Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

No, people were for closing because they were in precarious financial situations and they could not sell their house for what they bought it for.

Do you really think everyone who bought at the top of their DTI last year is in a great financial spot? Do you not see how inflation is affecting everyday Americans? What about the impending recession?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I will translate the portion that you highlighted:

"Housing correction" = housing prices are going to drop; we don't know how much but we are worried that people are going to start panicking so we are trying to prepare people now.

"No expectation that fallout ...would be comparable [to 2007] in terms of magnitude or macroeconomic gravity' = we are trying to prevent another housing crash by issuing this warning; we think that the debt-to-equity ratio in the current borrowers' market is better than in 2007, but it is also not nearly as solid as other experts think it is, which is why we are telling you this so both lenders and buyers can respond with appropriate caution. In other words, stop overpaying for housing because the bubble is eventually going to burst, but also please don't panic (hence we are sending this out of Dallas instead of having the Fed Chair call a press conference.

You sound very young.

A correction is not a collapse.

Markets get hot - and they get cold. That’s all normal.

If the markets cool, less desirable areas/properties might sit for longer and prices may flatten or even decrease. But the DC area should generally be fine. Deep breaths.

You sound like you don’t understand English. A correction is a correction, not getting “cold.” Correction means reverting back to the mean, where you would expect prices to be based on fundamentals. Right now, housing costs are way out of wack with fundamentals. They are too high and will have to come down very significantly. The question is when.

A collapse is a systemic economic crisis.

A real estate correction is a slowdown to allow supply/demand to level out. Maybe with some localized drops. But nothing like 2008.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I will translate the portion that you highlighted:

"Housing correction" = housing prices are going to drop; we don't know how much but we are worried that people are going to start panicking so we are trying to prepare people now.

"No expectation that fallout ...would be comparable [to 2007] in terms of magnitude or macroeconomic gravity' = we are trying to prevent another housing crash by issuing this warning; we think that the debt-to-equity ratio in the current borrowers' market is better than in 2007, but it is also not nearly as solid as other experts think it is, which is why we are telling you this so both lenders and buyers can respond with appropriate caution. In other words, stop overpaying for housing because the bubble is eventually going to burst, but also please don't panic (hence we are sending this out of Dallas instead of having the Fed Chair call a press conference.

You sound very young.

A correction is not a collapse.

Markets get hot - and they get cold. That’s all normal.

If the markets cool, less desirable areas/properties might sit for longer and prices may flatten or even decrease. But the DC area should generally be fine. Deep breaths.

I wish I was young. I research property and housing markets for a living. I'm just trying to help here. But far be it from me to question the wisdom of DCUM.

Translation - I got a part time job with the local realtor, who is in my book club, when my kids were all in school.

Translation: I am a tenured full professor.

A full professor who “studies property/housing markets” and gets info from MSN?

Sure.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

Yup. No NINJA loans.
If you don't have three years of taxes showing consistent income, you won't get a mortgage. I have so many friends who own their own businesses and they've had a tough time getting mortgages, even if they have significant assets.
Income streams from AirBnB and VRBO didn't exist during the last financial crisis.
Everyone who owned refinanced into a sub-3% 30 year or sub-2% 15 year mortgage since spring 2020 so monthly payments are down relative to three years ago.
And there's still the issue of supply in major job centers not keeping up with demographics. Not enough family-sized housing for Millennials and the older cohort Gen Z near major cities.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I will translate the portion that you highlighted:

"Housing correction" = housing prices are going to drop; we don't know how much but we are worried that people are going to start panicking so we are trying to prepare people now.

"No expectation that fallout ...would be comparable [to 2007] in terms of magnitude or macroeconomic gravity' = we are trying to prevent another housing crash by issuing this warning; we think that the debt-to-equity ratio in the current borrowers' market is better than in 2007, but it is also not nearly as solid as other experts think it is, which is why we are telling you this so both lenders and buyers can respond with appropriate caution. In other words, stop overpaying for housing because the bubble is eventually going to burst, but also please don't panic (hence we are sending this out of Dallas instead of having the Fed Chair call a press conference.

