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  #5981  
Old 02-14-2018, 08:35 AM
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This market has become so interesting..... half the time people are betting the market is going up and buying the dips -- half the time they're selling....

I sit here and laugh at the whole silly mess -- why? Because the market is UP UP UP ---- and when it goes down 5% everyone freaks out. Really?? Pick a name - check where it was at the beginning of last year -- and where it is / was at this years LOW....


Okay --------------- but here's one thing -- AS A BUSINESS -- I would be concerned about.

INTEREST RATES.

Why?? Because people are just people. Look at your own personal situation. Do you have ANY interest rate sensitivity? Buying a car? A house? Is your old loan at 3% ?? You think that payment is "okay"? What happens if your payment is based on 5% ?? Is your home loan on a 7/1 at 3.5%.... and you're 4 years in to that.... How much will your payment go up if you refinanced today to a 30 year??

Inflation is here -- it's been here for awhile.... it's been a coiled spring waiting for the worst opportunity to pop. Rates have been artificially low for years now... they too are a coiled spring. The FED thinks it controls rates.... but they're now a SELLER... and it's a BUYERS market. What's the mean?? That means that people buying debt -- control the rate they want -- this is controlled by what they will pay for bonds - and the government has a LOT OF THEM to sell... right when they're planning to add more debt to the pile.

Here's why it's important -------- going forward ----- will people be able to buy a house at the new rates? Cars? Or will they sit on their hands and stage a buyers strike.... When/if that happens we'll start with the layoffs in the housing market.... which hits suppliers (Caterpillar and Cummins and Deere etc).... and there's a chain reaction that doesn't end well.


OR


Do people realize it's still "cheap" and they'd better get busy buying stuff (most buy on time)...


SO ---- look at your own situation for some guide. Have you loaded up with debt? Has your business loaded up with debt? Or did you pay down debt - put money in the bank - and are sitting pretty?


IT'S THE REAL REASON YOU'RE SEEING THIS MARKET GO CRAZY ---- nobody knows where we're going and we're kind of at a bit of a crossroads. Will we be in trouble as a nation with higher rates -- or will we be fine and keep going? I have no idea. I'm not saying that I do.... I'm asking you to keep your ear to the ground and watch where you live and work. What do you hear from your friends and business associates.... are they working overtime or are things coming back to normal? Is biz great or has it changed etc?
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  #5982  
Old 02-14-2018, 12:23 PM
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Always interesting to read your posts Greg.

I have been thinking a bunch about the local housing market (SoCal) lately. I am in no position to buy right now so it seems like the best time to watch from a safe distance. Prices in my area are above 2006/7 levels with a decent amount of inventory for single family homes. I've had a couple friends recently purchase houses and a few have popped up in my neighborhood over the last year. One of which sat empty for 9 months before being sold. Sell price was within 5% of original asking.

I can't for the life of me imagine buying a house right now at these prices. Even IF I was in a position to buy. For you guys in the real estate business what are you seeing personally? First time buyers on the rise? Mostly investors with cash deals? Are prices trending up or down in your area?

What prompted this post is someone close to me that has a few rental properties is looking to buy right now. I fully respect him and most previous financial endeavors which made me wonder, "What does he know that I don't?". Maybe he's just more of a risk taker than I am. His History of such things would beg to differ. He's always been on the conservative side of things so it seems out of left field from my perspective.

He's looking at $300K condos that will likely produce $1500 in rents. That alone should be enough information to make a "NO" decision.
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  #5983  
Old 02-14-2018, 02:46 PM
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Comparing the real estate market from 2006 to 2018 is tough to do because they are not that alike. First, financing isn't anywhere close to that loose and most homes are bought with considerable documentation and scratch in the game these days. Don't discount inflation either. The cost over everything is up since 2006 so the same median price isn't relative.

With all that being said, I think a cool down is coming soon. It's been a really good run in most markets for quite some time. I'm not saying it's a bad time to buy if it makes financial sense. I wouldn't buy because you think you will hit a home run. That was in 2010-2014 in most markets.

The key is and always will be, buy real estate only if the numbers make sense personally long term and you can afford to wait to sell until the market is right again. If either of these don't equate, don't buy.
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  #5984  
Old 02-14-2018, 04:53 PM
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Originally Posted by slow4dr View Post
Always interesting to read your posts Greg.

I have been thinking a bunch about the local housing market (SoCal) lately. I am in no position to buy right now so it seems like the best time to watch from a safe distance. Prices in my area are above 2006/7 levels with a decent amount of inventory for single family homes. I've had a couple friends recently purchase houses and a few have popped up in my neighborhood over the last year. One of which sat empty for 9 months before being sold. Sell price was within 5% of original asking.

