The Investment Thread

[owbc]

15 hours ago, Fear The Chorizo said:

For starters, the US population is growing pretty rapidly - probably 60 million more US citizens now compared to 2000.  And yeah, baby boomers have their houses, but they haven't yet reached the collective age ranges where they're destined for retirement villages or the afterlife, meaning the big turnover of houses from them to others looking to enter the housing market hasn't happened yet.  When that does, I can see the housing shortage quickly turning into a glut.

Also, I think it's got alot to do with people who have the means to move from urban city centers to suburbs much more readily than a generation or two ago, which means more single family homes per capita - US cities are being hollowed out

It's completely the opposite in many places, particularly large coastal cities. Cities tend to have the most housing growth because they can grow upward. Suburbs have exclusionary zoning and face resistance to upzoning and have nowhere to build (without causing traffic/infrastructure problems). At first this caused single-family home prices within cities to go through the roof because they have the most limited supply of all, but recently the suburbs have caught up, especially after there was added demand away from cities during the pandemic -- although people have obviously held onto their purchases even if they have moved back to cities. 

[homer]

I don't know this is the same everywhere but in Milwaukee the number of owner occupied homes has gone down quite a bit the last 20 years or so. That's a combination of speculators coming in and buying up a lot of properties to rent out plus some vacation rental (eg Air BnB). 

[owbc]

50 minutes ago, homer said:

I don't know this is the same everywhere but in Milwaukee the number of owner occupied homes has gone down quite a bit the last 20 years or so. That's a combination of speculators coming in and buying up a lot of properties to rent out plus some vacation rental (eg Air BnB). 

My grandparents' old home in the Milwaukee area is owned by an investment company now. My parents get constant requests to buy their house for cash. 

Once the home is owned by one of those groups it is off the market forever, As they grow their power to purchase additional homes will only grow with time, as well as their ability to influence rental prices. They mostly work in markets with low housing prices like Milwaukee and especially in lower income neighborhoods like where my grandparents lived. 

[LouisEly]

On 10/16/2023 at 9:01 PM, zurch1818 said:

there is a housing shortage...but I wish I understood why. Boomers should already have their houses and I don't believe the US population is exponentially growing at this time. Is it just families want bigger houses?

There were 10% more adults 18+ in 2020 than 2010.  There are 7M more Millennials, now all 25+, than GenX.

There was virtually no home construction from 2009-2011.  That was a big factor in purchasing my rental properties in 2011; I knew there would be a shortage in the future.  On average there are 1.4M new housing starts per year, so that lack of construction 2009-2011 set back supply by several million units.

[MrTPlush]

An issue with the housing market I never see mentioned, look at new houses being built, they are never anywhere remotely close to starter home size/price. So even as we build houses, we are just fueling more inability for people to buy a first home. Houses are either being built at 'finally got debt paid off and into good paying stable jobs' prices or a huge portion are 'debt is gone, great jobs, dual income, either really wealthy or no kids' type houses'.

I don't expect $150k houses to be built, but essentially every house in my area that is new build or close to it for sale or sold is pushing $100k over the median price for area/state.

[nate82]

40 minutes ago, MrTPlush said:

An issue with the housing market I never see mentioned, look at new houses being built, they are never anywhere remotely close to starter home size/price. So even as we build houses, we are just fueling more inability for people to buy a first home. Houses are either being built at 'finally got debt paid off and into good paying stable jobs' prices or a huge portion are 'debt is gone, great jobs, dual income, either really wealthy or no kids' type houses'.

I don't expect $150k houses to be built, but essentially every house in my area that is new build or close to it for sale or sold is pushing $100k over the median price for area/state.

It is one of the main problems in the Phoenix area.  The majority like 99% are 3-5 bedroom homes starting at the $300k price range and some going even higher starting in the $450k price range.  Also starter homes have shot up by about $50k-100k depending on where you live. 

The starter home supply has been shrinking which is anything 1400 sq feet or less.  Something around 60% used to be the new housing supply is now somewhere between 10-15%.  If you wanted to start building houses you think you would want to tap into this market but it seems all of the builders just want to build luxury style homes. 

From:

https://www.businessinsider.com/housing-outlook-there-are-no-starter-homes-for-first-time-buyers-2023-1

 

This article also talks about the decrease in starter homes:

https://myhome.freddiemac.com/blog/research-and-analysis/20211013-starter-homes

From the Wall Street Journal:

https://www.wsj.com/articles/the-shortage-of-starter-homes-extends-beyond-major-cities-11626872400

Also a bit of an old article: https://www.realtor.com/news/trends/death-of-the-starter-home-where-have-all-the-small-houses-gone/

[LouisEly]

2 hours ago, MrTPlush said:

An issue with the housing market I never see mentioned, look at new houses being built, they are never anywhere remotely close to starter home size/price. So even as we build houses, we are just fueling more inability for people to buy a first home. Houses are either being built at 'finally got debt paid off and into good paying stable jobs' prices or a huge portion are 'debt is gone, great jobs, dual income, either really wealthy or no kids' type houses'.

