are inflation fears driving the housing market

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SashaWalpole
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are inflation fears driving the housing market

Post by SashaWalpole »

https://www.youtube.com/watch?v=1HmGLV46L60

Just curious what people think of this? The video claims that inflation fears are driving up real estate since a 30 year mortgage is the best hedge against inflation and rich people know this. It also claims that inflation is likely to hit consumer goods in the near future.
Robot Monster
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Re: are inflation fears driving the housing market

Post by Robot Monster »

The video is entitled, "Hyperinflation is Already Here – You Just Haven't Realised It Yet." Sounds a little nutty. Plus it's over 19 minutes long.
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Re: are inflation fears driving the housing market

Post by rustymutt »

SashaWalpole wrote: Wed Apr 14, 2021 1:06 pm https://www.youtube.com/watch?v=1HmGLV46L60

Just curious what people think of this? The video claims that inflation fears are driving up real estate since a 30 year mortgage is the best hedge against inflation and rich people know this. It also claims that inflation is likely to hit consumer goods in the near future.
My understanding is it's because of shortages due to shut downs around the country, and world. Materials are in short supplies for new homes. Every else follows as homes become thinner and thinner on the market. Nice homes that is. I heard an expert say prices will fall in 2022, as we open back up again. Sale now, and rent till then.
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Big Dog
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Re: are inflation fears driving the housing market

Post by Big Dog »

Agreed that its the shortage of houses for sale. Due to COVID, folks are hunkering down and staying put.
thenextguy
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Re: are inflation fears driving the housing market

Post by thenextguy »

SashaWalpole wrote: Wed Apr 14, 2021 1:06 pm https://www.youtube.com/watch?v=1HmGLV46L60

Just curious what people think of this?
I think it’s panic porn used to drive traffic from people that are inherently pessimistic and think societal collapse is right around the corner.
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Re: are inflation fears driving the housing market

Post by firebirdparts »

I think no. Spending money is never a hedge against the future, no matter what happens, but especially when you have to spend an extra large amount. The debt itself might be an element of a smart strategy, but it's spent on something which is obviously inflated. So it's certainly possible that a very dumb person would come up with a strategy like this, but it seems to me that it would have to be for dumb people.

So I think the present reality is driving the housing market. In the present reality, you can borrow money at 3% and you can work from home and it's hard to get lumber and nails and copper. That's where we are today. nothing imaginary about that. What would you do in that situation? Well, you'd buy an existing house with a nice view. That's what a reasonable person would do.
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Re: are inflation fears driving the housing market

Post by Tigermoose »

I've watched that video. I find the channel to be thought provoking and informative.

Their are a confluence of factors driving up the house prices, and I do think more people are buying homes at higher prices because rates are so low especially compared to the future value of money. It influence my decision last year, and so far that decision is paying off. I think people sense that something changed with the stimulus checks and easy fed, and now they see inflation as their biggest long term risk instead of a 2008/9 deflationary event.

Also - the Consumer Financial Protection Bureau is proposing an amendment to mortgage forbearance that would allow those affected to extend their mortgage forbearance for 40 years. No big deal, right? :? You must be "directly or indirectly" impacted by COVID to be eligible :?

https://www.federalregister.gov/documen ... settlement
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quantAndHold
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Re: are inflation fears driving the housing market

Post by quantAndHold »

Fear of interest rates going up is more likely.

Also some panic buying due to FOMO.
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Re: are inflation fears driving the housing market

Post by 59Gibson »

quantAndHold wrote: Wed Apr 14, 2021 4:50 pm Fear of interest rates going up is more likely.

Also some panic buying due to FOMO.
+1 the only fear with general public is FOMO. I do not think the herd is considering inflation prospects.
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typical.investor
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Re: are inflation fears driving the housing market

Post by typical.investor »

I suspect the youtube piece didn’t mention that big in­sur­ance com­pa­nies, sov­ereign-wealth funds and pen­sion funds have been pouring into the market as never seen before.

Of course, that doesn’t support their hyperinflation claim so why would they.

People promoting Bitcoin are going to hype up inflation. It’s the new thing ... influence the market via social media.
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Re: are inflation fears driving the housing market

Post by averagedude »

Supply is the issue right now. On the inflation note, housing prices are not in the CPI, but rent is. Their is a lag between prices of houses and rent, but eventually higher rent will happen and show up in the inflation numbers in the future.
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Re: are inflation fears driving the housing market

Post by watchnerd »

SashaWalpole wrote: Wed Apr 14, 2021 1:06 pm https://www.youtube.com/watch?v=1HmGLV46L60

Just curious what people think of this? The video claims that inflation fears are driving up real estate since a 30 year mortgage is the best hedge against inflation and rich people know this. It also claims that inflation is likely to hit consumer goods in the near future.
Well...

