Housing trap

[gzz]

When the GOP has control of the presidency and congress, it has always been a let the good times roll monetary and fiscal policy. Big tax cuts, big spending, combined with low interest rate policy. They feed each other since the rich who get most of the tax cut end up saving a large part of it, which further reduces rates.

[spdrun]

Good times have rolled since 2009 or so. Rates have nowhere to go but up :))))))

[spdrun]

Also, Yellen might hate the Orange Haired Gorilla enough to torpedo him. Here’s to another quarter percent hike next week 🙂

Economy historically has done better under D than R, though causation is unclear…

Clinton: Economy Better Under Democrats

[Escoguy]

http://www.businessinsider.com/history-of-federal-reserve-tightening-2013-1/#ly-1999-july-2000-28

Look at the cycle from 2004-2006

Beginning Fed funds rate: 1.00 percent

Peak Fed funds rate: 5.25 percent

Change in 10-year Treasury yield over entire tightening: 0.36 percentage points

We’ve already gone from 1.37 to 2.49 which is a bigger move in the ten year than most cycles.

An argument could be made that Bernanke was trying to show who was in charge (his own man vs Greenspan) and went too far. With the ARM loans of that era, this was one reason many mortgages reset and partly feed the negative feedback loop with foreclosures as those with ARMs couldn’t keep up.

More recently ARMS are used more for high end purchases: so if interest rates spike, foreclosure risks would be with a different market segment:

http://www.wsj.com/articles/SB10001424052702303546204579439171591130740

[Coronita]

[quote=spdrun]I’m saying I hope to ride the natural economic cycle (which tends to reset every 8-10 years). But if Trump turns this country into a literal police state, I’m out.[/quote]

But what if you bought a house because it was on sale, and then they started to do mass deportation? Wouldn’t you be in a pickle because you bought thinking prices were low, and then they started mass deportation, which drove prices lower.

Would you sell and get out of the US, at a loss?

[gzz]

Rates can go to zero or below like they have in Japan and most of Western Europe.

Not sure why those Europeans buy their 0% or negative bonds anyway, US bonds would have paid more and given them a boost in their own currency as the dollar soared.

I allocated a decent chunck of money to western European stocks. They have underperformed US stocks but still went up and paid large divideds.

[mixxalot]

My hope and dream would be the burst of the bubble here in southern California and San Diego real estate prices to drop at least 30-40% then I can buy that nice coastal place for under a million bucks instead of letting it sit in bank with no growth.

[Coronita]

[quote=mixxalot]My hope and dream would be the burst of the bubble here in southern California and San Diego real estate prices to drop at least 30-40% then I can buy that nice coastal place for under a million bucks instead of letting it sit in bank with no growth.[/quote]

Yeah, I know…A lot of people were hoping for the same thing during the Great Recession. It never happened…Because there is plenty of sideline money that would jump well before a sub-million price tag hit if it was coastal.

[flyer]

[quote=mixxalot]My hope and dream would be the burst of the bubble here in southern California and San Diego real estate prices to drop at least 30-40% then I can buy that nice coastal place for under a million bucks instead of letting it sit in bank with no growth.[/quote]

From my experience wrt the properties we own, as well as those of people we know, I just don’t see that type of drop being probable in the near future–but you never know.

[an]

[quote=mixxalot]My hope and dream would be the burst of the bubble here in southern California and San Diego real estate prices to drop at least 30-40% then I can buy that nice coastal place for under a million bucks instead of letting it sit in bank with no growth.[/quote]You and me both 😀

[Coronita]

[quote=AN][quote=mixxalot]My hope and dream would be the burst of the bubble here in southern California and San Diego real estate prices to drop at least 30-40% then I can buy that nice coastal place for under a million bucks instead of letting it sit in bank with no growth.[/quote]You and me both :-D[/quote]

I think there’s definitely more than the three of us… And that’s the problem 🙂

[flyer]

I know you kids are too young to remember this (I’m in my 50’s) but there were homes in Del Mar that went for the $300’s as recently as the 90’s and are now going for $1.8+.

That’s why it’s unlikely that those who bought during those years and prior will have any problem keeping their homes, or being affected by a crash when it comes to coastal properties.

Still, there might be some hope in picking something up from those who came in later and are in over their heads–should the economy really take a dive again, but even then, there will always be competition for these type of properties.

[Coronita]

[quote=flyer]I know you kids are too young to remember this (I’m in my 50’s) but there were homes in Del Mar that went for the $300’s as recently as the 90’s and are now going for $1.8+.

That’s why it’s unlikely that those who bought during those years and prior will have any problem keeping their homes, or being affected by a crash when it comes to coastal properties.

Still, there might be some hope in picking something up from those who came in later and are in over their heads–should the economy really take a dive again, but even then, there will always be competition for these type of properties.[/quote]

I would say that the majority of the beachfront homes here are not really investments for most people. They are now status symbols…

The best thing is to figure out how to make a shetload of money doing something else, to buy that status symbol, if that is your thing.

Fortunately, I don’t have an addiction to house porn, so that’s not on the high list of things I hope to accomplish.

[flyer]

Understand, flu. We’ve never invested in any properties–coastal or other–beyond what we felt was reasonable at the time, and never really imagined prices for these type of properties would explode as they have.

What’s going on today wrt the acquisition of “trophy homes” at any cost is definitely a phenomenon unlike anything we’ve ever seen.

[mixxalot]

+1 and I have cash ready to go

[Author]

Posts