US home construction surges 22.6%, third monthly increase
abcnews.go.com
abcnews.go.com
Growth is good, return to baseline is good, but this was already a largely suppressed market. Housing supply needs to improve much more than this to be a major indicator of growth. We are currently at 1982 and 1991 levels.
New Privately Owned Housing Units starts are at all time lows historically on average, again largely from the Great Recession. Good news, but not some massive gain.
... so COVID-19 somehow helped the YIMBY movement get apartment buildings permitted for bloody once? This is... great news, albeit without any clear causal connection between one thing and another.
> This is... great news
No. Apartment buildings are rented. Rent is bad.
What would be good would be single family homes being built and sold to people instead of anything being built to extract yet more rent from an already failing middle and lower class.
> albeit without any clear causal connection between one thing and another.
No clear causal connection? How about more capital available to businesses than basically ever before?
American brainwashing in action.
An 8' 2x4 is currently $5.32, whereas it was $3.12 in July (at Menards in Kearney, Nebraska).
15 year mortgages were even lower (2.38% APR at the time) but I didn't want to gamble too much with COVID uncertainties (for all we know this pandemic could ride on 2-5 years).
If you're fairly financially solid and looking at real-estate, it's not a terrible time. My agent also offered a COVID plan free which declares my agent's agency will re-list and resell the property for me at no cost should I desire within one year (obviously, I'd lose any difference in value should the the market value decline, but if things get truly nasty, I can likely bounce out before the market adapts given how quick sell turnover rates are here). No closing costs would be charged under this case (obviously any require renovations would be my liability).
I should add that my mortage will be less than what I'm currently paying in rent... and in pretty solid tech hub that isn't SF.
It makes sense to buy if you plan to stay in an area long term. But, I would be wary buying if you expect to move geographically or outgrow a home within a 5-10 year horizon. If you stay local, your next home will likely rise and fall with your current home.
Overall, with a lot of research and searching, I found a good buy under a very special set of circumstances (at least I hope--there could be hidden issues but I've been very thorough). Some other homes have inflated to ridiculous price points around the area (as if they weren't already incredibly high).
It's always a balance looking at interest rates and price, so you have to be careful. Also, there's nothing saying the pandemic won't completely gut the economy and housing market in this area for years to come or even indefinitely. It's possible rates could drop lower. I'm currently betting that in the long 30 year run, it won't, for a variety of other situational reasons. YMMV.
So far.
There is no great reason to think median and higher income jobs will be hammered while the economy is in recovery mode (and lower income job openings are also soaring).
The US is back up to 5.8 million job openings, up from around 5 million at the bottom. By contrast, at the bottom of the great recession there were only ~2.3 million job openings. This recession has been a far weaker hit to the overall job market, very sharp and short as one would expect from a temporary forced shutdown.
Americans are finally doing what they should have been doing months ago - wearing masks, social distancing better, being more pragmatic regarding the pandemic, which has resulted in the case numbers being cut in half from the peak five weeks ago (along with a correlating large plunge in hospitalizations). If people ingrain that behavior, it'll be very helpful through the Winter, when the Covid mortality rate is likely to spike higher (ie it may help avoid another full lockdown, better bridging the economy from here to a vaccine). There is an old quip (possibly incorrectly attributed to Winston Churchill) about Americans eventually doing the right thing after trying everything else, that appears to again apply with the pandemic.
Over the last few weeks, I've realized that people are okay with the risk in exchange for getting back their normal lives. Six months into the pandemic, it's also clear that while it is serious, it isn't the civilization ending pandemic we initially thought it was.
these are staggering numbers, that have and will have staggering effects. think how many people go into building, maintaining and flying a simple airbus 320. everyone from airbus, to its engineers, suppliers, everyone on delta, etc., is absolutely impacted if that plane is not flying.
this trickles down into private travel which hits even more well paying jobs that build/maintain/support/fly those aircraft.
travel is simply not some dumpy motel in some dumpy town going out of business, travel/tourism has tremendous implications.
If you look at the USA age distribution of 65+, the death rate of those above 65+, and assume 50% only get it because herd immunity we're talking about ~4M deaths.
Yes, not civilization ending but Losing >1% of your population isn't something to just brush off either.
