All these charts don't use a log scale, but looking at them, the dip in the '80s was probably the worst. Nevertheless, the enduring image is of something on a relentless upward path.
Right...so as rates drop you can buy more house for the same price and that is what stretched median home prices so far. And when rates go back up, the same mortgage buys you a smaller and smaller home. Also lending standards get much tougher, so a 650 credit score that could have taken your home off the market even if they could afford it can longer qualify. Banks can now invest that money risk free and get some yield. So you get about 30% of the buyers in the market get priced out now even if they can afford it.
Yeah you could just superimpose the 30 year bond chart, looks the same. The more stunning chart really is when you look at home prices from like 1950 to 1990, basically a flat line that tracks inflation almost one to one.
Up 450% off the 2008 lows with no leverage. LOL. And you get your 4% divie too. This is a 4 billion dollar real estate bundle.
Actually all of this is pretty insightful. If all the homes are being bought by banks, finance people, and alpha seekers then I definitely feel you are correct and I feel that your point about home ownership being flat while sales are up probably is the best support for this. Of course, we don't know when so that sucks.
I don't disagree with Mav's thesis that the 1st shock would come from rates, but as Mav said, we could rally another 50% in SPX before it happens. No one knows. I'm at the epicenter of the Canadian bubble so this isn't new, but what strikes me given the discussion points is that there is 1 thing that could be done for a softer landing: federal regulators/CBs could force a loosening by imposing looser lending standards into the housing market. Suddenly that 550 credit score and 2% down now has access. How they would implement it is beyond me. 1 thing to note is that many of the mainlanders CANNOT get their money out fast, so on an individual level, there will be bids if RE corrects. On a personal level, these people would rather take a 20% hit in RE marks than risk wealth 100% being seized overnight in China. On capital mkts, I'm aggressively long yield via the swap that these institutions are doing, except I'm in REITS vs physical. I would love physical, especially where I am but I don't qualify. Collecting about 7% net currently. More importantly, being long paper allows better liquidity if/when it all blows up and I've been aggressively building my credit, because when it all blows up holy shit will that be the time to buy.
The assumption being that you would want to take on debt. If Maverick and others are correct, all debt will be suspect, interest rates high and going higher, and we will finally get the debt cleansing which many have been looking for for a long long time. It's kind of hard to see right now, but I was around in the 70s and that was the last time there was a debt reckoning on a large enough scale to really teach anyone anything. I was a teenager, and seeing what was going on forever shaped my view of debt. That and having a Russian grandmother who grew her own vegetables and paid cash for everything. And saved string and tinfoil. Sorry I know it's not ACD but I've been lurking awhile and had to say something. Love the thread.