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Seems to be basically "no gas, nor breaks, until we figure out what direction the economy wants to go in." Economy doing pretty well overall, but tech and other ZIRP-sensitive sectors should dig in for 6 more quarters of winter. I'm just an idiot on the Internet though.
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Sep 20, 2023 20:07
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mrmcd posted:ZIRP Hey, I learned new a word today. Or an acronym. An initialism? I learned a new abbreviation today.
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Sep 20, 2023 20:19
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mrmcd posted:Seems to be basically "no gas, nor breaks, until we figure out what direction the economy wants to go in." The FOMC statement has almost nothing in it - I interpret the change from "economic activity ... expanding at a moderate pace" to "... solid pace" as meaningless - but the summary of economic projections is kind of interesting, if you want to try reading some tea leaves. The big change is the doubling of the 2023 GDP growth rate median projection, from 1.0 in June to 2.1 today. Obviously on some level that's just the committee accepting that the slowdown they've been waiting for isn't showing up, but one does get the sense that they're having to adjust priors. That also explains the downward adjustment of the 2024 and 2025 unemployment predictions. All this is happening despite no real change in the glide path for core PCE inflation - but the committee now expects to maintain rates above 4% until the end of 2025. Not that that projection means much, given the variance in the dot plot, but I agree that no one should expect a drop in rates any time soon.
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Sep 21, 2023 18:58
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I don't get the impression that they're waiting for a slowdown. I get the impression that they are hesitant to make a change without data supporting it. Higher for longer has been mentioned for the entirety of 2023. They haven't decided yet on actively stating their comfort zone or what actions they want to take to combat rising (perpetually) cpi.
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Sep 22, 2023 03:55
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I'm casually monitoring the house buying thread and car buying thread and nobody seems to be slowing their roll. Ok actually the house buying thread has slowed to a crawl. But not hearing anybody crying bloody bankruptcy yet. 6% is high but I still see people upgrading from Toyotas to Mercedes in the car buying thread. Personally like to see them return rates to 2% but the economy seems to be humming along despite getting shot in the ankle
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Sep 22, 2023 05:58
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People always need to live somewhere. If the rates are crazy you ultimately end up picking a slightly less expensive house than the one you would have otherwise. Not that nobody won't be priced out at the lower end but unless you are there you will just settle for something else. All the houses in my area have gone beyond my reach, but I can move 45 minutes away from where I work and get a house with a decent yard for what my rent is now. And if my landlord raises the rent again this year it becomes an easier choice! Ultimately, the price of housing is totally irrelevant. It is all about what that monthly payment is.
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Sep 22, 2023 13:12
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Lord_Hambrose posted:People always need to live somewhere. If the rates are crazy you ultimately end up picking a slightly less expensive house than the one you would have otherwise. Not that nobody won't be priced out at the lower end but unless you are there you will just settle for something else. All the houses in my area have gone beyond my reach, but I can move 45 minutes away from where I work and get a house with a decent yard for what my rent is now. And if my landlord raises the rent again this year it becomes an easier choice! Hypothetically the price of housing should be tied to the interest rate, because as you said at the end of the day the monthly payment is what matters to people. The problem is that prices haven't come down despite rates going up, which means that a house that was $400k at 2.5% is just hilariously unaffordable at 7%. Ignoring insurance and taxes etc, just the raw loan, you're looking at about $1600/mo vs $2700/mo. There are a lot of different opinions out there about why that decoupling happened - lack of building, increase in cash buyers insensitive to rates, increase in corporations (cash buyers) building rental property portfolios - but at the end of the day whatever the root cause it's a supply problem. Available houses are limited enough that the people competing for them can all afford those higher monthly payments. Part of the issue with that limited stock is that we have a fuckload of people who bought houses in the last 10 years at very low rates. In the example above, if you have that 2.5% loan there's nothing for you to upgrade to that's even remotely as affordable on a per-month basis as your current mortgage. We're just not going to see that normal churn of people moving to be twenty minutes closer to a new job or to change school districts or upgrade the size of their place when they have their 3rd kid, and that also affects how much supply there is on the market.