I don't expect $150k houses to be built, but essentially every house in my area that is new build or close to it for sale or sold is pushing $100k over the median price for area/state.

Average building cost per square foot is around $150 for low-end saltbox style architecture.  For 1,500 sq. ft., that's a cost of $225K just to build.  Homebuilders need to make a profit, so you're looking at $275K for a new low-end 1,500 sq. ft. starter home.

[wallus]

The new subdivision covenants pretty much make starter homes impossible as well.

[zurch1818]

Very interesting reading on starter houses. Thanks for posting. One other anecdote to add (at least in the Madison area), a lot of the new houses are not starter-sized...but are built on starter-sized lots. You can basically jump into your neighbor's house from your house without touching the ground. Or better yet, as my dad says, you can see when your neighbor needs another beer.

Don't get me started on current housing trend (putting white trim around everything to make it stand out). However when every house in a new neighborhood is a spec house stacked on top of each other, it overwhelms my brain with busyness. There isn't even room for trees. I bet the spec home market is not doing great right now with interest rates as high as they are.

We struggled to find a house in our price range that was at least a half acre in size until we started looking for slightly older homes (ours was built in '94). It was remodeled to feel newer than it really is. However, it is nice having mature trees around us and neighbors not stacked on top of one another. We also live on a cul-de-sac without really any neighbors in our back yard, so my neighbor can't see my beer level. The only problem is we are the only house in our cul-de-sac that hasn't taken a tree out in our front yard. It's like we missed a memo.

Complete side note, 3 of the 6 houses on the cul-de-sac are Randys (including both of my next door neighbors). I believe my son thinks a Randy is a male neighbor.

[homer]

Article in the NYT today says there are 100,000 fewer apartments since the 50's most of which disappeared in the 90's when people bought out the apartment(s) next door and expanded. 

[MrTPlush]

On 10/20/2023 at 7:33 AM, zurch1818 said:

We struggled to find a house in our price range that was at least a half acre in size until we started looking for slightly older homes (ours was built in '94). It was remodeled to feel newer than it really is. However, it is nice having mature trees around us and neighbors not stacked on top of one another. We also live on a cul-de-sac without really any neighbors in our back yard, so my neighbor can't see my beer level. The only problem is we are the only house in our cul-de-sac that hasn't taken a tree out in our front yard. It's like we missed a memo.

Glad I am not the only one who prefers some trees around. I just can't stand when they plop a sea of houses in an old farm field. 

[MrTPlush]

On 10/19/2023 at 6:30 PM, LouisEly said:

Average building cost per square foot is around $150 for low-end saltbox style architecture.  For 1,500 sq. ft., that's a cost of $225K just to build.  Homebuilders need to make a profit, so you're looking at $275K for a new low-end 1,500 sq. ft. starter home.

Yah, construction costs don't help. I doubt builders have much interest building a house under 1,400 sq ft. Though most of those houses (at least around me) have basements with egress windows already on them and framed/pre plumed for an additional bedroom/bathroom. So that square footage seems small, but realistically, they are easily 2k+ sq ft homes some day. 

[owbc]

New townhomes here in the Seattle area are going for roughly $500/sq ft. There are some near me that are $600K for 1200 sq ft which is the lowest price you'll find to purchase just about anything that isn't a dump within a 45 minute commute of downtown. They make really great starter homes. No yard but they usually have a rooftop deck which people like better anyway. There are plenty of parks, most people see a yard as more of a burden than a benefit anyway. 

The price was totally fine when rates were 3-4% so you could get that for somewhere around $3,000/month or even below that if you put some money down. Now it's more like $4,500/month which makes it really hard to afford. 

[Fear The Chorizo]

I don't care where you are located - $600K is not a starter home, and not having similarly sized condos/homes that are being built to sell at roughly 1/3rd of that price even in urban areas is exactly what's wrong with the current housing market.  

Interest rates are starting to crush everything despite consumers doing their best to hang in there over the past year, and rates are more likely to keep climbing than stay the same or dramatically drop anytime soon.  The interest payment on the national debt is now pushing $700B, basically double what that payment was just two years ago in large part due to the Fed's rate hikes to try and curb inflation - that's about the 20th largest economy in the world paid just to carry the debt, not reduce it.  Also, when rates go up, government revenue drops, spiking deficits and making this growing problem even worse.

[TURBO]

On 10/20/2023 at 7:33 AM, zurch1818 said:

 

Complete side note, 3 of the 6 houses on the cul-de-sac are Randys (including both of my next door neighbors). I believe my son thinks a Randy is a male neighbor.

I might feel stupid, but what is a Randy?

[zurch1818]

3 hours ago, TURBO said:

I might feel stupid, but what is a Randy?

It's a male first name...just like Bill, Michael, etc. That's why it's so odd that there is a concentration of them on our cul de sac...because Randy isn't really that common of a name.

My son might just think it is a male neighbor because they are all around us.

