The S&P just had it's best May since 2003

[dorndawg]

A lot of the housing issues today, especially around starter homes, is due to demand after the Great Recession. There were millions of millennials graduating in 2008 - 2020 and moving back in with their parents. Without that demand, we really under ran building affordable housing. I’m more optimistic about it now because demand is totally flipped.

We also have a lot of housing inventory “locked up” at 2020 interest rate levels. As that loosens up it should help with the upward trend in costs.

Our commercial real estate bubble is real. Gotta think some of that dead office space gets switched over to residential needs.

Everything you say is true, I’d only add that the cohort of people who need housing (1st time, apartments, you name it) is HUGE. I want to say those born in 97 was our high water mark in terms of size. Those folks are turning 27, and stuck with parents, or 4 deep in a 2 br rent house or apartment. Massive amount of folks slightly younger/older, same deal. They’ve mostly finished education or are getting rolling in a trade (obviously doesn’t apply to the knuckleheads doing neither )

Knowing what I know about humans, at 27 women start intensely wanting kids and a place of their own (if they don’t already have either, and less and less don’t). Birthrates are dropping, but that doesn’t mean there isn’t a helluva lot of remaining demand. And as those of us with Swiftie daughters or nieces know, at 27 their Saturn has returned…

All that to say, a part of me wants to leverage all the debt I can get my hands on and build economically constructed (within reason) apartments with good green spaces and dog parks and whatever else outside shiit young folks like. In like NW Arkansas, Birmingham/Huntsville. Maybe places like Tupelo and Hattiesburg. Even considering today's interest rates, I believe you’d make a killin’ over 20 years. @PooPopsBaldHead you in? Think we could hit up Uncle Fishwater??

ETA Boomers dying will of course free up some housing stock, which is also part of the solution. But I also firmly believe that generation will all live to 100 just to 17 the rest of us one last good time. There’s a few I sure hope make it that long, at least…

 

[dorndawg]

Chicago just announced a multi-billion dollar program designed to convert downtown commercial to residential.

I dig it - I do wonder what happens when jobs aren’t downtown, and that death cycle changes the restaurants/amenities/etc. Is living downtown still cool? I hope so, infill housing has got to be part of any solution.

New Yorker just did a great write up on this very thing, in Manhattan. https://www.newyorker.com/magazine/...-office-towers-into-apartments-save-downtowns

 

[OG Goat Holder]

A lot of my more aggressive investments have not kept up with S&P/Dow/etc. Some weird dynamics for sure. Hope it corrects or I’ve essentially lost money by not being conservative.

 

[dorndawg]

A lot of my more aggressive investments have not kept up with S&P/Dow/etc. Some weird dynamics for sure. Hope it corrects or I’ve essentially lost money by not being conservative.

It really is NVDIA, Microsoft, Apple and a couple more huge ones running away from the field.
(Also, my like is for the first part of the post - never want to hear a fellow Dawg lost money. Well, except for Drebin when he gets cut off at the buffet).

 

[PooPopsBaldHead]

Everything you say is true, I’d only add that the cohort of people who need housing (1st time, apartments, you name it) is HUGE. I want to say high school class of 97 was our high water mark in terms of size. Those folks are turning 27, and stuck with parents, or 4 deep in a 2 br rent house or apartment. Massive amount of folks slightly younger/older, same deal. They’ve mostly finished education or are getting rolling in a trade (obviously doesn’t apply to the knuckleheads doing neither )

Knowing what I know about humans, at 27 women start intensely wanting kids and a place of their own (if they don’t already have either, and less and less don’t). Birthrates are dropping, but that doesn’t mean there isn’t a helluva lot of remaining demand. And as those of us with Swiftie daughters or nieces know, at 27 their Saturn has returned…

All that to say, a part of me wants to leverage all the debt I can get my hands on and build economically constructed (within reason) apartments with good green spaces and dog parks and whatever else outside shiit young folks like. In like NW Arkansas, Birmingham/Huntsville. Maybe places like Tupelo and Hattiesburg. Even considering today's interest rates, I believe you’d make a killin’ over 20 years. @PooPopsBaldHead you in? Think we could hit up Uncle Fishwater??

ETA Boomers dying will of course free up some housing stock, which is also part of the solution. But I also firmly believe that generation will all live to 100 just to 17 the rest of us one last good time. There’s a few I sure hope make it that long, at least…

I made my real estate investments over the last few years. Tough to jump in for the next few years imo. As I said a few years ago, I think a decade's with of real estate gains were going to happen in the early 2020's. It will be flatish for a while.