No.

This is clickbait.

The big money that drives huge swathes of bond buying and are basically in the business of trying to estimate inflation are not forecasting any kind of hyperinflation over the next decade.

These institutions are betting with their wallets.

And they're predicting a 10 YR breakeven inflation rate of 2.33%.

https://fred.stlouisfed.org/series/T10YIE
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stocknoob4111
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Re: are inflation fears driving the housing market

Post by stocknoob4111 »

inflation is increasing yes, but to call it Hyperinflation is downright ridiculous. Interest rates are flattening out already which means the bond market has come to it's conclusion that we are somewhere around the new normal.
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Re: are inflation fears driving the housing market

Post by corp_sharecropper »

I think it's a mistake to think of your primary residence as some sort of investment asset. Zillow, and a recent appraisal for a refi says my house gained in value by 27% in the last year. I call BS. Nothing is ever as good/bad as it seems when dealing with these things. It's not even actionable in a sense that I can't profit from this good fortune unless I'm willing sell AND move to some God forsaken trailer park somewhere in oklahoma surrounded by meth labs.

Basically, at some point mortgage rates will rise, building materials prices will fall, demand will shrink, maybe even a recession will hit, or tax policies will change resulting in my house value returning back to earth. I'm fine with that, hell, I far prefer an environment of stable and low values in contrast to this absurd market.

Inflation hasn't done anything yet, and it may not, I wouldn't count on it either. So no, inflation isn't the reason the housing market is weird, there are other reasons which I'm certain everyone notices.
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Re: are inflation fears driving the housing market

Post by watchnerd »

corp_sharecropper wrote: Wed Apr 14, 2021 7:02 pm AND move to some God forsaken trailer park somewhere in oklahoma surrounded by meth labs.
That's like a level 80 Boglehead cheapskate move, though.
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health teacher
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Re: are inflation fears driving the housing market

Post by health teacher »

stocknoob4111 wrote: Wed Apr 14, 2021 6:18 pm inflation is increasing yes, but to call it Hyperinflation is downright ridiculous.
Have you checked the price of a 2x4 lately?

:P
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Re: are inflation fears driving the housing market

Post by Ocean77 »

When I see every single home in the area being snatched up within a day or so, and regardless of price, I already thought, people are buying what they can while their money is still worth something before even more is printed. We may well not get much inflation, let alone hyperinflation. But it's already enough if people are afraid of the prospect of it to drive the market.
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Re: are inflation fears driving the housing market

Post by watchnerd »

Ocean77 wrote: Wed Apr 14, 2021 8:25 pm When I see every single home in the area being snatched up within a day or so, and regardless of price, I already thought, people are buying what they can while their money is still worth something before even more is printed. We may well not get much inflation, let alone hyperinflation. But it's already enough if people are afraid of the prospect of it to drive the market.
I think people are snatching up while they can before interest rates go up.
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Re: are inflation fears driving the housing market

Post by dmcmahon »

Ocean77 wrote: Wed Apr 14, 2021 8:25 pm When I see every single home in the area being snatched up within a day or so, and regardless of price, I already thought, people are buying what they can while their money is still worth something before even more is printed. We may well not get much inflation, let alone hyperinflation. But it's already enough if people are afraid of the prospect of it to drive the market.
My one-word answer to the title question is: Yes.

We haven't seen a period like the 1970s in decades, but older investors have long memories, and younger ones can read history books.
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Re: are inflation fears driving the housing market

Post by masteraleph »

My one word answer: no.

We know that there are significant buying pressures right now:

1) Price increases for houses specifically (as opposed to general inflation fears, which are actually pretty low)
2) Folks who've been home with kids for a while who are desperate for more space- these are mostly millennials
3) Along the some lines, millennials having kids in general, and in particular those kids being school aged (trying to get into a good district)- the largest cohorts in America are in their late 20s to mid 30s
4) COVID convincing some younger folks to move out of apartments or to drop condos down their list of places to live
5) Relatively easy money in terms of interest rates, but not qualifications- this isn't 2008 (also, to the person who is talking about younger folks reading history books- I promise you, as a history teacher, that most aren't, and certainly most haven't internalized anything about inflation in the 1970s)
6) Potential expectations of Work from Home as a more permanent feature
7) At the same time as the previous item, many millennials want to be closer in to cities than some of the exurbs that were built previously

And also significant supply constraints:
1) People not wanting to move due to COVID
2) People not wanting to downsize to apartments or condos; see previous
3) A lack of new housing built since the 2008 downturn relative to population
4) Building on the previous item, a severe lack of starter homes built, because they're not very profitable
5) Spiking prices for construction items like lumber- again, not general inflation, but in specific sectors and a lot of it baked in already
6) In addition to not wanting to downsize due to COVID, many Boomers are not quite at the age where physical disability is forcing them to move
7) And also, whether because their kids have come back to live with them or because they have dreams of hosting large family gatherings, again, Boomers wanting to maintain larger residences
8) Forbearance, which is helping keep people in their homes
9) And complementing that, eviction protections, which means that investors have a much harder time selling houses with renters, since the renters can likely refuse to leave

For reference, housing inventory is down *54%* vs the same time last year.

