[XBoxBoy]

[quote=Rich Toscano]First, the steepening curve where as interest rates get lower, they exert a continually higher impact on affordability – that is something I had never thought about. That could be an important piece of the puzzle. I’d always observed that in the past, interest rates didn’t have such a big influence on valuations, but they seemed to have more of an impact more recently. This might be a result of the non-linear impact of rates — they didn’t matter so much when they were higher in the past, but matter a lot more now. Must think about it more.[/quote]

So mostly for amusement here’s the chart that shows what you could buy with interest rates from -10% to 20%.

This gives you a sense of just how unlinear the curve is. But if you think about it, realistically home loan rates are not likely to go into negative territory and even 10 and above seems extremely unlikely any time soon. So, we are only really interested in the 2-5% range which is comparatively flat against the overall curve.

[XBoxBoy]

[quote=sdrealtor]Nice work but so tough to simplify something impacted by so many factors.[/quote]

Actually, I don’t feel I’m trying to simplify. When I first set out to do this, I thought, maybe interest rates and inflation would account for about 50% of the rise in prices. I didn’t for one second think I would find that interest rates and inflation would account for pretty much all of the rise. When the charts first popped up, I was shocked how close they were. And then when I started to think about what I was seeing I realized that none of these other factors probably matters much at all. (At least not over the long term. Over the short term, we can see the actual prices (red case shiller) deviates from my expected prices during the mid-2000’s. So over the short term, prices can definitely be impacted by other factors!)

[quote] Rising rates would only lock more people with sub 3% in place and further limit supply. [/quote] Don’t misunderstand me here. I’m not making any prediction about what will happen. Not only would what you say potentially be true, but if interest rates do go up, there’s a good chance that they are going up because of higher inflation at the same time. Depending on the amount of inflation we could see very different paths.

[quote] On the demand side I would agree that inflation and rates were huge but don’t discount stocks, wealth transfers, stock based comp plans, work from home, higher awareness of SD worldwide, transforming from a tourist/military economy to tech/telcom/life science economy locally and of course crypto baby! They are all supercharging each other and I left out plenty Of others. In the current boom down payments have been huge on the whole which limits impact of wages and rates. There is no simple answer[/quote]

If we are talking short term (5 years?) maybe some of those factors will have a large impact. But looking back historically, it doesn’t look to me like any of those things have had a long term impact. I will certainly concede though that past performance is not indicative of future performance, so… who knows maybe in the future.

[XBoxBoy]

[quote=scaredyclassic]it just sucks so bad you might as well go to Hell.[/quote]

Hell’s probably more fun.

[XBoxBoy]

[quote=an]But I think you put more weight and correlation to rates than inflation. That’s what I’m trying to convey, is that wage inflation is probably a better correlation than rates.[/quote]

I’m not claiming any more weight or correlation to rates than inflation. I’m claiming that rates combined with inflation are the principle drivers of house price increases.

And I agree that wage inflation would be more appropriate than general inflation, and can see your point that low wage earners can probably be ignored. But I also doubt that there would be much difference in the charts. Maybe someone like Rich has wage inflation data we could use?

[XBoxBoy]

[quote=an]You forget the key factor about RE (location, location, location). Not all area of RE increase at the same rate or decrease at the same rate. [/quote]

Actually, I haven’t forgotten this at all. My post isn’t meant to address anything about any specific location. In the last two charts I do compare expected house prices with Case Shiller for San Diego, but I don’t attempt to address anything more specific than San Diego in general.

[quote]Also, not everyone’s salary increase at the same rate. Not everyone can afford/buy a home, so instead of looking at overall inflation, maybe you should look at wage inflation for the top 20%. [/quote]
I’m not sure why we would want to limit to just the top 20% unless you are arguing they are the only ones who buy houses in San Diego. But, yes, using wage inflation instead of general inflation would be an improvement. I just didn’t find wage inflation data so instead used general inflation as a proxy. I’m assuming that over the course of 35 years the two remain reasonably correlated. Maybe I’m wrong about that though.
[quote]Here’s an article about the migration pattern over the last year:
https://candysdirt.com/2021/05/19/pandemic-sparks-a-rebound-in-residential-migration-survey-finds/%5B/quote%5D

Overall, I think you’re missing what I’m saying in my post. While I initially set out to try and answer how much of recent price changes are due to issues like people moving from out of town versus interest rates, what I ended up showing is that over the last 34 years almost all the rise in home prices in San Diego can be attributed to interest rate changes and inflation. Because my charts show 34 years of data, only a very small part of the charts are specific to the current situation. And the part that is for the last year is for San Diego overall, not a specific area.

