Down goes the Dow

I don't buy the idea that the pandemic caused people to suddenly realize how much better their quality of life would be if they owned a house. Almost everyone has a goal of owning a house at some point in their life.

As mentioned, the housing market was already very tight.

The pandemic put more money in the pockets of the professional class because, to everyone's great surprise, there weren't mass layoffs of desk workers and in fact their brokerage account values went up by record amounts and they saved additional money by not taking vacations, not going to happy hour, not commuting, etc.

Additional factors:

* The "reopening" and "new economy" narrative gave people optimism. Homebuying is largely a reflection of financial confidence.

* Neighborhoods which are nice but had the downside of difficult commute to employment are no longer are perceived to have that downside. This unlocked a new market for homebuyers.

* FOMO: If at every dinner table conversation people are talking about how the house they bought went up 30% the past year, this will spur additional interest in homebuying from people who don't yet own a house, or even those who do and can afford a second house. And also, because the rise in home prices (in proportion to median incomes), especially in some areas, has been a defining trend of the past decade, the younger generations are very fearful of falling permanately behind the homebuying curve. The term "priced out of the market" comes to mind.

* I have a theory that Zillow and Redfin have increased demand for houses by creating a "gameification" of homebuying. Nowadays it's almost like a hobby to cruise the Redfin listings and go to open houses.

“* I have a theory that Zillow and Redfin have increased demand for houses by creating a "gameification" of homebuying. Nowadays it's almost like a hobby to cruise the Redfin listings and go to open houses.”

True. Investment firms allow the house values via Zillow or Redfin to be linked to your investment account. It is all about making people feel wealthy. It would be foolish to believe that there is no downside as all those figures head south. Psychology cuts both ways. One reason the coming bear market will likely be very nasty.

as I understand it, the lack of new home construction over decades is a very large reason for high home prices.

it's a bit confounding why the invisible hand hasn't taken care of this and made more houses where people want to live.

I think a lot of is anti-housing government regulation, having to do with codes and parking and - very importantly - local towns trying very hard to stop multi-family housing because that implies ahem people from cities.

Ghost of Igloi wrote:

“* I have a theory that Zillow and Redfin have increased demand for houses by creating a "gameification" of homebuying. Nowadays it's almost like a hobby to cruise the Redfin listings and go to open houses.”

True. Investment firms allow the house values via Zillow or Redfin to be linked to your investment account. It is all about making people feel wealthy. It would be foolish to believe that there is no downside as all those figures head south. Psychology cuts both ways. One reason the coming bear market will likely be very nasty.

lol what? This isn't fractions of shares or lotto ticket OTM options that you can buy for $1. It's a half million dollar loan, or more in a lot of cases.

Builders know people buy a house payment, and their business model is built around that. Furthermore, a builder that was burned in the housing bubble sees the twin problems of rising costs and interest rates and acts accordingly. Does not get overly aggressive with supply, happy to skim profits with higher prices. Knowing that in the end the market goes in cycles.

There's probably not as much consumer demand for new housing, because it would have to be cookie-cutter houses built (or sometimes pre-built and transported on trucks) out in the sprawl. Back in the 1950s, Americans were okay being "average" and would happily move into highly affordable "boring" houses that were mass-produced in the new suburbs. Instagram didn't exist then. A house was thought of in more utilitarian terms: you need bedrooms and a dining room to provide food and shelter for your 3-6 kids who are basically on their own to raise themselves.

Prof. Racket wrote:

Ghost of Igloi wrote:

“* I have a theory that Zillow and Redfin have increased demand for houses by creating a "gameification" of homebuying. Nowadays it's almost like a hobby to cruise the Redfin listings and go to open houses.”

True. Investment firms allow the house values via Zillow or Redfin to be linked to your investment account. It is all about making people feel wealthy. It would be foolish to believe that there is no downside as all those figures head south. Psychology cuts both ways. One reason the coming bear market will likely be very nasty.

lol what? This isn't fractions of shares or lotto ticket OTM options that you can buy for $1. It's a half million dollar loan, or more in a lot of cases.

The wealth effect is a game. Little of it is lasting. Encourages people to do stupid stuff. Even the Fed and Government has been drunk with advancing stupid policies. Now they have a witches brew of problems and really have a “we’ll wing it” plan to deal with it.

I missed out on Google before earnings and today it has given most of those gains back. Easy buy under 2800.

I have some AAPL, GOOG, MSFT and FB at decent entry points now. Waiting patiently for AMZN to go back under 3k to enter.

agip wrote:

Ghost of Igloi wrote:

I am not a perma bear. I bet in March 2009 you were slightly less optimistic. I suspect you will revisit that mood as the year progresses.

to be fair Igy had three of the best recent calls:

long XLE

long Hussman (but then held on too long. But the fund had great runs in 2021 and 2022)

long SARK/short ARKK

A permabear can have a correct call. Doesn't mean they aren't a permabear.

jamin wrote:

There's probably not as much consumer demand for new housing, because it would have to be cookie-cutter houses built (or sometimes pre-built and transported on trucks) out in the sprawl. Back in the 1950s, Americans were okay being "average" and would happily move into highly affordable "boring" houses that were mass-produced in the new suburbs. Instagram didn't exist then. A house was thought of in more utilitarian terms: you need bedrooms and a dining room to provide food and shelter for your 3-6 kids who are basically on their own to raise themselves.