That said, the thing nobody talks about when looking at housing stock/ population is that yes, Boomers are going to start dying... But so are houses... And they already have. 3 bed 1 bath houses on crawlspace foundations are covering good lots near city centers and they get torn down for McMansions... Slabs built in the 60's and 70's are trash and the houses are crumbling. A large percentage of the current "new" housing inventory and new construction is actually a wash, since we are replacing an existing structure.

My big disruption is 3d printed homes. It will be a game changer for affordable/entry level housing in the next decade. That's the one that will move the needle. Not sure when, but it's coming.***

Bring me 3d printed entry level housing plays in rapidly growing metros/areas and I am all in.

 

[Perd Hapley]

Good point. I’m guessing when people with no money quit getting approval for $400,000 loans, builders will start building those smaller homes again.

Well, thing is…..even those smaller homes cost $400k now.

 

[jethreauxdawg]

I made my real estate investments over the last few years. Tough to jump in for the next few years imo. As I said a few years ago, I think a decade's with of real estate gains were going to happen in the early 2020's. It will be flatish for a while.

That said, the thing nobody talks about when looking at housing stock/ population is that yes, Boomers are going to start dying... But so are houses... And they already have. 3 bed 1 bath houses on crawlspace foundations are covering good lots near city centers and they get torn down for McMansions... Slabs built in the 60's and 70's are trash and the houses are crumbling. A large percentage of the current "new" housing inventory and new construction is actually a wash, since we are replacing an existing structure.

My big disruption is 3d printed homes. It will be a game changer for affordable/entry level housing in the next decade. That's the one that will move the needle. Not sure when, but it's coming.***

Bring me 3d printed entry level housing plays in rapidly growing metros/areas and I am all in.

I don’t know if 3d printed houses can save the world, but the can trap me on YouTube for hours.

 

[jethreauxdawg]

Well, thing is…..even those smaller homes cost $400k now.

Good point, but I don’t see houses being built like my first one. 3/2, 1100sqf, cheap tile or cheap carpet floors, cheap finishes, solid roof. Maybe the simple/cheaper ones are being built, but all the “starter homes” I see are pretty fancy nowadays.

 

[dorndawg]

View attachment 583643
People are still buying things no matter what.

Yeesh. The housing crisis really was the perfect storm.

 

[The Cooterpoot]

People acting like they can't have a smaller house build is funny. Stop trying to live in McMansions in subdivisions. There's a ton of land to buy and build on if you're willing save and do it. Rates are around 6.75 or so which isn't even remotely high historically either. HPA is out of control and the government is basically forcing appraised values higher in slums these days for the sake of equality. With a housing shortage though, values aren't going to level off like they normally would.

 

[mstateglfr]

Good point, but I don’t see houses being built like my first one. 3/2, 1100sqf, cheap tile or cheap carpet floors, cheap finishes, solid roof. Maybe the simple/cheaper ones are being built, but all the “starter homes” I see are pretty fancy nowadays.

If your house costs $100k to build and sells for $150k, but the same land can support a house that coats $175k and will sell for $300k, then going with the 2nd option is way better for a developer/builder...if they want to maximize profit.


^ disclaimer for the nerds that would focus on numbers instead of the point- the numbers used are made up, but the point is accurate.

 

[jethreauxdawg]

If your house costs $100k to build and sells for $150k, but the same land can support a house that coats $175k and will sell for $300k, then going with the 2nd option is way better for a developer/builder...if they want to maximize profit.


^ disclaimer for the nerds that would focus on numbers instead of the point- the numbers used are made up, but the point is accurate.

Yes, but if people can’t/won’t buy the $300k house because they only have/will spend $175k, developers would rather make $50k than $0k. I copied your numbers, so if anyone doesn’t like those numbers, argue with golfer.

 

[BoDawg.sixpack]

I just really feel bad for Millennials and Gen Z. They are being forced to fork out a larger percentage of their paycheck to keep a roof over their heads than previous generations, if they choose to live on their own.

In 2005 the median household income was $68,000 and the average was $94,000. In 2023 the median was $74,000 and the average was $106,000. It is astounding that the median household income has only risen roughly 8.5% in that time.

In the chart below, a larger number means less affordable. An affordability ratio of 1 or lower means median-priced homes are affordable for that income bracket. The U.S. is trending in a very dangerous direction for home affordability.