Of course if there's a vaccine then it'll be much better but this is just the USA and now think on a global scale.
Not all countries will be able to afford the vaccine, not all countries will be able to get access to it in time, not all countries will be able to produce it by themselves at scale, etc.
Let it sink in what a 1% population loss looks like on a global scale, 78M deaths.
I think this is why the markets have been so bullish. How much financially better do developed countries with retirement plans look if they didn't have to pay out ~7% less of all retirement payments.
Look at how people are behaving in states that re-opened. Given the clear evidence of human behavior it is ridiculous to assert that a recession caused by the pandemic alone would have been as bad as the recession caused by government-enforced lockdowns. People are not acting like they are afraid. Maybe they are being stupid but that's not the point -- the point is that consumers are acting like there is no virus, and it was the government lockdown, not consumer behavior, that really hurt businesses. People were living normal lives until the day the lockdowns started, and they resumed living the same way the day the lockdowns ended, despite the clear risks to their health.
That's a big brush statement considering we've never done a shutdown like this before. Sure, it can inch back but consumer confidence is essential. It's difficult to imagine confidence growing when approx half the population is going to be sold a vision of unrest, distrust, mismanagement, and so on.
A self-fulfilling prophecy isn't out of the question.
In my (large, Canadian) city they're predicting 50% or more of the local businesses failing by the end of summer / early-fall -- which isnt' far away. If the current trends continue that number may be closer to 55-60%.
Many of the business that re-opened (food, gyms, retail) are getting terrible levels of foot traffic, and several have shuttered after a couple of months of struggling. At first it was mostly local places that were already kind of marginal -- RIP my greasy local pizza place -- but now we've been seeing Starbucks Red Robin, and other chains shutting down their branches.
Eventually this is going to start cutting into real estate, ad revenue, and other white collar gigs -- some of the stories I've seen on HN reflect that.
There may not be a gigantic explosion in the stock market a la 1929 or 2008, it may just be slowly withering on the vine until you look around and realize everyone is broke. Stocks are still soaring, but 1/4-1/3 of my apartment complex neighbors are unemployed.
You have an opinion backed by real data. That's fine. Your post has value and advances a conversation.
I live in central NJ, approx 75 mins by train from NYC and 60 mins to PHL. There is a small new development in my area of approx 20+ units. Best I can tell, these homes are struggling to be sold.
I assume people moving from the city to the 'burbs and those moving to rural/small town locations possibly 2-3 hours from a big city are fairly distinct groups.
Lots of people leaving, but since their properties sold it also means that people are, by definition, also buying and moving in. The key is not "how many people are leaving" but the net outflow.
I think there would be a more serious problem if property owners are trying to leave the city but cannot sell their units. But the property sales volume (i.e. completed closings) seem to be picking up again[1] in the city.
[1] https://www.propertyshark.com/Real-Estate-Reports/2020/08/25...
FTA:
* At $1.065 million, Manhattan YTD median slides 15% below 2019 figures
* Brooklyn median drops 9% Y-o-Y, virtually erasing year-to-date gains
9-15% is a huge set of 1-yr drops.
I'd be much more alarmed if the prices kept/keep dropping further.
It seems like values are up like 10% as a result.
It’s our first home. We were planning on waiting for things to bottom out at 12-24 months after the start of the recession and were passively looking. The perfect home came on the market. Super unique. Unlikely to find another one like it. It’s the kind of home that retains value and sells fast due to uniqueness. It was only on the market for less than a week.
It’s in Seattle. Massive windows with view of Lake Washington and Rainier and so much privatcy that I can walk around anywhere in the house naked without pulling any blinds.
Whether the pandemic rages on and we’re stuck at home or everything springs back to life in downtown Seattle, my partner and I are going to be very comfortable and we have room to start a family or take in my aging father or her nephew once he’s old enough to move out.
The calculus for waiting was lowering housing prices but you also need to factor that your rent will be buying your landlord’s home during that time. Two years worth of rent for us was going to be over $120k. If we lose $100k worth of value by buying ~1.5 years early, it’s a wash.
OTOH, in my area (semi-rural Ohio) these new houses are costing at least 1.75X (and some _much_ more) what similar houses cost 15 years ago. Stuff that went for $120 - $150K 15 years ago is running north of $250K now.