not exactly sure what you are saying but it's true that americans buy much larger, much fancier houses these days. which is another key reason they are so expensive and people complain so much.

if we all lived in small houses like those built in the 1950s and earlier, they'd cost a lot less. House cost per square foot hasn't gone up nearly as much as average price.

jamin wrote:

There's probably not as much consumer demand for new housing, because it would have to be cookie-cutter houses built (or sometimes pre-built and transported on trucks) out in the sprawl. Back in the 1950s, Americans were okay being "average" and would happily move into highly affordable "boring" houses that were mass-produced in the new suburbs. Instagram didn't exist then. A house was thought of in more utilitarian terms: you need bedrooms and a dining room to provide food and shelter for your 3-6 kids who are basically on their own to raise themselves.

Ah yes, no one suspected Instagram as the primary culprit of the housing issue, but now we see the light

Flagpole wrote:

agip wrote:

to be fair Igy had three of the best recent calls:

long XLE

long Hussman (but then held on too long. But the fund had great runs in 2021 and 2022)

long SARK/short ARKK

A permabear can have a correct call. Doesn't mean they aren't a permabear.

Well your views of the market are based on looking backward over the recent experience of the last dozen years. Totally appropriate for a 30 year old with $50k in there 401k.

Flagpole wrote:

agip wrote:

to be fair Igy had three of the best recent calls:

long XLE

long Hussman (but then held on too long. But the fund had great runs in 2021 and 2022)

long SARK/short ARKK

A permabear can have a correct call. Doesn't mean they aren't a permabear.

Oh, by the way agip, my first investment in HSGFX was November 2020.

jamin wrote:

I don't buy the idea that the pandemic caused people to suddenly realize how much better their quality of life would be if they owned a house. Almost everyone has a goal of owning a house at some point in their life.

You basically contradicted this with your instagram culture thesis.

Prior to 2020, there was no correlation between cost-of-living and where Americans would move (some higher-to-lower, some lower-to-higher). Since 2020, Americans who moved almost exclusively went from higher to lower COL (e.g. city to suburb, SF to Austin, etc). That's how prices can be "way up" almost everywhere, while the average individual isn't actually spending more than they previously did. I used to have a data point clearly demonstrating this behavior change, but I lost the link.

Ghost of Igloi wrote:

Swaglord_the_realest369 wrote:

I’ll be like Iggy does!

BTC 43.3k || ETH 3.1k

So question. How to know when to sell something like XLE that’s gone up 72% since I bought? Seems like oil will be in demand. But 72% is pretty solid. That was actually an Iggy bet from Nov 2020 when I started reading this thread I think…. I think.

I legit have no big expenses, not gonna buy a home, etc. So no risk to let it ride, only other investments as opportunity cost.

Comparatively energy is a bargain to Apple, that said I would stay away from both. A market call more than anything.

https://twitter.com/TaviCosta/status/1490460953174966273?cxt=HHwWgoCsmeKVl68pAAAA

I am avoiding Energy ETF insofar as it would hold oil and gas companies, which they invariably do, for environmental reasons.

Actually held one for a few days until I remembered my former commitment to this, and sold.

seattle prattle wrote:

Ghost of Igloi wrote:

Comparatively energy is a bargain to Apple, that said I would stay away from both. A market call more than anything.

https://twitter.com/TaviCosta/status/1490460953174966273?cxt=HHwWgoCsmeKVl68pAAAA

I am avoiding Energy ETF insofar as it would hold oil and gas companies, which they invariably do, for environmental reasons.

Actually held one for a few days until I remembered my former commitment to this, and sold.

Counterpoint - buy all the oil and gas stock, become majority shareholder with all the voting rights, force companies to go green through hostile corporate negotiations.

seattle prattle wrote:

Ghost of Igloi wrote:

Comparatively energy is a bargain to Apple, that said I would stay away from both. A market call more than anything.

https://twitter.com/TaviCosta/status/1490460953174966273?cxt=HHwWgoCsmeKVl68pAAAA

I am avoiding Energy ETF insofar as it would hold oil and gas companies, which they invariably do, for environmental reasons.

Actually held one for a few days until I remembered my former commitment to this, and sold.

How are going to feel about EVs when the carcasses of Tesla cars pile up in landfills after ten years on the road?

Ghost of Igloi wrote:

seattle prattle wrote:

I am avoiding Energy ETF insofar as it would hold oil and gas companies, which they invariably do, for environmental reasons.

Actually held one for a few days until I remembered my former commitment to this, and sold.

How are going to feel about EVs when the carcasses of Tesla cars pile up in landfills after ten years on the road?

The point being, no one really knows at this point the long term environmental impact of EVs. Maybe my 20 years old Acura TL-S will have proven to have had far less environmental impact than a Tesla.

One more discussion about home sales, i mean home prices, no i mean home sales.... and we rename the thread, Down Goes The DownPayment.

Okay, just want to show that I can be crabby, too.

Resume the discussion.