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0 pointsnonameiguess4y ago0 comments

Whether or not housing prices are in a "bubble" in the sense that the prices are going to correct and drop at some point, they're not a bubble in the Beanie Baby sense of seeing 10000% price appreciation in the span of a few years. Nobody's 4-bed condo is selling for $500 million. There needs to be some acknowledgement of the gap between probably mispriced and tulipmania. Conversely, if prices correct, they're still going to be back where they were in another decade because houses have actual value. You're never going to see a bag full of 150 4-bedroom condos being thrown away on an episode of hoarders because the owner can't even sell them for a few bucks each. There's a difference between "price is going to drop a bit for a while" and "will totally collapse and be worth marginally close to zero dollars for the rest of time."

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jurassic4y ago

I really appreciate this comment. The $1M house I bought last year at 2.75% (now supposedly valued $1.1M) might go down to $600-700k if we have some kind of major correction, but it's in a desirable area and never going to zero. I'm prepared for it to drop, but over the long term I expect to be fine. My house is a place to live for the long term, not something I'm looking to day trade. The only day I care what it's "worth" is the day I need to sell it. Thinking of your primary residence as a speculative investment seems so strange to me.

If you buy something that is comfortably affordable for you now where you're willing to stay for the long term, with a fixed rate loan, I don't see the benefit of waiting until the peak comes. I'd rather be building equity than paying rent waiting for the market to peak. People have been predicting another crash every year for the last decade, and I'm sure it will go down again at some point, but I wouldn't plan my life around anybody's ability to call the top accurately. Just buy what you can afford and get on with your life.

adam_arthur4y ago

Having equity can be important for:

1) Cash out refis. e.g. if you want to renovate, purchase a rental property or better yielding investment with the funds. Say you can take out cash at 2% rate, and buy a SFH rental with a 6% cap rate... you can build net worth faster (at more risk)

2) Being able to move without writing the bank a check. If you're underwater, you will have to pay out of pocket to sell, and then save a new down payment. If you don't ever plan to move, then this doesn't matter.

I consider valuation before purchasing property, rather than just whether I like it. But many don't, and that's fine too.

Commercial RE will definitely be driven by the fundamentals though, so I'm sure we will see cap rate expansion there unless rates begin to fall again. Residential can move out of line with fundamentals, for sure

jurassic4y ago

I think it makes sense to have a different approach for your primary residence vs your real estate investments. If I were a real estate investor, I probably would be hoarding cash waiting for deals, licking my chops at the prospect of another housing crash.

adam_arthur4y ago

Something with intrinsic value will never collapse to 0. A bubble to me is real prices far exceeding intrinsic value, particularly driven by psychology rather than fundamentals. Housing fits the bill to me.

There's a good argument that crypto presents similar to beanie babies, given that there is no intrinsic value to the coins themselves.

People buy crypto because they think they can sell it to somebody else for more later, not because it unlocks some value by holding it. But don't want to sidetrack the discussion.

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0 pointsnonameiguess4y ago0 comments

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jurassic4y ago

adam_arthur4y ago

Having equity can be important for:

I consider valuation before purchasing property, rather than just whether I like it. But many don't, and that's fine too.

jurassic4y ago

adam_arthur4y ago

There's a good argument that crypto presents similar to beanie babies, given that there is no intrinsic value to the coins themselves.

People buy crypto because they think they can sell it to somebody else for more later, not because it unlocks some value by holding it. But don't want to sidetrack the discussion.

j / k navigate · click thread line to collapse