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Sep 22, 2023 13:29
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Cyrano4747 posted:Hypothetically the price of housing should be tied to the interest rate, because as you said at the end of the day the monthly payment is what matters to people. The problem is that prices haven't come down despite rates going up, which means that a house that was $400k at 2.5% is just hilariously unaffordable at 7%. Ignoring insurance and taxes etc, just the raw loan, you're looking at about $1600/mo vs $2700/mo. One anecdote doesn’t prove anything, but I feel like I’ve heard a few so I’ll share mine too. This is exactly the boat we’re in - we locked in at 3% on a nice starter home, but now want to upgrade - needless to say everything is overpriced, so we’re trying to remodel. Only that’s taken two years and we’re still not ready past permitting - all housing choices are suboptimal atm. I would still jump if rates went back down to say 5%, and I would definitely make sure if I sold it would go to locals/a family. A 1 mile^2 neighborhood in my area has maybe 100-200 homes, and at least 20 of those (that I know of) are Airbnb’s - and one person owns 10 of those AFAIK. AND obviously zoning in my neighborhood does not allow for apartments, I know of multiple people that want to live in my neighborhood but are priced out. To concur, convergence of a multitude of issues all at once Ubiquitus fucked around with this message at 08:40 on Sep 23, 2023 |
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Sep 23, 2023 08:37
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Cyrano4747 posted:Hypothetically the price of housing should be tied to the interest rate, because as you said at the end of the day the monthly payment is what matters to people. The problem is that prices haven't come down despite rates going up, which means that a house that was $400k at 2.5% is just hilariously unaffordable at 7%. Ignoring insurance and taxes etc, just the raw loan, you're looking at about $1600/mo vs $2700/mo. Average rates hit 8.5% this week, shits getting ridiculous I think it’s going to hit prices slowly at first (the phase we’re in presently) and then, perhaps, very quickly Or just a continuous and prolonged slow sideways/down drift, who knows
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Sep 29, 2023 22:14
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Until the economy settles into a more stable state I predict the housing supply will stay tight enough to support current price levels but I have nothing to back that up. If you bought your house at the peak of the market in 21/22 at 3% there's no real way to exit without eating a huge loss AND bigger monthly payment right now In the house buying thread there's a graph that shows the new England housing market and it is just totally flat from like 1990-98 Seems like everyone is resigned to sit on their hands until mid 2024 and wait until the party stops when the Fed loosens the purse strings
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Sep 29, 2023 23:08
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I'm getting a new mortgage right now and I'm just building in "probably won't refi for 40 months at least" into my calculations. I'm happy to be wrong but I kinda don't think I will be.
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Sep 29, 2023 23:35
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I would advise a home buyer to not presume they will ever be able to refi. Hope, sure, but "surely interest rates must go down from these historically high levels" is an idea with an extremely big and obvious flaw to it, as illustrated by this chart: Rates stayed at or above their current levels from 1972 till 1993. That's 20 years. Yes, they then stayed below current values from about the end of 2000 till now, and that's 23 years. The moral of this story is that rates can stay high or low for decades.
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Sep 30, 2023 05:08
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Dumb question, how did anyone buy a home in the 1980s? Or was demand no where near that high with adequate supply?
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Sep 30, 2023 11:01
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prices were like 1/5th to 1/20th current so mortgage total amounts were smaller average total home price was 47k usd in 1980, compare to average wage 12k usd. both figures nominal
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Sep 30, 2023 11:10
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Higher interest rates have an effect on demand but also constrain supply since new construction is more expensive and individuals with existing homes are less willing to sell if they must take on debt at less advantageous rates to do so. Yes I realize that’s more to do with liquidity than supply pressure on price but shut up. In Denmark, 30 year fixed loans can be purchased back from the bank at market rates removing the liquidity issue but the trade off is higher capitalization requirements for the banks issuing them and presumably higher rates because of it. I am not an economist so that all is probably about 70% correct.
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Sep 30, 2023 12:16
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In the US, prices were lower as demand was lower compounded by construction being cheaper so supply wasn't as squeezed. In some fairness people were also more willing to live in smaller houses that are no longer really built or sought after. You probably had way less student debt, healthcare costs were lower vs middle class wages.
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Sep 30, 2023 14:46
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Hadlock posted:Until the economy settles into a more stable state I predict the housing supply will stay tight enough to support current price levels but I have nothing to back that up. If you bought your house at the peak of the market in 21/22 at 3% there's no real way to exit without eating a huge loss AND bigger monthly payment right now I just think at these rate levels the demand side could start to crumple. Low supply only matters if purchasing power and demand is there
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Sep 30, 2023 16:01
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Crosby B. Alfred posted:Dumb question, how did anyone buy a home in the 1980s? Or was demand no where near that high with adequate supply? Prices were lower as others have mentioned, but a lot of people also took variable rate mortgages so as to get relief if interest rates dropped.