With median household income in Ohio being around 56k, spending 15k on a house looks affordable.
Those folks who are selling their $150k houses for $250k are buying other houses, further raising demand.
They have normal middle-class jobs.
A pair of professional salaries almost anywhere should be able to afford a $250K mortgage.
I think most middle-class people wish their mortgage was only $250K.
So, nice solid growth in the "buying these houses" part of the sector, but by far bigger growth in the "people need to live somewhere" sector of apartments (which I am guessing is the bigger part of the apts-and-condos segment).
Some states stopped construction during the shutdown. Nearly everywhere is now allowing it, so activity surges to catch up. I know of no evidence that births slowed during the shutdown, and the deaths weren't enough to meaningfully impact demand for a place to live.
So, it's good news, but ought not to be surprising. Also from the article: "...these are the kind of gains seen after storms/hurricanes" Well, yeah, and the pandemic is in many respects more like a hurricane than it is like an economic recession.
All in all - yeah, people have time on their hands in both cases, but they're not otherwise very comparable, and I feel like, in the much higher-anxiety environment of the latter, it's considerably less likely that people will opt to pass some of that time by boning down - and on top of that, safety measures foreclose a considerable range of opportunities for doing so in the first place. That said, we'll know pretty well one way or the other by probably January or February, so for anyone not trying to front-run the diaper and formula markets, the uncertainty of the moment is probably fairly bearable.
Fwiw, some Brookings economists found not wholly dissimilar reason to predict a very measurable bust, along with an interesting aside on rates of conception during and around the various waves of the 1918 flu. I don't know whether I entirely buy their analysis, but it's at least not absurd on its face; make of it what you like. https://www.brookings.edu/research/half-a-million-fewer-chil...
But, you're right, we'll know soon enough. Lockdown lasted a lot longer than power outages, also.
Unfortunately, with very few exceptions, they're all being built by retired "empty nesters". My wife and I are always hopeful that families with young kids will move in so they can be friends with our children. But wealthy rural communities are pretty inaccessible to young couples starting families.
Funny, while so many in this community are discussing moving out into cheap rural areas, I'm longing for neighbors my age and friends for my kids and weighing moving to a city.
I think it's easy to overlook that aspect, people are focused on the upsides and it doesn't even occur to them they might not have any neighbors under sixty.
I'm not sure wealth is the key barrier. Rather, if a parent ranks school quality & neighborhood playmates highly when buying a house, they will wind up close to good schools. I've seen this in action myself- I lived all over the place, rural, urban, suburban, for ten years and saw virtually no children. Then I moved within sight of a good school, and now kids of all ages are a constant presence outside. Quite a few of my neighbors could easily afford to live in a lavish rural mountain mansion, but have told me point blank they live here for their kids.
Nobody buying a house like that does significant housework themselves. It usually starts with a paid landscaping service, then interior cleaning service (to clean furnishings picked out by an interior designer), then cooks, etc. I know families who pay photographers to take regular "candid" pictures to post on Instagram. I wouldn't be surprised to find out that at least one of my acquaintances has hired a house manager to deal with all the other hired help. And I don't know anybody in a 20,000sf home.
> nobody is appreciating them
Probably not the case. Or maybe day to day, but I'm sure they have plenty of visitors whenever they want. This is also the realm of people who have at least a 1/8 share of a private plane (including pilot) in their budget, and fly across the country on a whim.
It's a very different world up there, where there's never any serious question of needing to work and money is little more than a way to keep score. Anyone who doesn't realize we've already returned to Gilded Age levels of separation between the aristocracy and the rest of us hasn't been paying attention.
BTW, I live in Massachusetts. When you assume...
Edited to respond to parent's context-changing edit:
> The kids run their own Instagrams. The interior "design"
If that's the milieu you're thinking of, you're talking about something very different than what either I or GP were.
Forgive me for not seeing why how often someone entertains company is relevant. That's more of a personal thing about how you run your life and really has nothing to do with wealth. Some people have friends over all the time. some don't. It doesn't really have to do with money. The idea of a photographer (or influencer for that matter) sharing pictures of your house would just be absurd to the overwhelming majority of these people. The only context I can see it being palatable is if you just had some work done and one of the relevant parties wants to take pictures for their marketing material.
