Are we in another real estate bubble? If so, what will pop it?

Yup, I’m advocating for standardization at least in each state if not region, and perhaps a small.amount of local rules that go on top of it. Everything before gets wiped xlean.

Why? It should allow builders to more easily move from locale to locale. No more local builder dominating each locale. Efficiency.

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:laughing:

How much were CDs and govt bonds paying in the '80s? Wasn’t it in the 18%'s at some point?

I’d take a 15% mortgage if I could get an 12% CD just as easily as I would take a 5% mortgage if I could get a 2% CD.

Really, you might even prefer a 15% mortgage and a 12% CD. You can likely refi the mortgage down later and keep the 12% for the longest term possible. With 5%/2%, it’s less likely you’ll have a great chance to refi lower and capture free returns.

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Yeah 12% CDs would be great.

But I’d think the vast majority of people that paying 15% on their mortgage would be more expensive than the interest gains they’d get on a 12% CD. I mean if you look at the typical American family today they owe probably $100-150k on a mortgage and might have $5-10k in their savings. Even 1 year at 15% mortgage rates would be a lot more expensive than the gains on their CD’s.

OTOH if you were sitting on a pile of cash in the late 70’s / early 80’s then there was no better time to buy a long term treasury bond. But how many people were in a position to buy those and did so? Very few.

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Thanks for that! Sometime we lose perspective.

That’s not really my point. My point is that the absolute percentage amount is irrelevant. A 12% CD would not be that great, because it, just like a 15% mortgage, both imply rampant inflation.

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Gotcha.

I honestly don’t recall now but I might have been replying to GodelianKnot rather than you.

Yes rampant inflation does kind of ruin it all.

But I still really would have liked to lock in a 10%+ long term bond back in 1980. Even if it meant being hit with double digit inflation for a year or two. And the 15% mortgages could have been refi’ed. So while the inflation and punishing mortgage payments are relatively short term the long term bond rate could have lasted many years.

What was this thread about?

I think you’re making post-factum assumptions. You could be locked into a 10% CD, but inflation could kick up to 20 or 30% for more than a year or two. It might not go below your locked in rate for the entire lock period. You’d be losing money the whole time. Same thing goes for mortgages – you can’t predict future rates. You could refi if they drop, but you wouldn’t if they kept going up.

The best you can do is hope that the FED does the right thing and maintains it’s policy and goals to keep inflation in check for the long-term and is actually successful in doing it.

March ‘pending homes sales’ down 3% from March '17.

Homes are always depreciating assets: they wear out and need constant renovation. The land can appreciate based on supply and demand.

Interest rates fell for 30 years causing people to invest in real estate and load up on debt.

This will work in reverse as interest rates rise. When people expect real estate to be a bad investment in the future they will dump their speculative housing on the open market and collapse the prices.

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You’re ignoring all the cash buyers, including foreign investors.

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According to RealtyTrac, 40% of the market is all-cash purchases.

The “always” in this statement makes it sound quite foolish. And I wouldn’t even call it accurate to replace “always” with “generally”

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In what scenarios does the structure itself actually appreciate? Maybe in the very short term around the price of building supplies and labor. Or due to timing and availability of housing stock in an area. But in the medium-to-long term, I think the statement is basically accurate.

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It can only depreciate. Unlike wine that can get better over time a house requires constant maintenance just to keep it in the same condition that it was already in.

Houses also quickly go out of style based on the latest fads. Imagine a house from the 1970’s with shag carpet and wood panel walls. The home requires constant renovations to keep up with the latest styles that buyers demand yet constantly change like stainless steel appliances, 42" kitchen cabinets, open floor design, and granite counter tops.

This is the big one

But that’s very short term (~1yr). Ultimately, it’s the land that’s appreciating, not the structure itself.

That is, the only reason you would value an existing house on a plot of land, vs a newly-built house on the same plot, would be if you don’t have the time to build a new house. Otherwise, the older house is always worth less as it ages.

Not necessarily. These days, it doesn’t make much financial sense for home builders to build “starter” homes in lots of markets with plenty of available property. In those places, lots of homes built in the past 40 years have appreciated even though the property they are built on hasn’t changed much in value.

Then they’ll all just live in a van down by the river?

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