[nate82]

I wonder how reliable space mining could be?  I mean technologically we are almost there.  No this is not science fiction there are actual companies out there doing the research and planning to test in space soon. 

https://arstechnica.com/science/2023/10/space-is-starting-to-look-like-the-better-mining-operation/?utm_source=pocket-newtab-en-us

If we plan to go fully EV and you don't want to stripe mine nearly the whole planet then you will need to mine in space.  Asteroids make the least amount of sense to me but I don't believe the moon nor Mars have the mineral deposits we need for EV's.  So as of right now unless there has been new information on mineral deposits on the moon or Mars.

I would think a moon base would be needed first before we could even start mining asteroids unless the plan is to mine near Earth objects? 

I don't believe this would be a feasible investment now but maybe in the next 10-15 years? 

[Fear The Chorizo]

On 10/28/2023 at 3:33 PM, nate82 said:

I wonder how reliable space mining could be?  I mean technologically we are almost there.  No this is not science fiction there are actual companies out there doing the research and planning to test in space soon. 

https://arstechnica.com/science/2023/10/space-is-starting-to-look-like-the-better-mining-operation/?utm_source=pocket-newtab-en-us

If we plan to go fully EV and you don't want to stripe mine nearly the whole planet then you will need to mine in space.  Asteroids make the least amount of sense to me but I don't believe the moon nor Mars have the mineral deposits we need for EV's.  So as of right now unless there has been new information on mineral deposits on the moon or Mars.

I would think a moon base would be needed first before we could even start mining asteroids unless the plan is to mine near Earth objects? 

I don't believe this would be a feasible investment now but maybe in the next 10-15 years? 

Bruce WIllis and Ben Affleck have already been up there doing it

[CheezWizHed]

Starter home thoughts.  The problem isn't exactly new.  Certainly it is exacerbated by inflation and other factors - clearly ebbs and flows in the markets and changes in demand, but demand always produces opportunity for people t meet the demand. 

When I was out of college in the mid-90s and trying to find a place in Libertyville, IL (a far-northern suburb of Chicago), housing was so crazy that anyone close to work had two people working professional jobs just to afford the house (i.e. $250-400k back then).  I ended up living 25 miles (and a 45 min commute) away in WI just to get a 1100 sq ft rambler with no basement for $100k.   At current day prices, those numbers are probably doubled. 

I think part of the problem is dealing with expectations.  People want an easy route to having cheap housing in an area with high salary jobs, but that just doesn't exist.  If you want to work downtown because of high salaries, there is going to be high cost of living with it. 

But rather you need to take the moneyball approach... if people are buying new, buy old.  If they are buying houses, look at a condo or townhome.  Start small, build equity and upgrade. Move out to cheaper houses and move into the area you prefer as you can afford it. 

I'm on my 4th home now and it is worth about $800k (covid-inflation has increased it dramatically).  Owning a home is key to protect yourself from inflation. 

[wallus]

I am selling my rental properties starting in early 2024. Is it better to have them rented out or vacant in terms of a potential buyer? I live in one of the rental sides currently but am moving to a new house at the end of the month. I am debating about finding a renter or just letting it sit.

[nate82]

4 hours ago, wallus said:

I am selling my rental properties starting in early 2024. Is it better to have them rented out or vacant in terms of a potential buyer? I live in one of the rental sides currently but am moving to a new house at the end of the month. I am debating about finding a renter or just letting it sit.

Depends on the buyer.  If they are looking at the property as a rental property then having someone there already paying should be a positive.

Also would depend on if they think repairs or upgrades would be needed.  If not then a positive if they think otherwise then probably a negative.

[wallus]

The market went crazy today on the fed signaling three cuts in 2024. Sorry Bears, you lose again.

[nate82]

46 minutes ago, wallus said:

The market went crazy today on the fed signaling three cuts in 2024. Sorry Bears, you lose again.

Hopefully these are small cuts otherwise we will be back where we were inflation wise.

[LouisEly]

2 hours ago, wallus said:

The market went crazy today on the fed signaling three cuts in 2024. Sorry Bears, you lose again.

We're not out of the woods yet.  Consumer balance sheets are in worse shape, credit card balances are at an all-time high, and buy now pay later has exploded.  Cuts aren't necessarily a good thing.

[Fear The Chorizo]

14 hours ago, LouisEly said:

We're not out of the woods yet.  Consumer balance sheets are in worse shape, credit card balances are at an all-time high, and buy now pay later has exploded.  Cuts aren't necessarily a good thing.

It's late 2007/early 2008 all over again.  Signals by the Fed for rate cuts are good temporarily for the stock market and for investment firms to pad their year end bonuses - but wall street and main street are living in completely different universes at the moment, which is actually a really bad thing and the main reason the Fed is going to start going back down the ladder with rates.  The market has been counting on the Fed easing rates for quite awhile.

Making $ in the market can happen at any time if people are buying/selling the right things at the right time - the fact the DOW is pushing over all-time highs right now doesn't feel like it's going to indefinitely keep climbing.