I know it doesn't fit the "new gilded age" narrative you're trying to spin here but these people live much like the professional suburban middle class who live in the Boston and NYC areas. They just do it with stupid high dollar amounts and without having to pick and choose where to be cheap. If they want a $5k status symbol couch in their living room, they buy that. If they don't care they go sit on the couches at some furniture store and pick whichever one they happen to like.
>BTW, I live in Massachusetts. When you assume...
I'm a masshole too and I'm firmly of the opinion that it's not something anyone should be proud of.
If you're so in tune with how things are here than why isn't your opinion better informed? You're coming across as some Lexington Karen complaining about those dastardly Kochs and Kennedys down on the Cape. The average pharma exec or hedge fund manager isn't living in a different world. They're just living in a more expensive one.
>If that's the milieu you're thinking of, you're talking about something very different than what either I or GP were.
So then explain what you're talking about. I used to hang out with these people (and still hang out with the ones I'm friends with). Based on my experience your statements thus far contain overwhelmingly more falsehood than truth.
> I'm a masshole
I live in Massachusetts, but your statement also involves personality traits I don't have. Please don't project.
In a rural area near me, somebody built a big luxury "house" with an unfinished interior. It was not for living; the building was dedicated to growing illegal drugs.
Maybe you don't - when a room gets dirty just close the door and move onto the next one?
We’re trying to find a place where people are different than what we experienced in California — small/no families, workaholics, tech obsessed, “progressive”...
This is exactly what happened to Seattle between 2005-2020, basically SF-ifying a sleepy town in the northwest. We will simply be seeing the same thing play out in a much faster and in a more widespread manner in the 2020s.
A californian, a texan, and an oregonian are sitting around a campfire drinking.
Suddenly, the texan throws his half-drunk Jack Daniels bottle in the air, unslings his Colt, and shatters it with two shots. "What'd you do that for?" ask the two others. "Felt like it. Where I come from, we've got plenty of whiskey."
A little while later the californian throws his half-drunk Chardonnay bottle in the air, whips out his Glock, and shoots it as well. "What'd you do that for?" ask the two others. "Dude. Where I come from, we've got plenty of vineyards."
Finally the oregonian throws his half-drunk Hank's bottle in the air, picks up his shotgun, and fires both barrels into the californian, before catching the bottle again. "What'd you do that for?" asks the texan, blanching. "Where I come from, we've got plenty of californians."
"But this bottle is worth 5 cents."
https://www.youtube.com/watch?v=CXk1882z5oo
Compare "Overpaid, oversexed, and over here."
With regard to "look down upon them and aggressively try to reprogram them into the same thing they left behind", consider the eponymous https://en.wikipedia.org/wiki/Chief_Seattle et.al.
As far as I can tell, looking at the last 6'000 years, cities with economic exports have tended to generate cultural exports in their hinterlands.
"Now, nobody else move here or change a thing!"
There is no disdain like that of the older transplants for the newer. IMX the real life-long residents of a place tend to be more laissez-faire about it.
It's common globally. Cultures and peoples have always prioritized their own.
A typical 15th century small town French person associated with his village more than his country, and he associated more with his country than with England. Tribalism and cultural identity are nothing new.
I think maybe it's because the Bay Area doesn't actually have any big cities, it doesn't quite have that effect.
Then again, if I think about it, the times I spent in each of these places was when the Internet culture wars weren't so prevalent, so maybe it's just that right now everyone is in a big war on the Internet.
People in real life are quite nice in the Bay and I know lots of natives - none of whom make a big deal out of it. But online...ugh.
People rarely say unpleasant things directly to someone in real life, even if they're thinking it. Plenty of people don't like their bosses, but they know better than to directly say it.
To me what is surprising is that people are willing to accept that cultural erasure is a problem in contexts like colonization or gentrification of poor neighborhoods in urban areas, but can’t accept that the same applies to other people and places. It feels a bit like that empathy only exists for favored causes and groups.
Note this was ~15 years ago.
The reason Apple's share price is booming is because "consumers" are buying their products so their earnings were great. Many of them probably spending printed stimulus money. Same for Amazon.