And unfortunately, in order to see the same gains in the equities and the housing market that previous generations have seen, the debt to GDP ratio is probably going to have to continue the trend we've seen in the last 25 years. And that's assuming there's not another global pandemic that shutters the economy (which would be disastrous).

This may prompt more Americans to resort to risky financial behavior, such as investing in individual stock picking, gambling on cryptocurrency or other poorly understood technologies, financial scams, visiting casino's, buying scratch offs and lottery tickets etc, etc, in an effort to pad their nest eggs, instead of diversifying in a conservative mutual fund which has been proven to weather all of the financial crises of the past.

Below is the historical chart for the debt to GDP ratio. If you had told most economists in the 1990's that we would be where we are today, they would have ridiculed you.




The good news is that the U.S. continues to lead the world in the overall value of patents, education and basic science advancements so there's a bedrock of income possibilities which is buoying the overall job market as innovation remains strong. And, people want to live in the U.S., so the number of customers and the value of human capital is increasing (this is extremely nuanced but I won't get into it since I'd be sitting at the computer all day).

 

[PooPopsBaldHead]

If your house costs $100k to build and sells for $150k, but the same land can support a house that coats $175k and will sell for $300k, then going with the 2nd option is way better for a developer/builder...if they want to maximize profit.


^ disclaimer for the nerds that would focus on numbers instead of the point- the numbers used are made up, but the point is accurate.

Yes, but if people can’t/won’t buy the $300k house because they only have/will spend $175k, developers would rather make $50k than $0k. I copied your numbers, so if anyone doesn’t like those numbers, argue with golfer.

The overall problem is the idea of the affordable single family home as we know it in general has been torpedoed. The step up since in 2019 in labor, materials, interest rates, and insurance has made it virtually impossible to get new construction close to what it was.

For a first time home buyer at the top of your affordability budget to afford the same new build that cost $200k in 2019 today, your income would have had to increase about 65%. The reality is those people who would have bought a $200k single family house in 2019 are more than likely going to end up in multifamily or manufactured housing... Or continue to rent.

The cost to build homes is never coming down unless we automate it. Manual labor is a commodity that is scarce and getting scarcer. Raw materials are scarce and getting scarcer. Land (in locations that people want to live on) is scarce and getting scarcer. The final straw is the requirements a builder must meet to build a home are going the other way... As municipalities adopt newer and more stringent IRC codes, additional costs are added to the construction process... An estimated 35% increase to build a home since 2007 is just from new building codes.

I puke a little when people say "disruptive technology" but that's what single family home construction needs. I'm big on 3D because it has the potential to eliminate 50+% of the time and labor required to build a home. Factory built (not necessarily trailers, but more assemble on site) homes have the potential to cut time and labor to a lesser degree. Multigenerational living is another option. But ultimately, something is going to have to change...

 

[PooPopsBaldHead]

Good point, but I don’t see houses being built like my first one. 3/2, 1100sqf, cheap tile or cheap carpet floors, cheap finishes, solid roof. Maybe the simple/cheaper ones are being built, but all the “starter homes” I see are pretty fancy nowadays.

Ask and ye shall receive. Elm Trails by Lennar in Converse Texas... The biggest pieces of shìt built since Fox and Jacobs... And for $165k you can have 661sf of paradise too.

Explore these turds

 

[ETK99]

I had the chance to see 3D printed homes in FL. In theory, that would be a great technology for home building. But, it's all concrete and the equipment is insanely expensive. Maybe AI solves the problem or we all need to get into the shed building or camper sales business because that's what's being used In Mississippi more and more. The "tiny home" Tuffy Shed has become a staple in rural Mississippi.

 

[dog12]

The housing issue is tough. 5 days ago, my 13yo said she is concerned about buying a house after college. Clearly someone has discussed the issue with her- teacher in class or grandparent are my guesses.
Kinda early to have it on the radar for worries, but it's probably a legitimate worry.

Sure the current interest rate is a concern, but the lack of available entry level single family housing seems like a way bigger issue when it comes to the genersl housing concern.
I understand why so few lower priced houses are built, compared to mid-expenskce houses, but it still seems like a rough to just swallow and accept.

Here's one strategy that a young adult could use to get into the real estate market and start building equity: buy whatever you can afford (e.g., 2 BR condo, 3 BR townhouse, etc.), and then rent out the extra BRs to friends (or, other young professional adults in the area).

Possibly, the rent collected would cover much of the mortgage, escrow, HOA, monthly utilities, etc. (or, at least part of it).

If necessary, maybe the young person could live with parents for a short time to save up a sufficient down payment for the purchase.