You sound very young.

A correction is not a collapse.

Markets get hot - and they get cold. That’s all normal.

If the markets cool, less desirable areas/properties might sit for longer and prices may flatten or even decrease. But the DC area should generally be fine. Deep breaths.

You sound like you don’t understand English. A correction is a correction, not getting “cold.” Correction means reverting back to the mean, where you would expect prices to be based on fundamentals. Right now, housing costs are way out of wack with fundamentals. They are too high and will have to come down very significantly. The question is when.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm confused by everyone referring to the Fed. The Fed has made no such statement. People are referencing an article published by staff at the Federal Reserve Bank of Dallas, a private entity.

Um, no. No, no, no, no. The statements quotes by these various articles were issued by the Federal Reserve Bank of Dallas, which is one of 12 regional banks that (with the Board of Gov in DC) makes up the Federal Reserve. Which is the central bank of the United States. It is not a private entitle. Referring to these statements as issued by the Fed is entirely correct.

https://www.bloomberg.com/news/articles/2022-03-29/dallas-fed-sees-signs-a-housing-bubble-is-brewing-in-the-u-s

You can say "no" as many times as you want. One of us is an expert on the Fed, and it's not you. The Federal Reserve Board is a federal agency; the Reserve Banks are not. An article on a Reserve Bank web page by some research staff is not even an official position of the Reserve Bank, let alone the Federal Reserve System. But please, go ahead and mansplain away. It's very clear you have no idea what you're talking about.

Let’s talk again in a week.

Anonymous wrote:

Anonymous wrote:I'm confused by everyone referring to the Fed. The Fed has made no such statement. People are referencing an article published by staff at the Federal Reserve Bank of Dallas, a private entity.

Um, no. No, no, no, no. The statements quotes by these various articles were issued by the Federal Reserve Bank of Dallas, which is one of 12 regional banks that (with the Board of Gov in DC) makes up the Federal Reserve. Which is the central bank of the United States. It is not a private entitle. Referring to these statements as issued by the Fed is entirely correct.

https://www.bloomberg.com/news/articles/2022-03-29/dallas-fed-sees-signs-a-housing-bubble-is-brewing-in-the-u-s

You can say "no" as many times as you want. One of us is an expert on the Fed, and it's not you. The Federal Reserve Board is a federal agency; the Reserve Banks are not. An article on a Reserve Bank web page by some research staff is not even an official position of the Reserve Bank, let alone the Federal Reserve System. But please, go ahead and mansplain away. It's very clear you have no idea what you're talking about.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A lotta speculators, investors, people who bought at peak FOMO, and RE agents are in denial ITT. The Federal Reserve must be wrong when they use the B word. Prices on assets only ever go up, amirite?

Clickbait gets the clicks, amirite?

What specifically do you think is going to happen to “pop” this “bubble”?

Not the PP, but who knows. Could be anything. We won’t know until we know.

I’m more worried that we have an “all asset” bubble that will take stocks down too. The minor stock market correction earlier this year didn’t affect things much.

So…irrational fears.

Rapidly rising interest rates, a threat of an impending recession, 40 year highs of inflation, an gross over speculation in the housing market at not 'irrational' fears.

But even if all of those thing happen how would that lead to anything more than a cooldown?

People need a place to live. Housing is not purely an investment that can lose all value. Unless massive amounts of people are foreclosing we won’t see another bubble.

Did you not even read the Fed's article? Over 30% of hikes are being bought by investors. These aren't people or entities that need a place to live, they're treating housing like it is the stock market. If there's any sign of a recession/economic slowdown or rates rise so high that people can no longer to afford to borrow to buy stupidly jacked up prices for homes that are flip jobs done by speculators/investors then investors will start panicking and try to unload their bags to exit before everyone else. It will lead to a cascading effect for a sell off, plus the 30% of investors will simply buy less.

This is an interesting point. What happens when the investors simply stop buying?