There is really no magic here except the illusion of unlimited money through quantitative easing.
The QE is the only thing holding things together, if that stops, everyone is going down the same drain to poop town.
Edit: I should also mention many investors are probably putting a lot of money into Apple as it's seen as a safe haven for equities right now.
Small businesses are getting killed because the government deemed most of them "non-essential" so big boxes and eCommerce were the only things available, so of course Amazon, Walmart, Target, etc are all doing incredibly well. Their small competition was killed off. This pandemic has definitely worsened the transfer of wealth from the small hands to the large hands, and it's 100% the government's fault.
I'm not an economist, just an interested investor and from my understanding, using QE on this scale is just an easy short term solution to a longer term, hard problem.
Printing money like this has never really been done before on this scale, but the fear is that "printing money" like this will potentially lead to very bad debt and hyperinflation inflation crisis (maybe already started).
The limitations of QE aren't entirely known, but will be known as more money is printed and money becomes more worthless.
Will having a lot of "monopoly money" in circulation be a problem? Time will tell; however there have been many examples where hyper inflation has caused economies to fail, such as Venezuela recently and the Roman Empire in the past.
The US Federal Reserve should probably be careful with their actions because they wouldn't be the first country to run into dire issues doing this.
What I fear is, the people at the top of the US are blinded by greed and the desire to be reelected and aren't concerned about the lessons of history.
But we've had QE for over a decade in various amounts and it didn't lead to inflation, unless there's direct monetisation (the fed prints money and gives it to the government to spend in an unlimited fashion) I'm not sure why the situation would change.
You are kidding, right?
have you seen what is happening in healthcare? Do you have kids in college? Have you tried to buy a residence in a large urban area like seattle, nyc, miami? Have seen what is happening to food package sizes ij most american supermarkets? Do you know the increasing rate of us retirees is no longer flocking to fl, but abroad? Do you realize that it is no longer possible for a working class family to sustain itself with 1 breadwinner? Do you wonder why?
Just because tech , internet, and freight efficiencies are keeping in check in some sectors of the economy doesnt mean there is no inflation.
We are heading into the lost decades of japan
Welcome to salaryman life , where you live in a shoebox amd expect no asset accumulation for the rest of your life
I'd be amazed if it ends well, we haven't invented a perpetuum mobile yet...
$1200 issued months ago?
I'm just waiting for the financially ailing counties to start selling themselves in their totality to corporations and those corporations begin providing employment in exchange for literal cradle-to-grave services.
We don't have meaningful scarcity anymore, not for the essentials anyway. There is a finite amount of land but not a finite amount of housing units, because you can build arbitrarily many of them on top of each other. We can produce more food than people have any need to eat and producers then spend rather a lot of money convincing them to buy more than that. Medicine is only genuinely scarce to the extent that it's limited by labor availability, which means labor should move there and drive down the price unless something is constraining it.
But if you can make something like housing or medicine artificially scarce, you can suck all the surplus out of everybody's paycheck. And that's the problem.
Maybe an example of a person who makes a large some of money through having zero employees where they used to have many and where those people were replaced with automation and completely obsoleted.
Not challenging you, I'm just interested in your theory.
A phone/computer replaces all of those, but it's one product instead of hundreds. It doesn't take anywhere near the labor to produce as all of those things once did.
Not quite zero employees but numbers were reduced greatly, ie accounting. Example: accounting, before you needed a team of accountants for a mid level enterprise, not sometimes even one is sufficient.
If The Office was made today, you'd just have Oscar in accounting and Jim closing deals alongside a robocaller
Because I'm constantly gobsmacked by inefficiencies and companies that have too many people involved in achieving simple goals?
> Because I'm constantly gobsmacked by inefficiencies and companies that have too many people involved in achieving simple goals?
That is also true, by no means I am implying that. There is a lot of inefficiency in many companies, but at the same time what took X people in the past now takes X-Y people for many sectors, ie accounting. Another good example is website creation and development for Small-Medium Enterprise. In the 90-s/2000s you had to pay someone to create a website for you, where now there are countless website builders, some of which are really great.