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Sep 30, 2023 16:07
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Lockback posted:In the US, prices were lower as demand was lower compounded by construction being cheaper so supply wasn't as squeezed. In some fairness people were also more willing to live in smaller houses that are no longer really built or sought after. You probably had way less student debt, healthcare costs were lower vs middle class wages. I do think that one of the edge pieces of the problem is that small houses and non-luxury apartments aren’t being built because the cost of materials and time to build bigger / “fancier” is a trivial amount in the overall cost of construction, but allows you to command much higher prices. So why bother building at the low end (unless subsidized or otherwise forced to)? Every single building that’s going up in my city in the (marginal) densification push is luxury condos/apartments. Some get designated as low income but nobody’s building actually inexpensive housing.
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Sep 30, 2023 16:26
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I feel like the whole "Their only building luxury housing for rich people  " is over dramatized. Only difference between  luxury housing is mostly marketing and granite countertops with a fancy thermostat with a LCD Display.
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Sep 30, 2023 16:33
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Sure, but the price is then a lot higher.
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Sep 30, 2023 16:39
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In terms of construction, yes, but in terms of what they charge for it there's a pretty big difference.
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Sep 30, 2023 16:39
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no, peeps literally do not remember when nonluxury construction was viable. land is like 70-90% of the cost of housing in san francisco and new york, so 30%, 40% differences in build cost is insignificant
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Sep 30, 2023 16:39
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Construction code is another factor. You have to build to a much higher quality in the "bones" that you may as well add 10% to the construction cost for higher end finishes. End of the day, more luxury new builds doesn't mean anything. It just pushes everything else down the stack. Density and amount of construction is all that matters to help fix out of control valuations.
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Sep 30, 2023 16:43
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KYOON GRIFFEY JR posted:Sure, but the price is then a lot higher. Less luxury just means rich people end up living in older buildings and pushing out lower income residents. See California! 
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Sep 30, 2023 16:45
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Yeah I think it's far less about specific finishes or features and more about being nicer than you had/nicer than what your friends and family have
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Sep 30, 2023 16:53
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We’re so constrained that all housing construction is good home construction but some new construction has a lot of social benefit like senior housing. Senior housing has its own set of special requirements and the place I’m working for is trying to make sure that we build units for low income seniors as well as help those caught in the middle income trap. I’m personally worried about skilled nursing facility capacity in a few years because most facilities are scaling down right now despite the demography wave about to hit us. But the big industry trend is for more at home services rather than those higher care levels and CNA staff is so expensive that skilled nursing facilities are turning into big ol liabilities.
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Oct 1, 2023 11:24
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Leperflesh posted:I would advise a home buyer to not presume they will ever be able to refi. Hope, sure, but "surely interest rates must go down from these historically high levels" is an idea with an extremely big and obvious flaw to it, as illustrated by this chart:
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Oct 1, 2023 14:12
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The junk collector posted:It's worth keeping in mind to that rates weren't lower prior to 1970. That's just when the fed started tracking a published rate. That 10 year stretch of sub 5% is a major historical anomaly that seems to have broken a lot of people's brains finance wise. If we hit it again it will probably be because of a major financial crisis. That's certainly a possibility, and one that many people don't consider, but I think it's definitely also possible that we are in a new world where sub-5% rates are no longer an anomaly. Even that chart Leperflesh linked has a clear downward trend since 1982. Obviously none of that is a guarantee, but I personally believe when we look back in 50 years, rates are more likely to have averaged sub-5% than over that. That's a total guess/opinion, and I'm definitely not organizing my life in a way that I'll be screwed if that is not the case, but if I had to guess, that's what I'd guess.
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Oct 1, 2023 14:58
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Yeah I think those with influence have gotten very addicted to low rates and I'd be a little surprised if they're not brought down again in the next few years, even if that risks another inflation spiral and a quick reversal. Again, I agree your should not depend on that and 7% may still be low, but I'm putting my O/U at about 3.5-4 years before things measurably down. The over may be a smart bet  .