I can't for the life of me imagine buying a house right now at these prices. Even IF I was in a position to buy. For you guys in the real estate business what are you seeing personally? First time buyers on the rise? Mostly investors with cash deals? Are prices trending up or down in your area?

What prompted this post is someone close to me that has a few rental properties is looking to buy right now. I fully respect him and most previous financial endeavors which made me wonder, "What does he know that I don't?". Maybe he's just more of a risk taker than I am. His History of such things would beg to differ. He's always been on the conservative side of things so it seems out of left field from my perspective.

He's looking at $300K condos that will likely produce $1500 in rents. That alone should be enough information to make a "NO" decision.
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Comparing the real estate market from 2006 to 2018 is tough to do because they are not that alike. First, financing isn't anywhere close to that loose and most homes are bought with considerable documentation and scratch in the game these days. Don't discount inflation either. The cost over everything is up since 2006 so the same median price isn't relative.

With all that being said, I think a cool down is coming soon. It's been a really good run in most markets for quite some time. I'm not saying it's a bad time to buy if it makes financial sense. I wouldn't buy because you think you will hit a home run. That was in 2010-2014 in most markets.

The key is and always will be, buy real estate only if the numbers make sense personally long term and you can afford to wait to sell until the market is right again. If either of these don't equate, don't buy.




Both good posts.......

Personally --- I'm so happy we're selling the apartment complex RIGHT NOW..... We've made a great return. Time will tell if we were stupid. In my head the old adage -- pigs get fat and hogs get slaughtered comes to mind.

In rental real estate it's all in the numbers.... they work or they don't. Long term - they can work on the SALE side of things. In ALL of my business dealings -- I work with the adage "the money is made on the buy, not the sale". In other words - I like to buy LOW and sell high.

My post was really about --- looking forward --- in an Investing 102 way.... a "heads up" --- pay attention - don't be complacent and think the market goes straight up for years and years -- houses don't go up forever and always.... and I'm not saying to sell -- or not buy -- Rates are still historically low... The stock market and housing market CAN and DO go up even in a rising rate environment.... We could be in a space like the 50's and 60's when employment was good - and steady - houses sold steadily - the market was steady.... and there's nothing wrong with "steady". I just hope the FED doesn't get it wrong and we have to be MINDFUL of where we're headed --- not where we've been.
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  #5985  
Old 02-15-2018, 08:47 AM
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Debt is an interesting topic for me at the moment. I'm pushing 40, and I see a lot of people my age and younger that are working furiously to get out of debt (myself included). A lot of people older than me have already made it there. I don't know if I see more of it because it's my mindset, or if there are more people who look at debt differently than we did 20 years ago, or differently than their parents did. I've never liked debt, but there have been times in my life that I thought it was a necessity.

I've also talked to a lot of people in the their mid-twenties that seem to be a lot smarter about debt than I remember people being on average 10-15 years ago. Most of these kids are actively saving, buying used cars and driving them longer, buying reasonable homes, etc., etc.

I say all that to say that I've been having some of the same thoughts that Greg mentioned, though not nearly as coherent or well formed , but in my little bubble, there are fewer and fewer people taking on debt. Even companies are buying with cash. At least equipment valued in the vehicle range down. That's despite money being so "cheap" these days.

The housing market is another oddity here. There aren't enough contractors to keep up with the demand for new home construction, and the "contractors" have come out of the woodwork. It's at the housing bubble pace here with no signs of letting up. I think people are just buying less house with the new mortgaging rules.
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  #5986  
Old 02-16-2018, 08:03 AM
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Originally Posted by AU Doc View Post
Debt is an interesting topic for me at the moment. I'm pushing 40, and I see a lot of people my age and younger that are working furiously to get out of debt (myself included). A lot of people older than me have already made it there. I don't know if I see more of it because it's my mindset, or if there are more people who look at debt differently than we did 20 years ago, or differently than their parents did. I've never liked debt, but there have been times in my life that I thought it was a necessity.

I've also talked to a lot of people in the their mid-twenties that seem to be a lot smarter about debt than I remember people being on average 10-15 years ago. Most of these kids are actively saving, buying used cars and driving them longer, buying reasonable homes, etc., etc.

I say all that to say that I've been having some of the same thoughts that Greg mentioned, though not nearly as coherent or well formed , but in my little bubble, there are fewer and fewer people taking on debt. Even companies are buying with cash. At least equipment valued in the vehicle range down. That's despite money being so "cheap" these days.

The housing market is another oddity here. There aren't enough contractors to keep up with the demand for new home construction, and the "contractors" have come out of the woodwork. It's at the housing bubble pace here with no signs of letting up. I think people are just buying less house with the new mortgaging rules.



