%. I’m a Florida resident (no state income tax), and Obama passed Section 1202, which exempts the first $10 million in proceeds.

In sum, unremarkable kids no longer have access to remarkable opportunities. Today, I would not be admitted to a good school, wouldn’t be able to start a business due to crushing student loan debt, wouldn’t be able to buy a house, invest in stocks, or start a business. My professional life, and economic fortune, would foot to who I was/am — unremarkable. "

I tend to agree with his assessment presuming one wanted to follow his path. One could also argue it was not possible in 1992 for an unremarkable kid to make a living playing video games or an unremarkable but hot chick make money posting selfies on Instagram.
Things change. His example was a glide path in that environment. Consultants rarely pay 90k for kids out of school due to the prevalence of H1B, primarily Indian kids at the remaining big 4. I see it every day in my industry. What he saw as attainable housing in San Francisco was way out of reach for a steel worker being laid off in Pittsburgh in the early 90’s. I do t think the homes in San Francisco are empty yet, so someone is buying them.
Times change. Those who adapt win. It’s his tech bros who flooded their industry with cheaper foreign labor, gig economy type startups like Uber and are now working on automation solutions to disrupt even more workers.
He probably opined for California, but ditched it for Florida the minute he was becoming wealthy.
He might as well say, “ I won and now I feel bad you can’t”

[iceman]

He is saying that. Essentially he's saying the country is fucked because opportunity to prosper is far less widely available than it was in the past.

[rideit]

Just out of curiosity, Benny, how are/were you a Florida resident if you don’t reside there more than 181 days?

[Benny Profane]

Edit: Oh, no, I'm not a resident, but, from what I understand, for average schmoes, yeah, you have to spend over half the year there to claim residency. You see Florida plates around here in the summer, hardly any in the winter. But, the states in the tri state keep a very close track on this, even staffing well an entire department of tax cops to watch. They keep a very close eye on business owners back here who just go and buy a residence in FL. and try to escape taxes. A few hedgies have tried this recently and been denied. It could literally mean tens of millions or more in lost revenue for one case.

[shroom]

i see the same, kevo.

i can’t seem to upload a picture, but 98125 and 98119 are recent examples i have in my inbox from zillow showing forecasted 1-yr decline. for sure has been that way in spots around seattle for a bit.

[Kevo]

My post was accidentally deleted.

Here is what it said-
I've never seen Zillow forecasting declines anywhere. They always seem defiantly bullish. That's new as far as I know.

Re: Scott Galloway- the numbers just don't add up for paths that once were open. The University of Colorado (my Alma mater and not a great school by any stretch, but still probably the fourth best school in the state behind Air Force, Mines and maybe Colorado College) now costs $120k for an in state undergrad business degree. New grads are lucky to come out earning $45k per year. Out of state costs are now $200k.

CU's MBA program now costs about $80k for in state tuition and the average starting salary is about $80k.

Houses in the front range are well out of reach of anyone making $80k, let alone someone servicing student loan debt from undergrad and/or grad school.

The new MBA is not getting an MBA.

My office neighbor went to Haas for his MBA. He's a couple years older than me and paid out of state tuition in CA. We have the same title and are in similar divisions of the company. We earn about the same, but I didn't have to pay well over $100k for an MBA.

[AdironRider]

I just read this thing from Scott Galloway which explains, using his own experience as an indicator, why the housing market and our economy in general is stuck. He went to UCLA and barely made it out.

"Some data on why unremarkables have become an endangered species. I’ll use my background as context:

The acceptance rate at UCLA has gone from 42% (1989) to 12% (2019). Put another way, it’s 3 times as difficult to be a Bruin.

In 1992, the annual tuition at Haas was $1,500, and upon graduating I received an offer from a consulting firm at $90,000/year. A degree ROI of 60. Haas tuition in 2020 is $62,000, and the median starting salary of a Haas grad is $140,000, yielding a degree ROI of 2 (97% decline).

There were nearly twice as many new companies formed each day during the Carter administration vs. now. We are living in an era of non-innovation as a feckless DOJ/FTC and media enable monopoly abuse.

My first house in San Francisco (Potrero Hill) cost $285,000, two years post-grad school (1994). Our household income was $210,000. A house/income of 1.36. The average house in San Francisco now costs $1.6 million, and a married couple (both MBAs, two years post-Haas) could make around $320,000 combined, yielding a ratio of 5. So, housing is almost 4x the cost.

In 1997 we purchased a home in Noe Valley (next-door to where the Zuck lives now … no joke) for $760,000 and sold it 2 years later for $1.2 million. I used the gain to move to NYC, start an e-commerce incubator (Brand Farm), and purchase stock in Nike, Oracle, Apple, and disk drive firm Iomega.

