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Fed Reserve and Interest Rates
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Real Estate Guy
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PostPosted: Wed Feb 15, 2017 7:00 pm GMT    Post subject: Bubble Reply with quote

Very interesting articles. Very good reads.
The way history repeats itself never ceases to amaze me. I have been around long enough to see several corrections. Each of them were bubbles. From back in the 80's to our most recent 2008....ALL bubbles. The irony is that EACH AND EVERY TIME we see them grow right in front of our eyes and people talk about how low inventory is pushing up prices,...really? Of course it is! If demand didn't exceed supply you wouldn't really have a bubble(at least not like the one we're in). With more level demand/supply you would get a steady growth bubble that would GRADUALLY extend past incomes(kind of like 2001-2006). What we're seeing now is a MASSIVE BUBBLE compounded by BOTH inventory shortage and ultra low rates and accomadative monetary policy by the Fed Bank. As every time before, when prices get pushed excessively past median incomes, the correction begins, and EVERY TIME it starts with RISING INTEREST RATES. Even if supply of housing is low, for every point interest rises, buyers become either limited in purchasing power or removed from a certain market all together. As this continues(as the FED is now boldly calling for), supply and demand will become more aligned. At first this is a good thing, and if the FED can gauge it correctly we would see a "soft landing" as they pull back on raising rates. That, of course, NEVER Happens. For every rate hike(or reduction) the FED makes it takes MONTHS to see it's impact in the real housing market. By the time the signs of a correction(or "pop") are seen, it's too late. This is why housing has never corrected without pain, and I got news for ya....this is the biggest one I've ever seen, researched or studied in all my years. Don't believe the hype, but believe your instincts and NEVER gauge YOUR decisions on a realtor feedback in a market like this. They can't make money telling you anything but positives. Buyers are nervous enough just by the very nature of buying. If realtors were honest, or expressed concerns, they would loose sales. Never happens. Moreover, they spend a fortune in advertising personally and via the National Association of Realtors to push as much positive propaganda as possible. For them every sale is a commission. For the buyer, it's a long term commitment and financial decision that they will be STANDING ALONE with after they by. It's certainly a tough time for buyers, but patience is my advice in a market like this. To rent(even at high rents) is better than getting stuck in an over valued asset. With rising rates, House prices CERTAINLY can not go up higher(or much higher). Why wouldn't you at least wait a couple of years to see how this all plays out? worst case scenario, you can still buy an overpriced house in a couple of years.
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PostPosted: Fri Feb 17, 2017 3:07 pm GMT    Post subject: Reply with quote

History certainly does seem to repeat itself.

Re: housing bubble. I'll believe you that this is the biggest one you've seen, you certainly have a lot more experience than I do. Yet, in this area, we keep hearing that sitting on the sidelines means we might just get "priced out forever". The Boston Globe printed this uplifting article a year ago:

https://www.bostonglobe.com/business/2016/01/07/think-boston-housing-expensive-now-wait-five-years/6qTjKdarDT2AdZkpqrJWaJ/story.html

Yet, all of the "luxury housing" being built in Boston and all over the country does make one wonder…

Re: stock market bubble. I started tiptoeing back into the market in 2012, and in retrospect wish I had been smarter and bought up a lot of stocks (in my retirement account) when they were cheaper. I never touched anything after the 2008 crash, just left it - it came back and more. Started buying into the S&P 500 Index fund when it was $51.00 a share in 2012. Got lazy and fearful, thinking it would get lower...stopped buying as much. Now the price is $82.37. Sigh.

Yet, we have been shown that history will repeat itself.

I have been hearing for well over a year that stocks were way overvalued, this bull market could not continue and a crash was imminent. I have 30% in cash and hoping for a "correction" yet now the DJIA is breaking records. I thought about buying Apple stock in the fall of 2016 (although it is present in my mutual funds) but read the price would go down in late Feb-March 2017. Hmmm….so I decided to wait. Then I hear yesterday that Warren Buffett quadrupled his stake in Apple in the last quarter.