> Here’s the thing: from where I live, the world has drifted away. We aren’t precarious, we’re unnecessary. The money has gone to the top. The wages have gone to the top. The recovery has gone to the top. And what’s worst of all, everybody who matters seems basically pretty okay with that. The new bright sparks, cheerfully referred to as “Young Gods” believe themselves to be the honest winners in a new invent-or-die economy, and are busily planning to escape into space or acquire superpowers, and instead of worrying about this, the talking heads on TV tell you its all a good thing- don’t worry, the recession’s over and everything’s better now, and technology is TOTES AMAZEBALLS!
Unemployment is high, but much lower than the initial surge from coronavirus. It's likely we're still seeing significant hour/shift reduction, but as lockdown measures relax that will mostly let up or those workers will shift to different fields.
We are seeing things shift away from brick and mortars, but that isn't new just accelerated. It seems like ecommerce is eating everyones lunch now.
This also implies that the ones that are able to buy an iPhone, will pay significantly more for it. Which will make the ones that can afford it even more narrow.
There is something wrong with the reasoning that losing a big part of the market has no influence on companies and consumers that are still able to afford things. This impacts everyone, there is no question about that. Maybe some more than others, but everyone will feel it.
This doesn’t match the actual unemployment numbers.
(disclaimer: not an economist, just a dude in an armchair with an Opinion)
The pandemic has probably accelerated a migration that would have happened anyway--but arguably slowed down the new grads moving into cities to replace them.
A lot of different factors come into play which I certainly don't claim to be able to predict--and will likely vary by city.
On the one hand, lower prices make urban areas/city cores relatively more attractive for those who want to live there. (I doubt living in the cores of top cities is ever going to be cheap; it wasn't in Manhattan in the 1980s.)
On the other hand, there may well be less need to be in a city for certain jobs. Furthermore, if city services are a mess, crime is up, and a lot of the restaurants and small businesses are closed, urban living may be less attractive.
"Low mortgage interest rates mean that home ownership is currently cheaper than renting...and would rule out the prospect of a significant increase in defaults... This is due to the low mortgage interest burden seen in recent years, as well as the fact that financing requirements have been tightened on several occasions. Specifically, this means a majority of home owners are unlikely to have any difficulty servicing their mortgage debt in the event of a temporary reduction in their income" (https://www.credit-suisse.com/ch/en/articles/private-banking...).
I think the thesis still holds up for owner-occupied homes. Residential, luxury, and commercial property market is a different story, although it seems that residential has bounced back, not sure about luxury, and commercial has gotten destroyed and is why Amazon is buying it up for cheap.
I think it's unfair to assume people are panic buying houses. The people I know that have purchased a house in the last six months would have purchased a home regardless of the pandemic. In addition, the threat of inflation is real and having a stable housing cost can help with inflation.
i'm glad that prices and interest rates are finally at a level that people can purchase a home. now hopefully these people have learned from others mistakes in 2007 and only buy a house that they can afford which usually means that your whole MIT payment (mortage + taxes + insursure) never goes above 25% of your monthly net income. things got crazy in 2007 when people were committing 50% or more of the monthly net income to their home payment in hopes that they could flip it in a year or so for a big profit. while this is fine for an investment property that you don't care about getting foreclosed, you never have that mindset with your primary residence.
No, getting into a risky, speculative, highly leveraged position that takes more than half your monthly income just to service the interest is not a good idea, period.
This was not simply a case of people being otherwise shrewd investors, making only the small mistake of making the object of their speculation their residence.
If you tell the average person “X dropped by 50%.” And then next month “X surged by 50%” they’d think it dropped and is back to where it started, not that in reality “X surged by 50% actually means it’s still down by 25% from where it was.”
A lot of this going on at the moment giving either intentional or unintentional impressions of what’s actually happening.
We only have a small handful of cities in the country that can even compare to this on any level. That's why young people would leave cities, because the cities aren't built for living in.
Esp in NYC. At least until next April/May, why would you want to pay $2k/month for a shoebox room that you work remote from. Ridiculous.
This puts everything in much better context, especially the time series plot. It seems home starts / permits were already increasing from July 2019 - Dec 2019, matching the July 2020 levels. So the better question might be: why that surge?
There's nothing magical going on. Housing purchases are made with debt. If you suppress the price of debt, you increase demand for houses.