The "new" mortgage rules are onerous.... I have several friends that are real estate agents. I hear stories all the time about the perfectly good credit people have and perfectly good down payment - and the fighting they have to go thru to get their mortgage approved.

Debt -- AKA "leverage" isn't bad in and of itself... but most times it's used and abused. People use debt to raise their standard of living.... to buy things on time they really can't afford ---- and the worst example is --- use expensive debt to buy DEPRECIATING assets. Debt to buy a home - that's okay - debt to start a business - that's okay. Debt to buy a fancy car.... STUPID. Debt for a vacation - DUMB.

That's where people just simply lack discipline. Discipline would have them driving their current car 3 more years - all the while putting what would be the payment, in the bank.... and then paying cash for a car (the version they can pay cash for) and driving it and once again - putting the payment in the bank/market..... Ditto the vacation. If you know you have 2 weeks of vacation and you're going to Hawaii --- and you can't manage your money well enough to be able to put some away to cover that (you have a YEAR!!).... then the last thing you should do is put that on your credit card @ 22% interest rate. OMG....

Personal debt is more about a discussion of "living within your means". You don't buy furniture when you have to make payments on it. #1 that furniture is overpriced junk - and it's not worth tossing it on the curb and you still owe money on it. LOL
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  #5987  
Old 02-16-2018, 09:14 AM
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Originally Posted by GregWeld View Post
The "new" mortgage rules are onerous.... I have several friends that are real estate agents. I hear stories all the time about the perfectly good credit people have and perfectly good down payment - and the fighting they have to go thru to get their mortgage approved.

Debt -- AKA "leverage" isn't bad in and of itself... but most times it's used and abused. People use debt to raise their standard of living.... to buy things on time they really can't afford ---- and the worst example is --- use expensive debt to buy DEPRECIATING assets. Debt to buy a home - that's okay - debt to start a business - that's okay. Debt to buy a fancy car.... STUPID. Debt for a vacation - DUMB.

That's where people just simply lack discipline. Discipline would have them driving their current car 3 more years - all the while putting what would be the payment, in the bank.... and then paying cash for a car (the version they can pay cash for) and driving it and once again - putting the payment in the bank/market..... Ditto the vacation. If you know you have 2 weeks of vacation and you're going to Hawaii --- and you can't manage your money well enough to be able to put some away to cover that (you have a YEAR!!).... then the last thing you should do is put that on your credit card @ 22% interest rate. OMG....

Personal debt is more about a discussion of "living within your means". You don't buy furniture when you have to make payments on it. #1 that furniture is overpriced junk - and it's not worth tossing it on the curb and you still owe money on it. LOL
Agree on all points. The only things I might change would be to put more stuff in bold

About the only thing I see requiring debt these days is a house on the personal finance side. Then there's startup costs or large capital purchases (depending on your business structure) on the business side. I'm sure there are some circumstances outside the norm that make it necessary, but it's a quick way to get in trouble if you're not careful.

There were several generations that learned to buy it (and that's whatever "it" you want right then) on credit and pay it off when/if you can. Then several generations got to see how that worked out, and I see more and more that are willing to wait a little while and buy it without the debt.
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  #5988  
Old 02-16-2018, 08:01 PM
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The recent stats I’ve seen show Americans burying themselves in personal debt not dissimilar to 12 years ago. Student loans being the biggest difference. Kids have giant loan balances to enslave them for a loooooooong time. That’s exactly what all debt is, slavery. You are forced to work to pay it off. It reduces your options and flexibility.

The only debt that may not enslave you is investment debt. Real estate or business, but you can get caught with your pants around your ankles. It best be very optimistic calculated risk.
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  #5989  
Old 02-18-2018, 09:19 AM
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Ah yes Todd..... Student debt. In many cases it shows the same brilliant "investment" strategies as many of their other life choices. What do I mean?

Why would someone take out debt to the tune of $100,000 or $200,000 for a job that pays $35,000 a year. Can they not do basic math and realize the burden this is going to be? I don't care what the interest rate is...
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Old 02-18-2018, 04:54 PM
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Ah yes Todd..... Student debt. In many cases it shows the same brilliant "investment" strategies as many of their other life choices. What do I mean?

Why would someone take out debt to the tune of $100,000 or $200,000 for a job that pays $35,000 a year. Can they not do basic math and realize the burden this is going to be? I don't care what the interest rate is...
I heard an interesting podcast on this. For your perusal:



Not that I agree with everything that he says, but it poses some interesting questions.

I think that government involvement in education is part of why costs for university have significantly escalated and why there are degree programs that are, from a society perspective, useless. These programs produce people with degrees that can only work at low wage / skills jobs.

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