If us average people could just make a decent return on their savings, we would not all be forced to put our money at risk in the stock market.

Since I'm a "punished" saver, I do plan to pay cash for a home when the next bottom strikes, if I have the fortitude to wait that long…a crystal ball would be nice. Very Happy
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PostPosted: Fri Feb 17, 2017 8:12 pm GMT    Post subject: Reply with quote

Anonymous wrote:


Since I'm a "punished" saver, I do plan to pay cash for a home when the next bottom strikes, if I have the fortitude to wait that long…a crystal ball would be nice. Very Happy


You have to bear in mind the following: A "severe" crash will have serious affects on the economy. Real estate prices generally start to show cracks about 2 years after a stock market has crashed.

Let's say you wait until current house prices go back to 2009 prices, or if you are adventurous to 2001 prices.

at 2001 prices, the employment situation will be so dire, the last thing on your mind will be buying a house. We are talking 10-15% real unemployment, layoffs every quarter, slow return of crime etc. You may not even have a job to get a mortgage

It is easy to say, but when the time comes you will still want it cheaper to compensate for the risk (lack of jobs, foreclosures etc).
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PostPosted: Sat Feb 18, 2017 2:07 am GMT    Post subject: Reply with quote

Anonymous wrote:
Anonymous wrote:


Since I'm a "punished" saver, I do plan to pay cash for a home when the next bottom strikes, if I have the fortitude to wait that long…a crystal ball would be nice. Very Happy


You have to bear in mind the following: A "severe" crash will have serious affects on the economy. Real estate prices generally start to show cracks about 2 years after a stock market has crashed.

Let's say you wait until current house prices go back to 2009 prices, or if you are adventurous to 2001 prices.

at 2001 prices, the employment situation will be so dire, the last thing on your mind will be buying a house. We are talking 10-15% real unemployment, layoffs every quarter, slow return of crime etc. You may not even have a job to get a mortgage

It is easy to say, but when the time comes you will still want it cheaper to compensate for the risk (lack of jobs, foreclosures etc).


Except for places like Detroit and during World Wars 1 and 2, home prices have never gone below the bottom of the previous bubble. You will never see 2009 prices again unless World War 3 happens and the US gets nuked by Russia. Then the lucky survivors will get to live in mansions in Wellesley for next to nothing.
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PostPosted: Sat Feb 18, 2017 2:31 am GMT    Post subject: Re: Bubble Reply with quote

Real Estate Guy wrote:
Very interesting articles. Very good reads.
The way history repeats itself never ceases to amaze me. I have been around long enough to see several corrections. Each of them were bubbles. From back in the 80's to our most recent 2008....ALL bubbles. The irony is that EACH AND EVERY TIME we see them grow right in front of our eyes and people talk about how low inventory is pushing up prices,...really? Of course it is! If demand didn't exceed supply you wouldn't really have a bubble(at least not like the one we're in). With more level demand/supply you would get a steady growth bubble that would GRADUALLY extend past incomes(kind of like 2001-2006). What we're seeing now is a MASSIVE BUBBLE compounded by BOTH inventory shortage and ultra low rates and accomadative monetary policy by the Fed Bank. As every time before, when prices get pushed excessively past median incomes, the correction begins, and EVERY TIME it starts with RISING INTEREST RATES. Even if supply of housing is low, for every point interest rises, buyers become either limited in purchasing power or removed from a certain market all together. As this continues(as the FED is now boldly calling for), supply and demand will become more aligned. At first this is a good thing, and if the FED can gauge it correctly we would see a "soft landing" as they pull back on raising rates. That, of course, NEVER Happens. For every rate hike(or reduction) the FED makes it takes MONTHS to see it's impact in the real housing market. By the time the signs of a correction(or "pop") are seen, it's too late. This is why housing has never corrected without pain, and I got news for ya....this is the biggest one I've ever seen, researched or studied in all my years. Don't believe the hype, but believe your instincts and NEVER gauge YOUR decisions on a realtor feedback in a market like this. They can't make money telling you anything but positives. Buyers are nervous enough just by the very nature of buying. If realtors were honest, or expressed concerns, they would loose sales. Never happens. Moreover, they spend a fortune in advertising personally and via the National Association of Realtors to push as much positive propaganda as possible. For them every sale is a commission. For the buyer, it's a long term commitment and financial decision that they will be STANDING ALONE with after they by. It's certainly a tough time for buyers, but patience is my advice in a market like this. To rent(even at high rents) is better than getting stuck in an over valued asset. With rising rates, House prices CERTAINLY can not go up higher(or much higher). Why wouldn't you at least wait a couple of years to see how this all plays out? worst case scenario, you can still buy an overpriced house in a couple of years.