Read some of the articles written about the real estate boom prior to 2008. They also left out the minor detail of panicked policy makers juicing the money supply.
Had they the logistics I was hoping they would do more road construction during March April May when traffic was almost non-existent.
If road constructions had to be done in groups (likely?) then it was putting construction workers in front of an unknown set of risks. I think we understand all those things a little better now so in retrospect it may have been a good idea.
For those here doing work on your home, why now?
Furthermore, interest rates are very low and there is a perception that this won't last, so people are scrambling to get a loan.
I believe this because I am one of those people and I know several others in similar situations. I'm in escrow right now.
Imagine a $500k house. If you paid cash then you save interest payments and you could invest that into other things. But paying $100k and keeping the other $400k to invest will out perform the former strategy considering today’s interest rates of 3%.
If rates go way up then home asking prices will fall and a cash purpose begins to make more sense. But they haven’t for nearly 40 years. And there’s more money than ever out there which means there is less demand to borrow it which means interest rates continue to fall as the bid drops since there are so many eager lenders.
* historically low interest rates in the last ten years means the actual amount of interest you're paying each month vs principle is not that high.
* Tax Cuts and Jobs Act reduced the amount of property tax deductions that were typically available in HCOL blue states like NY and California.
* Standard deduction increase (also part of Tax Cuts and Jobs Act) was increased so high that many would be now be better off not even bothering to itemize deductions, even if they had a mortgage.
When I was thinking of buying in about 2017, I did the math, and due to the low interest rates and the lack of any other deductions, neither mortgage interest nor state property taxes would have been high enough to offset the standard deduction. In effect, not a single tax advantage would be available to me with buying a house vs just continuing to rent.
Honestly, the tax cuts really benefit people in this situation. Your effective tax rate is much lower than before and although you only get a piece of the property/income tax write-offs, it might make for lower effective taxes.
In terms of buying VS renting, although I bought a home I still think renting makes a whole lot of sense for a lot of people. Buying a home is expensive in terms of furnishing it, customizing it, etc. But also in selling it and related expenses.
Imagine your home can be sold for 900k. Around 6% ($54k) of that is going to be taken away from an agent. You'll probably be buying a new home so you have to factor in closing costs for the new mortgage, assume $15k and then moving expenses, etc and you're looking at $75k-$80k. So unless your home has appreciated to cover these costs, you're losing potentially significant money. A renter doesn't have to face this at all and likely pays less in rent than the mortgage and property taxes would be.
Buying a home makes sense if you plan on living in it 10 years or more in many cases I believe. By then you'll likely get back anything you've put into it and have built decent equity. The best part of buying is that as time goes on, your monthly payment begins to look like a bargain as rents and home prices continue to rise - once again, about 10 years in.
I hope it goes on longer, more time to build up more leverage selling trash to folks who believe oft repeated things as if they were the word of god.
long tail risk: assets that have problems that take a long time to affect the price
HY: high yield, meaning they change quickly in price by large percentages and can make more money quickly
trash: low priced stocks for crappy companies
bottom falls out: market takes a dive
garbage: same thing as trash
collateralized HY coming due: investments backed by assets that will default
leverage: money
"oft repeated things": aphorisms about finance that are often wrong, in this case the poster you replied to's comment.
I'm probably wrong on half of this and I still don't really get what you are saying. Excuse my ignorance.
> long tail risk: assets that have problems that take a long time to affect the price
Not necessarily, could be any asset or derivative that could be susceptible to experiencing large declines in return relative to normal conditions during certain periods of time
> HY: high yield, meaning they change quickly in price by large percentages and can make more money quickly
No, high yield bonds. Avg yield on 4.5-5 year maturing ones right now is about 6%. Or at least the 1217 cusips I track ASOF mon close.
> trash: low priced stocks for crappy companies
Not just stocks, but yes
> garbage: same thing
^^^
> collateralized HY coming due: investments backed by assets that will default
about 91.8% of HY bonds coming due in 4.5-5 years are not backed by any collateral. "Will default" is subjective, but my work has about 61% have a good chance of default (from ratings, current price of the bonds, 10-q/10k data available), not including liquidity premiums/discounts for people who "want out now", not including leverage actors take when buying/lending such now like they do.