I know a young person in the DC area implementing this strategy, and it's working for him.

One more thing: in the future, don't ever sell that condo/townhouse. Instead, turn it into a rental property.

 

[thatsbaseball]

People acting like they can't have a smaller house build is funny. Stop trying to live in McMansions in subdivisions. There's a ton of land to buy and build on if you're willing save and do it. Rates are around 6.75 or so which isn't even remotely high historically either. HPA is out of control and the government is basically forcing appraised values higher in slums these days for the sake of equality. With a housing shortage though, values aren't going to level off like they normally would.

LOL you sound like a boomer (like me) . Compared to us, young folks today seem absolutely fearless of debt and big house notes, car notes, credit card debt etc. where we were petrified of them. We never even dreamed of paying notes on big nice $70K pickups and $65K BMW's. We bought homes we could actually afford at the time and usually ended up putting "sweat" equity in them ourselves and some of the vehicles we drove were one step from the junkyard. Too many times today "we can't afford a home" seems to mean "we can't afford a home and also have enough income left over to keep up with our neighbors".

 

[BoDawg.sixpack]

Manual labor is a commodity that is scarce and getting scarcer.

If the population of the country is growing why is manual labor becoming more scarce?

 

[jethreauxdawg]

Ask and ye shall receive. Elm Trails by Lennar in Converse Texas... The biggest pieces of shìt built since Fox and Jacobs... And for $165k you can have 661sf of paradise too.

Explore these turds

View attachment 583943
View attachment 583945

Well…gotta start somewhere. Wow.

 

[DesotoCountyDawg]

LOL you sound like a boomer (like me) . Compared to us, young folks today seem absolutely fearless of debt and big house notes, car notes, credit card debt etc. where we were petrified of them. We never even dreamed of paying notes on big nice $70K pickups and $65K BMW's. We bought homes we could actually afford at the time and usually ended up putting "sweat" equity in them ourselves and some of the vehicles we drove were one step from the junkyard. Too many times today "we can't afford a home" seems to mean "we can't afford a home and also have enough income left over to keep up with our neighbors".

That’s a lot of generalizing. Where do you think Millennials got the keeping up with the Jones’ mentality?

 

[thatsbaseball]

That’s a lot of generalizing. Where do you think Millennials got the keeping up with the Jones’ mentality?

Well after we Boomers made our sacrifices and financially got our feet on the ground we didn't want our kids to have to make the sacrifices we made so we (generalizing here also) spoiled the schit out of them. Of the mountain of mistakes we (boomers) made this may have been our biggest.

 

[mstateglfr]

That’s a lot of generalizing. Where do you think Millennials got the keeping up with the Jones’ mentality?

^ yup.
It's akin to when older people over the last 20 years have complained about millennials being a participation ribbon generation where they are soft and unable to handle criticism or loss.
Well who the 17 crteated that culture and chose to have everyone get a ribbon and celebrate participating?....boomer parents.

 

[pseudonym]

I'm not an expert on economics either. I just wonder how we can have one part of the stock market do so well while our cost-of-living of our basics have increased so much. I feel sorry for anybody trying to buy a house now.

I'm not taking any political stance. I'm just really worried what kind of world we leaving for the next generations.

It’s not surprising that stocks and consumer prices are both going up because the main driver of both is an expanding monetary base. When you flood the system with additional monetary units, everything goes up priced in dollars: stocks, consumer prices, real estate, bitcoin, etc.

Jack Black is wrong: The denominator is important.

This is illustrated when you price everything in bitcoin:

https://www.pricedinbitcoin21.com/

Nearly everything is down over the last 5 years when priced in bitcoin. MSTR, TSLA, and NVDA to name a few are up priced in bitcoin over that time.

 

[The Cooterpoot]

LOL you sound like a boomer (like me) . Compared to us, young folks today seem absolutely fearless of debt and big house notes, car notes, credit card debt etc. where we were petrified of them. We never even dreamed of paying notes on big nice $70K pickups and $65K BMW's. We bought homes we could actually afford at the time and usually ended up putting "sweat" equity in them ourselves and some of the vehicles we drove were one step from the junkyard. Too many times today "we can't afford a home" seems to mean "we can't afford a home and also have enough income left over to keep up with our neighbors".

It's true, but I'm not quite at boomer status. I tried that debt early in life and figured out it was the most difficult thing in life, so I figured things out.
The economy provides opportunity and it takes it away too sometimes. It's a down cycle right now for housing is all. Younger folks act like people haven't lived through stuff in the past. You adjust and move on, you don't run up credit cards and stupid debt.