This bubble is definitely due to the shortage of inventory, but will pop once housing starts crack 2 million. Yes, housing prices CERTAINLY will go up higher before the bubble pops. You haven't seen crazy yet, but you will in a few years.

http://www.macrotrends.net/1314/housing-starts-historical-chart
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PostPosted: Sat Feb 18, 2017 7:09 pm GMT    Post subject: Re: Bubble Reply with quote

Anonymous wrote:
Real Estate Guy wrote:
Very interesting articles. Very good reads.
The way history repeats itself never ceases to amaze me. I have been around long enough to see several corrections. Each of them were bubbles. From back in the 80's to our most recent 2008....ALL bubbles. The irony is that EACH AND EVERY TIME we see them grow right in front of our eyes and people talk about how low inventory is pushing up prices,...really? Of course it is! If demand didn't exceed supply you wouldn't really have a bubble(at least not like the one we're in). With more level demand/supply you would get a steady growth bubble that would GRADUALLY extend past incomes(kind of like 2001-2006). What we're seeing now is a MASSIVE BUBBLE compounded by BOTH inventory shortage and ultra low rates and accomadative monetary policy by the Fed Bank. As every time before, when prices get pushed excessively past median incomes, the correction begins, and EVERY TIME it starts with RISING INTEREST RATES. Even if supply of housing is low, for every point interest rises, buyers become either limited in purchasing power or removed from a certain market all together. As this continues(as the FED is now boldly calling for), supply and demand will become more aligned. At first this is a good thing, and if the FED can gauge it correctly we would see a "soft landing" as they pull back on raising rates. That, of course, NEVER Happens. For every rate hike(or reduction) the FED makes it takes MONTHS to see it's impact in the real housing market. By the time the signs of a correction(or "pop") are seen, it's too late. This is why housing has never corrected without pain, and I got news for ya....this is the biggest one I've ever seen, researched or studied in all my years. Don't believe the hype, but believe your instincts and NEVER gauge YOUR decisions on a realtor feedback in a market like this. They can't make money telling you anything but positives. Buyers are nervous enough just by the very nature of buying. If realtors were honest, or expressed concerns, they would loose sales. Never happens. Moreover, they spend a fortune in advertising personally and via the National Association of Realtors to push as much positive propaganda as possible. For them every sale is a commission. For the buyer, it's a long term commitment and financial decision that they will be STANDING ALONE with after they by. It's certainly a tough time for buyers, but patience is my advice in a market like this. To rent(even at high rents) is better than getting stuck in an over valued asset. With rising rates, House prices CERTAINLY can not go up higher(or much higher). Why wouldn't you at least wait a couple of years to see how this all plays out? worst case scenario, you can still buy an overpriced house in a couple of years.


This bubble is definitely due to the shortage of inventory, but will pop once housing starts crack 2 million. Yes, housing prices CERTAINLY will go up higher before the bubble pops. You haven't seen crazy yet, but you will in a few years.

http://www.macrotrends.net/1314/housing-starts-historical-chart


When you say "crazy" do you mean regarding how high prices will get before it pops?
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PostPosted: Sat Feb 18, 2017 8:29 pm GMT    Post subject: Reply with quote

Anonymous wrote:

Except for places like Detroit and during World Wars 1 and 2, home prices have never gone below the bottom of the previous bubble. You will never see 2009 prices again...