And in a variety of cases, sources of additional wealth to tap into:
1) Boomer parents helping their kids buy a house
2) People who did own a starter home being able to sell that at a higher price and upgrade
3) "Cash" buying services (there are a variety of strategies for buyers who want to make all cash offers, from hard money loans with plans to refinance to companies that buy the house with a promise to sell it to you, with a fee once you get a mortgage).
4) People cashing out stocks, whether issued as part of compensation or just invested.



It's worth noting that houses on the higher end of markets- and that varies by location, whether it's $400k in a more rural place or $4m in the NY area (or even 2 or 3 million)- are not seeing the same kind of appreciation. It's the houses that are still cheap enough for upper middle class folks, or even upper class but not ultrawealthy, to buy for their families to live in that are appreciating like crazy.
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Re: are inflation fears driving the housing market

Post by Fat Tails »

I don’t think its inflation fears. I’d guess the following:

Lack of housing supply,
All time low interest rates,
Wealth effect from increased stock portfolios.

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Re: are inflation fears driving the housing market

Post by Valuethinker »

watchnerd wrote: Wed Apr 14, 2021 7:10 pm
corp_sharecropper wrote: Wed Apr 14, 2021 7:02 pm AND move to some God forsaken trailer park somewhere in oklahoma surrounded by meth labs.
That's like a level 80 Boglehead cheapskate move, though.
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Re: are inflation fears driving the housing market

Post by adamthesmythe »

health teacher wrote: Wed Apr 14, 2021 7:58 pm
stocknoob4111 wrote: Wed Apr 14, 2021 6:18 pm inflation is increasing yes, but to call it Hyperinflation is downright ridiculous.
Have you checked the price of a 2x4 lately?

:P
That's not hyperinflation.

Hyperinflation means (if lumber has doubled in the last few months) that lumber doubles again in the next few months, and doubles again after that. And that steaks do the same thing, and canned tomatoes do it too, etc. etc.

Let's come back in a few months and see if it's a temporary spike in one commodity or a real economy-wide hyperinflation. I'm betting not.
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Re: are inflation fears driving the housing market

Post by NabSh »

Yes I did read about the double digits interest rate in 1970s and. 1980s. And I read about housing crash of 1980 due to oil and savings and loans crisis.

Question: did the salary go up accordingly?
dmcmahon wrote: Thu Apr 15, 2021 12:39 am
Ocean77 wrote: Wed Apr 14, 2021 8:25 pm When I see every single home in the area being snatched up within a day or so, and regardless of price, I already thought, people are buying what they can while their money is still worth something before even more is printed. We may well not get much inflation, let alone hyperinflation. But it's already enough if people are afraid of the prospect of it to drive the market.
My one-word answer to the title question is: Yes.

We haven't seen a period like the 1970s in decades, but older investors have long memories, and younger ones can read history books.
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Re: are inflation fears driving the housing market

Post by J295 »

No. .
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Re: are inflation fears driving the housing market

Post by Beensabu »

Housing prices are just the result of the FOMO of a certain socioeconomic segment of society that can still afford that housing at those prices. You can see it on this board. Better get in now before we're priced out forever! Even if leveraged to the gills and held hostage for the next 30 years (if they're lucky) to an incredibly stressful work environment.

Rich people don't need to buy houses to combat inflation. They buy ag land.

There's a limit to how high consumer prices can go sans continued stimulus and still be viable. If UBI actually happens, sure -- there will probably be substantial inflation in that case. But it's incredibly uncertain.
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dmcmahon
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Re: are inflation fears driving the housing market

Post by dmcmahon »

NabSh wrote: Sat Apr 17, 2021 6:13 pm Yes I did read about the double digits interest rate in 1970s and. 1980s. And I read about housing crash of 1980 due to oil and savings and loans crisis.

Question: did the salary go up accordingly?
I remember hearing about the so-called wage-price spiral, so I think workers did have more bargaining power than they do in today’s globalized economy.
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Re: are inflation fears driving the housing market

Post by Barefootgirl »

Perhaps artificially created by the suppression of interest rates coupled with the increase in costs of construction materials (caused by all kinds of things - delays in production and shipping caused by Covid, 20% tariff on Canadian lumber and lumber products, etc).

A shortage of homes for sale and cheap money have created short supply and high demand.