My tax rate on the proceeds from the sale of L2 was approximately 20%. I’m a Florida resident (no state income tax), and Obama passed Section 1202, which exempts the first $10 million in proceeds.

In sum, unremarkable kids no longer have access to remarkable opportunities. Today, I would not be admitted to a good school, wouldn’t be able to start a business due to crushing student loan debt, wouldn’t be able to buy a house, invest in stocks, or start a business. My professional life, and economic fortune, would foot to who I was/am — unremarkable. "

I don't necessarily disagree that certain asset classes are getting more expensive, notably housing and college.

However, this guy is so full of shit on calling himself unremarkable. Without even touching this whole concept of this guy starting tech companies and consulting businesses like they are nothing, median household income in 1994 was barely over 30k a year. He started out at 3x that in 1992 and by 1994 was making 7x the average household income. Median home costs were 125k in 1994, he bought a place again, at almost 3x that cost. In 1994 less than 5% of the population held a masters degree, and not even 25% held a bachelors.

This guy has been at the top of the food chain his entire life and is trying to humble brag at best that he is just some regular guy. It was never that easy to become a millionaire and this guy is acting like anyone could do it back in the day. The facts say otherwise. This dude has been in the top 5% of households in basically every statistical category of education and income his entire life and acts like it was just average, not even that he just got lucky.

[El Chupacabra]

^^^That.

Dude in the article sounds like a douche.

[Benny Profane]

I don't necessarily disagree that certain asset classes are getting more expensive, notably housing and college.

However, this guy is so full of shit on calling himself unremarkable. Without even touching this whole concept of this guy starting tech companies and consulting businesses like they are nothing, median household income in 1994 was barely over 30k a year. He started out at 3x that in 1992 and by 1994 was making 7x the average household income. Median home costs were 125k in 1994, he bought a place again, at almost 3x that cost. In 1994 less than 5% of the population held a masters degree, and not even 25% held a bachelors.

This guy has been at the top of the food chain his entire life and is trying to humble brag at best that he is just some regular guy. It was never that easy to become a millionaire and this guy is acting like anyone could do it back in the day. The facts say otherwise. This dude has been in the top 5% of households in basically every statistical category of education and income his entire life and acts like it was just average, not even that he just got lucky.

He was the product of a single parent household and was on academic probation twice at UCLA and some other kind of warning a few other times. He graduated with a 2.5 average. Top of food chain? Really? He's real smart, I'll give you that, love his insights, but, his whole point is that he fell into shit that he couldn't today. I know I'd be fucked, with the same attitude and drug habit I had at the time. But, I could've been on the line at the local Ford plant with a union card, making about 30% more than most BAs.

Here's the whole post: https://www.profgalloway.com/unremarkables

I totally disagree that his playmates at the Yellowstone Club are all smart, bootstrap types. 60% of wealth in America is inherited, and I predict that will rise to 80-90 % soon.

[AdironRider]

He was the product of a single parent household and was on academic probation twice at UCLA and some other kind of warning a few other times. He graduated with a 2.5 average. Top of food chain? Really? He's real smart, I'll give you that, love his insights, but, his whole point is that he fell into shit that he couldn't today. I know I'd be fucked, with the same attitude and drug habit I had at the time. But, I could've been on the line at the local Ford plant with a union card, making about 30% more than most BAs.

Has anyone ever asked you your GPA when applying for a job? No, they care that you got the job done in the first place and got that piece of paper.

This guy is full of shit when he says he was unremarkable. Unremarkable would be making 60k a year managing a Safeway in Kansas with a bs state school degree. UCLA has never been equivalent to San Diego State if you know what I mean.

If MBA's, starting tech companies, and buying million dollar pieces of real estate were so easy, a whole lot more people would have done it than the sub 5% of people in his age group did.

He didn't fall into anything. It sounds like he is a sharp guy, made the right decisions and put himself in position where a couple lucky breaks make the difference. That is what most successful people do, and are better at than 95% of other people. Aka he is decidedly remarkable, just like everyone else with a similar CV to him.

[Benny Profane]

It sounds like he is a sharp guy, made the right decisions and put himself in position where a couple lucky breaks make the difference.

Precisely. That's his point. But, it's pretty hard to be lucky and take chances if you're starting life with maybe 30,000 in debt, job choices are now limited because monopolies stifle and new growth, and real estate is still at bubble levels.

[AdironRider]

Precisely. That's his point. But, it's pretty hard to be lucky and take chances if you're starting life with maybe 30,000 in debt, job choices are now limited because monopolies stifle and new growth, and real estate is still at bubble levels.