You should adjust for inflation.

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PostPosted: Sun Feb 19, 2017 1:20 am GMT    Post subject: Re: Bubble Reply with quote

Anonymous wrote:
Anonymous wrote:
Real Estate Guy wrote:
Very interesting articles. Very good reads.
The way history repeats itself never ceases to amaze me. I have been around long enough to see several corrections. Each of them were bubbles. From back in the 80's to our most recent 2008....ALL bubbles. The irony is that EACH AND EVERY TIME we see them grow right in front of our eyes and people talk about how low inventory is pushing up prices,...really? Of course it is! If demand didn't exceed supply you wouldn't really have a bubble(at least not like the one we're in). With more level demand/supply you would get a steady growth bubble that would GRADUALLY extend past incomes(kind of like 2001-2006). What we're seeing now is a MASSIVE BUBBLE compounded by BOTH inventory shortage and ultra low rates and accomadative monetary policy by the Fed Bank. As every time before, when prices get pushed excessively past median incomes, the correction begins, and EVERY TIME it starts with RISING INTEREST RATES. Even if supply of housing is low, for every point interest rises, buyers become either limited in purchasing power or removed from a certain market all together. As this continues(as the FED is now boldly calling for), supply and demand will become more aligned. At first this is a good thing, and if the FED can gauge it correctly we would see a "soft landing" as they pull back on raising rates. That, of course, NEVER Happens. For every rate hike(or reduction) the FED makes it takes MONTHS to see it's impact in the real housing market. By the time the signs of a correction(or "pop") are seen, it's too late. This is why housing has never corrected without pain, and I got news for ya....this is the biggest one I've ever seen, researched or studied in all my years. Don't believe the hype, but believe your instincts and NEVER gauge YOUR decisions on a realtor feedback in a market like this. They can't make money telling you anything but positives. Buyers are nervous enough just by the very nature of buying. If realtors were honest, or expressed concerns, they would loose sales. Never happens. Moreover, they spend a fortune in advertising personally and via the National Association of Realtors to push as much positive propaganda as possible. For them every sale is a commission. For the buyer, it's a long term commitment and financial decision that they will be STANDING ALONE with after they by. It's certainly a tough time for buyers, but patience is my advice in a market like this. To rent(even at high rents) is better than getting stuck in an over valued asset. With rising rates, House prices CERTAINLY can not go up higher(or much higher). Why wouldn't you at least wait a couple of years to see how this all plays out? worst case scenario, you can still buy an overpriced house in a couple of years.


This bubble is definitely due to the shortage of inventory, but will pop once housing starts crack 2 million. Yes, housing prices CERTAINLY will go up higher before the bubble pops. You haven't seen crazy yet, but you will in a few years.

http://www.macrotrends.net/1314/housing-starts-historical-chart


When you say "crazy" do you mean regarding how high prices will get before it pops?


It really depends on how long before we hit 2 million housing starts. Who knows if it will take 1,2,3,4 or 5 years. If you look at the chart, it can happen as quickly as 2 years. It's very likely we will continue to see 5% YOY increases until then. Once builders flood the market with new houses, prices will start to come down.
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PostPosted: Wed Mar 22, 2017 5:45 pm GMT    Post subject: Fed Reserve Reply with quote

Is anyone else getting concerned about all the foreign money pouring into our country? Boston, as well as other major cities, are experiencing unprecedented demand from foreign buyers throwing cash into our markets. This is also adding to the bubble and creating a worse one. Now, as interest rates rise, Americans are getting squeezed out by foreigners that are looking for more security than they can find in their own countries. America sure isn't what it used to be, is it? How did we as Americans let this country be taken over like this?? Between this, and the Fed Reserve pulling us like puppets on a string, this country is finished.
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PostPosted: Wed Mar 22, 2017 6:12 pm GMT    Post subject: Reply with quote

Yes, it is a big problem and why is it being allowed?