Will these forces relax and when?
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typical.investor
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Re: are inflation fears driving the housing market

Post by typical.investor »

adamthesmythe wrote: Thu Apr 15, 2021 7:08 pm
health teacher wrote: Wed Apr 14, 2021 7:58 pm
stocknoob4111 wrote: Wed Apr 14, 2021 6:18 pm inflation is increasing yes, but to call it Hyperinflation is downright ridiculous.
Have you checked the price of a 2x4 lately?

:P
That's not hyperinflation.

Hyperinflation means (if lumber has doubled in the last few months) that lumber doubles again in the next few months, and doubles again after that. And that steaks do the same thing, and canned tomatoes do it too, etc. etc.

Let's come back in a few months and see if it's a temporary spike in one commodity or a real economy-wide hyperinflation. I'm betting not.
Futures prices for July delivery are down 41% from early May. Prices have declined 14 out of past 16 days*.

Cash lumber prices just had it's biggest ever weekly decline.

Prices are still high but the market is being corrected with stockpiles that big buyers had created out of a fear of unavailability.

Estimates are $700 - $800 through next year which is up from a pre-pandemic record of $639*.

And this should be viewed I believe in the context of, per Freddie Mac's estimates, that the US is 3.8 million houses short due to a lack of construction since 2008*. Maybe stimulus is boosting demand, but maybe it's better units get built.

* June 15th WSJ
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Re: are inflation fears driving the housing market

Post by rockstar »

This is a good article on Vox. Personally, I think, it's a supply issue that's made worse by COVID, lumber prices, and mortgage forbearance and deferment. No one seems to be talking about the lack of foreclosures.

https://www.vox.com/22464801/housing-bu ... -recession
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Re: are inflation fears driving the housing market

Post by nisiprius »

Robot Monster wrote: Wed Apr 14, 2021 2:04 pm The video is entitled, "Hyperinflation is Already Here – You Just Haven't Realised It Yet." Sounds a little nutty. Plus it's over 19 minutes long.
Hyperinflation is a word with a meaning. According to Wikipedia,
In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation... Cagan defined a hyperinflationary episode as starting in the month that the monthly inflation rate exceeds 50%, and as ending when the monthly inflation rate drops below 50% and stays that way for at least a year. Economists usually follow Cagan's description that hyperinflation occurs when the monthly inflation rate exceeds 50% (this is equivalent to a yearly rate of 12974.63%).
The idea that the United States is currently experiencing over 50% per month in inflation and that we haven't realized it doesn't pass the laugh test.
Last edited by nisiprius on Tue Jun 15, 2021 9:02 pm, edited 1 time in total.
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Re: are inflation fears driving the housing market

Post by KlangFool »

SashaWalpole wrote: Wed Apr 14, 2021 1:06 pm https://www.youtube.com/watch?v=1HmGLV46L60

Just curious what people think of this? The video claims that inflation fears are driving up real estate since a 30 year mortgage is the best hedge against inflation and rich people know this. It also claims that inflation is likely to hit consumer goods in the near future.
SashaWalpole,

I don't know and I don't care. It does not matter to me.

Why should this matters to you? Please explain.

A) If you are the RICH people, then, you supposed to know. If you don't know, then, this has to be false.

B) If you are the POOR people, you cannot afford to buy anyhow. So, it won't matter to you anyhow.

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Re: are inflation fears driving the housing market

Post by KlangFool »

OP,

For anyone that understand hyperinflation aka 50% per month like Venezuela/Rwanda, the last thing that a RICH person would want to do is to buy a house at that area. It would not be safe to live in that area.

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Re: are inflation fears driving the housing market

Post by JBTX »

I'd say the answer is primarily no, but secondary maybe.

Primarily it is supply and demand. Covid caused a decrease in New house construction (shrinking supply), move towards remote work at home work (increase demand), greater savings (increased demand), many people deciding to buy rental house or keep prior house for rental (- increased demand, decrease supply)

Secondarily, yes having a low rate fixed mortgage on an appreciating asset is perceived as inflation hedge.
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Re: are inflation fears driving the housing market

Post by phantom0308 »

Barefootgirl wrote: Sun Apr 18, 2021 12:53 pm Perhaps artificially created by the suppression of interest rates coupled with the increase in costs of construction materials (caused by all kinds of things - delays in production and shipping caused by Covid, 20% tariff on Canadian lumber and lumber products, etc).

A shortage of homes for sale and cheap money have created short supply and high demand.

Will these forces relax and when?
Interest rates have been ‘artificially depressed’ since 2008 and the it didn’t prevent the housing market from collapsing then. It seems more likely that supply shortages, extra disposable income, and lack of foreclosures have pushed up prices. Most of these forces are temporary COVID related things. It could be worse, the economy could be in recession.
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