> leverage: money
Borrowing money in order to increase ones exposure (or contracts that act as such), larger returns/drawdowns are expected if (not) managed properly compared to not borrowing to finance a position (or buying the underlying out right in cash).
> "oft repeated things": aphorisms about finance that are often wrong
Or wrong in certain contexts.
Under the efficient market hypothesis, if the prices are dropping because of many bankruptcies forcing a sale, you will also feel that the price is not worth buying, or if there's actually little to low risk, then the price would get bid up by many buyers (assuming all buyers are perfectly rational).
textbook vs reality… having a rational for buying something is not the same as an objectively rational choice.
https://tradingeconomics.com/united-states/housing-starts
That being said, lumber prices are up 50% for just six months ago.
How much of this is because of wildfires causing disruptions?
This site[1] has an outdated table. California was 6% of lumber production in 2015.
Most of the timber production in California comes from way up north, in the Eureka area and in the Sierra Nevadas. This area is somewhat resistant to fires since it gets so much more moisture and precipitation.
No idea was just thinking out loud
Saw mills aren't sure they are going to buy logs and living trees are better than rotting logs and so on.
> Construction of new U.S. homes surged 22.6% last month as homebuilders bounced back from a lull induced by the coronavirus pandemic.
"bounced back" being the takeaway. It's just bouncing back to somewhat normal levels after it being down a lot.
It's a non-story.
Industries recovering to pre-pandemic levels is anything but a non-story. There's nothing inevitable about that happening right now. It's news.
Well, I do not have a huge sample to drive any conclusions. But I know a couple whose adult children live in other parts of the world (one in Miami, the other in London).
So the couple is choosing, finally, to sell their NY city home and move to south east Florida closer to one of the children.
Largerly, besides emotional reasons (lack of feeling secure, feeling of being unwanted, feeling of being robbed by local taxes, wanting to be closer to their children) -- they no longer see that their home price will continue to go up to justify sitting there as an 'investment vehicle'.
They are closer to retirement age, so their needs, perhaps are different then others.
They also do not want their children, under any circumstance to move back to NY city or NJ.
Even the people that are there for work and already knew their city reality may also be realizing their gained happiness out of the city is worth more than the financial boost of their job in the city.
Long term thinking isn't something everyone has.
This is how the immune system works! Stop sensationalizing this story.
America has had declining cases for weeks straight.
Whatever sensational news story you read about herd immunity is there to scare you and you should be careful of your information diet.
> Critics say even Tegnell’s most optimistic forecasts for Sweden are still a long way from the critical 60% to 70% goal required for herd immunity to have a chance at working, and save the lives of the elderly and those with underlying conditions — those most vulnerable members of the population. [1]
you should be careful of your information diet.
[1] https://www.marketwatch.com/story/sweden-has-developed-herd-...
They're still Europeans bro. They packed them in tight there.
Are you just making stuff up to try to discredit things that disagree with your view?
You were right about one thing. Due to cross-reactivity with other common cold coronaviruses giving previous immunity, they're speculating you only need between 10 to 30% of the population infected with covid to develop herd immunity.
Honestly it kind of makes sense.
And bro i was talking about NYC, of course it is more dense than Stockholm
There is no other logical explanation.
I'm sure you'll try to come up with something hand wavy though since it disagrees with your narrative.
You can continue to be afraid if you want. If I were you I would pay particular attention to the sensational news articles that highlight when cases are increasing and then also look at the data and notice that America has been decreasing in cases for weeks straight and ask yourself why hasnt the news media reported this remarkable development?
Mark my words America is heading towards herd immunity as long as we stay this course, and this will be all over by the end of the year.
I guess they put their travel money into home improvements.
I don't see how interest rates can ever go higher. We have been trapped near zero since 2008.
Luckily, the local real estate market stayed strong. We sold the house about 30 days before we moved into the new place in July-- above asking price! It felt like a miracle.
It felt like the last parts of the new house took forever. Appliances, lights, etc. took a long time to arrive. Window blinds took several months. (All this affected by covid, we are told.)
I feel bad for people who have houses under construction now. I'm told the wait for materials is much worse (!)