Also, it was commercial real estate, but I just read an article about office vacancies & how Blackstone is defaulting on an office building in NYC on Broadway. Blackstone was leveraged, and it sounds like it the bank that is holding the paper that will take the hit. The investors are likely to have protected themselves, and won’t have any hesitation about walking away, even if the financial system as a whole takes a hit.

The whole damn US economy is a bubble. A giant bubble that the feds fed with low interest rates, QE and free money. They are now seeing the error of their ways (hello inflation!) and are desperately trying to throw water on that fire (increase interest rates to lower demand) but can't really do much else because they are scared of bursting the bubble. Imagine the shock wave that would cause in the U.S. economy and globally! The U.S. is not the only economy that is bubbling. Check out what's happening in Europe and Canada (none of this has to do with with the war in Ukraine).

Anonymous wrote:

Anonymous wrote:A lotta speculators, investors, people who bought at peak FOMO, and RE agents are in denial ITT. The Federal Reserve must be wrong when they use the B word. Prices on assets only ever go up, amirite?

Clickbait gets the clicks, amirite?

What specifically do you think is going to happen to “pop” this “bubble”?

Aggressive rate increase to fight inflation.
Calculate how much your house mortgage payments will be with at 10% rate.
You see that is why you have to lower the price if you want to sell.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:“Our evidence points to abnormal U.S. housing market behavior for the first time since the boom of the early 2000s. Reasons for concern are clear in certain economic indicators—the price-to-rent ratio, in particular, and the price-to-income ratio—which show signs that 2021 house prices appear increasingly out of step with fundamentals.”

The whole article is about how there is a bubble - the fallout might not be as bad as as 2008 but bubble nonetheless. Warning signs are flashing all over.

Market cooling <> bubble

You think there will be a bunch of bankruptcies? Foreclosures?

I think when people’s homes are underwater they walk away. Especially second homes - vacation or rental.

I don't understand why you think people just walk away if their house is underwater, second homes included. If you need a place to live or don't need to sell your second home, you wait it out until the value rises again. It isn't like your home is a checking account where you suddenly have less money to spend.

This is another echo from 2007. The economists said “People don’t default on mortgages. They will lose everything else before they let their homes go.” Add that to the list of “conventional wisdom that turned out not to be true.”

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it hilarious that people are genuinely arguing over whether an article by Fed economists is "clickbait." Economists at the fed could give a damn whether their article gets clicks. Citations? Oh, yes, that they care about. But whether randos on the internet click on that page? Man, y'all are hilarious.

Totally. OP and those with similar views are never going to convince the RE agents and other true believers that there is a significant risk of a collapse in housing prices, no matter who says it or what evidence is cited.

You know that is not what the article from the Fed you are quoting, right? Did you even read it?

Here's what it actually says:

"Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom."

I will translate the portion that you highlighted:

"Housing correction" = housing prices are going to drop; we don't know how much but we are worried that people are going to start panicking so we are trying to prepare people now.

"No expectation that fallout ...would be comparable [to 2007] in terms of magnitude or macroeconomic gravity' = we are trying to prevent another housing crash by issuing this warning; we think that the debt-to-equity ratio in the current borrowers' market is better than in 2007, but it is also not nearly as solid as other experts think it is, which is why we are telling you this so both lenders and buyers can respond with appropriate caution. In other words, stop overpaying for housing because the bubble is eventually going to burst, but also please don't panic (hence we are sending this out of Dallas instead of having the Fed Chair call a press conference.

You sound very young.

A correction is not a collapse.

Markets get hot - and they get cold. That’s all normal.

If the markets cool, less desirable areas/properties might sit for longer and prices may flatten or even decrease. But the DC area should generally be fine. Deep breaths.

I wish I was young. I research property and housing markets for a living. I'm just trying to help here. But far be it from me to question the wisdom of DCUM.

Translation - I got a part time job with the local realtor, who is in my book club, when my kids were all in school.

Translation: I am a tenured full professor.

I'm sure.