I hate to break it to you Benny, but being smart and setting yourself up for success, and also getting a couple lucky breaks along the way has been the way of the world since the beginning of time. That hasn't changed.

Think about it, if it was so easy back then to get an MBA and start companies, why did less than 5% of people do it, especially if it was a 50/50 shot at getting in and only cost 1500 bones according to him? There is more to ol Scott's story than he is letting on, because according to him, at least 43% of the country should be as well off as he is.

[Benny Profane]

Duh. Calm down and reread.

[Benny Profane]

X

[Toadman]

Surprised Seattle isn't on the list. Bunch of slackers...Maybe it changed after 2015?

[dunfree]

I hate to break it to you Benny, but being smart and setting yourself up for success, and also getting a couple lucky breaks along the way has been the way of the world since the beginning of time. That hasn't.

nah, plenty of people didn’t give a fuck back in the day, hustle culture pimp. There’s all kinds of bios out there of 19th century robber barons who owed favors to guys that just didn’t want the fucking money.

[Benny Profane]

https://www.economist.com/leaders/20...policy-mistake

"The soaring cost of housing has created gaping inequalities and inflamed both generational and geographical divides. In 1990 a generation of baby-boomers, with a median age of 35, owned a third of America’s real estate by value. In 2019 a similarly sized cohort of millennials, aged 31, owned just 4%. Young people’s view that housing is out of reach—unless you have rich parents—helps explain their drift towards “millennial socialism”. And homeowners of all ages who are trapped in declining places resent the windfall housing gains enjoyed in and around successful cities. In Britain areas with stagnant housing markets were more likely to vote for Brexit in 2016, even after accounting for differences in income and demography."

[Kevo]

^I think that helps explain the rise of populism on both sides. Non asset owners got fucked hard by quantitative easing and stagnant wages.

I watched a really interesting long form PBS interview with Steve Bannon recently. He goes into this in pretty serious detail in the first 20 minutes.

https://youtu.be/pm5xxlajTW0

I thought I hated him, turns out he has a pretty solid grasp on the economic realities of neo-feudalism. His solutions are very different than mine though.

I feel like I'm constantly playing catch up after getting fucked by starting my career during the recession. I worked some really shitty jobs for really shitty pay with a college degree. People graduating today are often even more fucked because wages for entry level workers are way out of line with the cost of living in most major metro areas.

[Benny Profane]

I'm reading a biography of Hitler, and his whole platform early on was all about taking control of the international financial cabal. Bannon seems to be as passionate. And he's right. It's hitting a breaking point. That disparity between the Boomers and millennials in house ownership I quoted is stark. And there really is no hope for a vast swath of young people to grow old well.

[schuss]

Steve Bannon isn't dumb, he's just devoid of any care for his fellow man

[Name Redacted]

Wanna tank home prices in the mountains? Tax STRs as commercial real estate:
https://www.summitdaily.com/news/sta...to-a-tax-hike/

[Harry]

Wanna tank home prices in the mountains? Tax STRs as commercial real estate:
https://www.summitdaily.com/news/sta...to-a-tax-hike/

That is long overdue. Absolutely no reason that rentals should be taxed dramatically less than other businesses, like restaurants. The article interviews a real estate pimp who says mountain real estate prices will “collapse” if this goes through.
(A) that won’t happen
(B) if it does, so what.



Sent from my iPhone using TGR Forums

[Dantheman]

Only have to live there a measly 30 days per year to be exempt, that's a pretty low bar.

[fastfred]

short term rental owners are the greediest mother fuckers out there
I've never met one who isn't they are so concerned about their rental income and not missing out on a single dollar
they pay a measly 100 or so dollar fee to the town/county and that's it when I become county commisioner I'm going to up to a 2,500.00 yearly fee
the local polticians can't pat themselves on the back enough when it comes to "affordable housing" if they really had some balls and cared they would tax the shit out of short term rentals
and who gives a fuck about the real estate market collapsing, give me a fucking break, I hear that all the time when it comes to a complex or neighborhood banning short term rentals through their hoa
asking a realator for an opinon the truth or trying to get a straight answer out of one is impossible I've never met people so full of shit in my life especially in a mountain resort town
end of rant
tax the shit out of short term rentals they all act like it's a hobby when it's a business
most of them are so strung out financially since they are betting on rental income when the economy hits the fan it's tits up for em

and on a side note the local sewer district is going to start charging short term rentals a higher fee, instead of a 4 people flushing a toilet on regular basis you've got 10 people cramed into a three bedroom flushing the toilet alot more