Vancouver was being bought up by Chinese/foreign money and they instituted a 15% tax on foreign buyers, now those buyers are reportedly moving south to Seattle. Not sure if any such tax is hitting them here in the U.S. (it should!):

https://www.theguardian.com/world/2016/aug/02/vancouver-real-estate-foreign-house-buyers-tax
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Real Estate Guy
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PostPosted: Thu Mar 23, 2017 12:31 am GMT    Post subject: Fed Reserve Reply with quote

We really need to step up as Americans and take our country back. Is anybody contacting their Senators, Governor Baker, our State Reps? People need to start there. Be smart who you vote for. Most countries don't allow unfiltered foreign buyers to swoop in and manipulate their markets. Our Congress has wanted a low dollar to compete globally. Now our currency is weak and foreigners can come here without any significant government controls and buy up our real estate and manipulate value. How about our kids? Any first time buyers out their had enough? How about when your kids have to move out to the boonies to rent or buy while foreigners suck up all the better real estate they can afford. I'm telling you, between the corrupt Fed Reserve and a Government that isn't getting involved it is up-to the people. If we the people don't stand up and start dealing with this it will be too late.
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PostPosted: Fri Mar 24, 2017 7:38 pm GMT    Post subject: Reply with quote

Eh, whatever. I'd be happy to sell my overpriced house that I just bought, for 10% profit in the next two years or something, then buy a place in VT for like $300K cash and retire at 40. I'm just generally sick of the rat race. Some Chinese dude wants to buy my house with skyline views of the city? That's cool. I can't be bothered to care. The whole country's gone to shit, anyways.
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PostPosted: Mon Mar 27, 2017 6:45 pm GMT    Post subject: Reply with quote

It sure has. Last time I checked we were still America. The Chinese already over populated their country and created massive real estate bubbles that now seem destined to destabilize their economy. Eh, why not just sit back and let them now ruin America? Because I have kids that's why.......and I hope enough people get involved before this invasion takes down our way of life for good. Too many good people fought for this Country to see it sold out to foreigners, at the expense of our younger generation.
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PostPosted: Mon Mar 27, 2017 8:53 pm GMT    Post subject: Reply with quote

Real Estate Guy wrote:
It sure has. Last time I checked we were still America. The Chinese already over populated their country and created massive real estate bubbles that now seem destined to destabilize their economy. Eh, why not just sit back and let them now ruin America? Because I have kids that's why.......and I hope enough people get involved before this invasion takes down our way of life for good. Too many good people fought for this Country to see it sold out to foreigners, at the expense of our younger generation.


Since we live in a capitalistic society, we have to live with both the positives and negatives. If there is any blame, the root cause is 'lack of supply' or 'fix' the traffic/commute issues so that living outside 10 miles of Boston does mean a 1.5 hour commute.

One technology advancement may solve all of this: self driving cars. If most cars on the road could drive themselves to work.. it really wouldn't matter where you lived as it would be a breeze to get into work. The car could drop you off at the nearest train station and drive itself back home


There is plenty of land to build vertically... NIMBYs are trying to artificially keep supply down
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PostPosted: Mon Mar 27, 2017 9:04 pm GMT    Post subject: Reply with quote

Anonymous wrote:

One technology advancement may solve all of this: self driving cars. If most cars on the road could drive themselves to work.. it really wouldn't matter where you lived as it would be a breeze to get into work. The car could drop you off at the nearest train station and drive itself back home


I think it's even more promising than that. Why stop at the train station? Have the car take you all the way to work, and work on the way there and back so that your commute time doesn't matter (if your type of job allows that). Have the car/van intelligently car pool so that its full, your ride is cheaper, and the environmental impact is much smaller (perhaps on par with the train). Better still, if enough people do the same with regard to carpooling, that could significantly reduce the number of cars on the road, which would make traffic move faster.

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