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Oct 1, 2023 15:08
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Folding Ideas came out with his 2.5 hour long video about Gamestock and the crazy investment landscape that came from it. https://www.youtube.com/watch?v=5pYeoZaoWrA
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Oct 1, 2023 15:11
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The junk collector posted:It's worth keeping in mind to that rates weren't lower prior to 1970. That's just when the fed started tracking a published rate. That 10 year stretch of sub 5% is a major historical anomaly that seems to have broken a lot of people's brains finance wise. If we hit it again it will probably be because of a major financial crisis. I'm not sure precisely what you mean by saying the fed started tracking a published rate in 1970, but the fed has certainly provided bank funding with published rates for decades prior to that. The FEDFUNDS series at FRED goes back to 1954: https://fred.stlouisfed.org/series/FEDFUNDS and researchers have tracked it prior to that going back to 1928, via newspaper-published rates: https://www.federalreserve.gov/econres/feds/files/2020059pap.pdf
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Oct 1, 2023 15:12
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The junk collector posted:It's worth keeping in mind to that rates weren't lower prior to 1970. That's just when the fed started tracking a published rate. That 10 year stretch of sub 5% is a major historical anomaly that seems to have broken a lot of people's brains finance wise. If we hit it again it will probably be because of a major financial crisis. that's average rates, though, and a buyer with excellent credit could plausibly get a mortgage only a point above the FFR. I highly doubt anyone alive today is ever going to get a mortgage below 2% like the most credit-worthy buyers did post-GFC, but wouldn't be surprised if some people can get 4% in a few years. The problem with trying to point to pre-1970s rates is that those are also a historical anomaly - you have the post-war era where America had massive industrial overcapacity, the rest of the world was experiencing either the Trente Glorieuses or early post-colonialism, etc, and the impact of all that on rates is hard to parse. Historical data doesn't go back far enough to know what to expect from the future, given that future conditions are not going to be like the twentieth century. My guess is that we're still in the global savings glut that drove rates to zero during the 2010s, and will be for at least the next decade or two as the rich countries continue to age. I don't expect them to get down to the zero lower bound again but the Fed's long-term projection of 2.5-3.5 seems as good a guess as any.
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Oct 1, 2023 15:12
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hypnophant posted:I highly doubt anyone alive today is ever going to get a mortgage below 2% like the most credit-worthy buyers did post-GFC, but wouldn't be surprised if some people can get 4% in a few years. …at least in the United States 
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Oct 1, 2023 15:54
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God, learning that I could easily afford an entire house in Japan but can't anywhere in the US right now is not how I wanted to get my daily dose of depression
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Oct 1, 2023 17:28
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they had their land speculation madness in the 80s, imperial palace bein worth more than california and all they clamped down successfully at the cost of gdp stagnation for decades. a lot of critical perspectives on the prc note that they gently caress w their gdp a lot by juicing it with land speculation but so does every rich country except japan bob dobbs is dead fucked around with this message at 17:32 on Oct 1, 2023 |
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Oct 1, 2023 17:30
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Gologle posted:God, learning that I could easily afford an entire house in Japan but can't anywhere in the US right now is not how I wanted to get my daily dose of depression Your plan falls apart if you look at average salaries in Japan. Depending on your job a cross comparison can mean a difference of 30-50%. Japan is better at giving benefits including housing allowances as part of your job but I am not sure I'd really like that.
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Oct 1, 2023 17:52
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quote:There are four kinds of countries: developed countries, underdeveloped countries, Japan, and Argentina.
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Oct 1, 2023 18:32
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even japan has seen some signs of inflation over the last year or two so I wouldn't even bet on that. but the BoJ has been a real thought leader in creative solutions to monetary policy constraints, so if they want money to be easy they'll find a way
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Oct 1, 2023 19:00
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Gologle posted:God, learning that I could easily afford an entire house in Japan but can't anywhere in the US right now is not how I wanted to get my daily dose of depression Lockback posted:Your plan falls apart if you look at average salaries in Japan. Depending on your job a cross comparison can mean a difference of 30-50%. Japan is better at giving benefits including housing allowances as part of your job but I am not sure I'd really like that. I'm in Thailand right now and the real estate market is absolutely insane. I can get the same thing in Bangkok for the equivalent as I do in LA but for nearly 80% less. There's that much development.
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Oct 2, 2023 03:28
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