Fed has a duty to stop this rapidly forming bubble

[deaddog]

The key to lower housing prices is to have lower interest rates. If he keeps hiking it's going to go down as one of the most epic policy mistakes of all time.

We just went through a period of low interest rates. Housing prices were in bubble territory. People could afford to get a mortgage so bid the prices up. Lots of stories of bidding wars in desirable area.
Higher interest rates means you have to drop the price of your house if you want to sell it.
If you can't renew your mortgage then you'll have to sell, more downward pressure.

 

[Sergio123]

We just went through a period of low interest rates. Housing prices were in bubble territory. People could afford to get a mortgage so bid the prices up. Lots of stories of bidding wars in desirable area.
Higher interest rates means you have to drop the price of your house if you want to sell it.
If you can't renew your mortgage then you'll have to sell, more downward pressure.

You're looking at this too simplistically. The problem is supply not demand. The highest bidders were usually institutional investors who could pay in cash anyways.

During Covid the problem was also a lack of supply as people wanted to escape the metro areas because they turned to shit.

Higher interest rates are not going to fix the root of the problem. Let's say it again...The problem is SUPPLY. To get more supply you need to build more. That means that developers are going to need money to invest into their real estate development projects. It means that factories are going to need to manufacture more lumber, insulation, roof shingles, appliances, furniture, etc. etc. It means that builders are going to need money to hire a construction crew.

Capital needs to be deployed into manufacturing and real estate assets and labor. Not sit in 6-month T Bills collecting 5-6% risk free.

Maybe they really don't want more housing built and prefer everyone to just be a renter.

 

[themickey]

The highest bidders were usually institutional investors who could pay in cash anyways.

Don't forget dirty money laundering, paying cash for houses is not too uncommon.
Then there's money coming from overseas which is not squeaky clean.
But politicians allow these loop holes, money coming into the country, their properties increasing due to this rort, - why stop the gravvy train.

 

[themickey]

The problem is SUPPLY.

Not really, the more you build the more and quicker investors will jump in ahead of home buyers.
The problem is the tax rorts for investors, they claim tax relief off their high income, so mugsey rental client pays twice, they pay rent and also their taxes go to paying off the investors.
Empty houses is another problem, investors who are land banking empty houses and claiming tax relief.

 

[deaddog]

You're looking at this too simplistically. The problem is supply not demand. The highest bidders were usually institutional investors who could pay in cash anyways.

If that's the case then interest rates are not the problem.
If the interest rates get high enough that the institutions stop buying real estate then the price will drop.

If as an investor you can get a risk free rate then you turn your apartment into condos.

 

[nitrene]

All these housing problems explain why US home builder stocks seem to go up every day. Just buy ITB or XHB. My main investment ideas is to buy the FANG+ stocks & homebuilders. I own FNGU, SOXL & NAIL -- all 3X ETFs of FANG+, semiconductors & housing.

 

[mervyn]

All these housing problems explain why US home builder stocks seem to go up every day. Just buy ITB or XHB. My main investment ideas is to buy the FANG+ stocks & homebuilders. I own FNGU, SOXL & NAIL -- all 3X ETFs of FANG+, semiconductors & housing.

just buy tech and use the profit to buy a house ot two or live in or vacation, housing is not important anymore, people are mobile these days.

 

[Sergio123]

The supply problem could be fixed in the future with technology using 3D Printing.

They are going to be very cookie cutter though. The jury is still out on how they hold up over time, and through the different seasons.

 

[piezoe]

Not really, the more you build the more and quicker investors will jump in ahead of home buyers.
The problem is the tax rorts for investors, they claim tax relief off their high income, so mugsey rental client pays twice, they pay rent and also their taxes go to paying off the investors.
Empty houses is another problem, investors who are land banking empty houses and claiming tax relief.

Canada, I think it was last year maybe, passed legislation restricting the sale of real estate to other than citizens or permanent residents. A lot of money from the wealthy in the Middle Eastern absolute monarchies and other non-democratic countries, e.g., Saudi Arabia, UAE, China Russia, etc., has been flowing into prime real estate in the Western democracies. Naturally this is one contributor to higher real estate prices and rents in certain areas. The remedy would be to do what Canada has done. Of course this isn't the only cause of rising real estate prices.

 

[maxinger]

Valuations in relation to interest rates are some of the highest in history -- politician problem.
and more trading opportunities for the traders

Tech CO’s simply laid off 100’s thousands to goose earnings -- CEO problem
and more trading opportunities for the traders

Powell keeps raising till asset prices and inflation contract -- Fed problem
and more trading opportunities for the traders

If fed stops asset prices rocket much more -- more trading opportunities for the traders

Homelessness will sweep the nation as nobody can afford shelter - politician problem.
and more trading opportunities for the traders


BOTTOM LINE :

MORE PROBLEMS ----> MORE TRADING OPPORTUNITIES.

small bubble ---> small trading opportunity

big bubble --> big trading opportunity


So stop complaining. Be thankful for the trading opportunities.
For we are the traders and not politicians/CEOs/Fed.