But the bigger take away for me is that if I am correct that home price increases are largely correlated to interest rates and inflation, that means a lot of the narratives told in the past about why home prices are going up were false. Which leads me to be rather skeptical of the narratives I’m hearing now.

[XBoxBoy]

[quote=gzz]up 46% from 3/2020 sale. $485k to $707k in 14 months.

https://www.zillow.com/homedetails/2501-Navarra-Dr-UNIT-126-Carlsbad-CA-92009/16659785_zpid/%5B/quote%5D

And note that it closed $108k above asking, which is 18% above asking.

[XBoxBoy]

[quote=deadzone]That is my complaint about our entire system which is completely run by the Fed (irrespective of President or party in Office). It is disturbing that our economy is run by a secret cult of “Fed Presidents” that aren’t elected or accountable to the people.[/quote]

I have serious doubts that Congress (or a President) would do a better job. It seems to me that too many politicians would direct policy to improve their chance of promoting their party. While it is easy to criticize the current fed policy, I think with Congress in charge things could be way worse.

[XBoxBoy]

Can we please stop with pretending the performance of stock markets is somehow correlated with presidential performance. 1) The presidents job is not to make stock markets go up. 2) The president has very little impact on the economy particularly in their first half year.

[XBoxBoy]

I bought the dip last Wednesday. Not sure my track record of buying or selling stocks is something to brag about though… so I don’t know that my buying is a great recommendation. That said, you asked if we would, and yes I would and did.

[XBoxBoy]

[quote=sdrealtor]30% appreciation year over year is pretty much in the tank and Im seeing a bunch showing closer to 40%.[/quote]

So my question is how much more appreciation before NCC is not cheaper than Silicon Valley and nice LA neighborhoods? Another 10%? 20% more? Even more than that?

[XBoxBoy]

[quote=gzz]
People are buying high end gaming PCs, stripping out the GPU, and then selling the gpu-stripped desktop as “New (other)” on ebay.

Any thoughts on them?[/quote]

It really just depends on what you are doing. I work as a programmer in 3D graphics for games and I’m looking for a machine with enough horse power to do ray tracing demos. That’s way more than most games at this point, and that’s even farther from what your average user needs. If these gpu-stripped desktops are decent you can get a decent graphics card and put it in. Cards under $500-$600 are readily available I believe. Just know that they won’t really work well with ray tracing. But for most people that’s a non-issue.

[XBoxBoy]

Hah, try and buy a top of the line graphics card today or a top of the line CPU. Lots of luck! Chip shortage has hit gaming computers really hard. I’ve been hoping to upgrade to a new PC for about 8 months now but can’t because I can’t get the parts I want. More than likely I won’t be able to for another 8 months, probably even longer. (Although I guess I could always break down and pay scalpers)

[XBoxBoy]

More and more I get the feeling that north county coastal is on its way to being the new Silicon Valley when it comes to real estate. Five years from now NCC could be the most expensive real estate in California.

[XBoxBoy]

[quote=The-Shoveler]Seems like an idea that could go really bad quickly even among family members.[/quote]

I would think even worse idea among family members. Nothing like a good sibling rivalry to mess up this sort of thing.

[XBoxBoy]

[quote=scaredyclassic]
i immediately embraced this theory as the overarching unified theory of everything human, from hoarding, to trump, to money, religion, art, fashion. no more need to wonder why anyone does anything anymore. it’s all about managing death terror[/quote]

The problem is we do lots of things and have lots of needs that fly in the face of this theory. Like sex, or thrill seeking, or going to war. Terror management is just a part of the complex human psyche.

[Author]

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