 

[The Cooterpoot]

That’s a lot of generalizing. Where do you think Millennials got the keeping up with the Jones’ mentality?

I think it's the opposite actually. I think they've learned some ways around some things and don't value the same thing the older generations have. But, they also don't want to work for things too, generally speaking. Plus, they blame older generations because they have stuff and they don't. Saving money has become a lost art. Debt is too easy. Don't spend all your money, and you'll have money is a pretty simple concept but takes discipline. I can't tell you how many times I've told older people they're stupid when they tell young people to build their credit with a credit card. Talk about ignorant advice!

 

[DesotoCountyDawg]

I think it's the opposite actually. I think they've learned some ways around some things and don't value the same thing the older generations have. But, they also don't want to work for things too, generally speaking. Plus, they blame older generations because they have stuff and they don't. Saving money has become a lost art. Debt is too easy. Don't spend all your money, and you'll have money is a pretty simple concept but takes discipline. I can't tell you how many times I've told older people they're stupid when they tell young people to build their credit with a credit card. Talk about ignorant advice!

I farm for a living. Debt it part of life.

 

[OG Goat Holder]

Well after we Boomers made our sacrifices and financially got our feet on the ground we didn't want our kids to have to make the sacrifices we made so we (generalizing here also) spoiled the schit out of them. Of the mountain of mistakes we (boomers) made this may have been our biggest.

Whoa now. When I think of making sacrifices, I think of the WW2 generation, not boomers. Boomers essentially were the spoiled ones. Come on, man, I mean yall were the hippies bro.

 

[The Cooterpoot]

I farm for a living. Debt it part of life.

Different kind of debt though. All debt isn't the same. Consumer debt is the problem. I bet you have a great accountant too. I would if I was full time farming. I've dabbled in cattle before. I use my "farm" as a tax write-off.

 

[The Cooterpoot]

Here's an interesting article lol

Amazon, Target, Walmart and Walgreens are slashing prices. Here's why

From snacks to toiletries and even Squishmallows, prices are coming down.

www.wapt.com

 

[PooPopsBaldHead]

If the population of the country is growing why is manual labor becoming more scarce?

The youngs don't like the physical labor and the olds can't do it anymore. Why don't the youngs like physical labor? Because of how the olds raise them.

The olds tell the youngs to go to college and then pay for it.

The olds tell the youngs to focus on grades and travel ball and hire people people to mow the yard instead of making the youngs do it when they are kids.

The olds don't make the youngs get jobs in high school, instead they over schedule them with "activities".

The very old olds worked the hell out of the olds when they were kids. So the olds don't mind hard work, unfortunately the olds and society itself has let the youngs down.

 

[OG Goat Holder]

The youngs don't like the physical labor and the olds can't do it anymore. Why don't the youngs like physical labor? Because of how the olds raise them.

The olds tell the youngs to go to college and then pay for it.

The olds tell the youngs to focus on grades and travel ball and hire people people to mow the yard instead of making the youngs do it when they are kids.

The olds don't make the youngs get jobs in high school, instead they over schedule them with "activities".

The very old olds worked the hell out of the olds when they were kids. So the olds don't mind hard work, unfortunately the olds and society itself has let the youngs down.

Typical American population isn’t growing, though. Immigrants are, and they are also the answer to the labor shortage.

 

[patdog]

Good point. I’m guessing when people with no money quit getting approval for $400,000 loans, builders will start building those smaller homes again.

May be a while. Saw yesterday someone is coming out the a 97% mortgage with a 3% 2nd mortgage product they’re marketing to people with up to 80% of the median income. That doesn’t seem like a bad idea at all. **

 

[jethreauxdawg]

Typical American population isn’t growing, though. Immigrants are, and they are also the answer to the labor shortage.

I’m doing my part. What’s y’all’s problem?

 

[ckDOG]

LOL you sound like a boomer (like me) . Compared to us, young folks today seem absolutely fearless of debt and big house notes, car notes, credit card debt etc. where we were petrified of them. We never even dreamed of paying notes on big nice $70K pickups and $65K BMW's. We bought homes we could actually afford at the time and usually ended up putting "sweat" equity in them ourselves and some of the vehicles we drove were one step from the junkyard. Too many times today "we can't afford a home" seems to mean "we can't afford a home and also have enough income left over to keep up with our neighbors".

It's a mistake my generation (I'm an elder millennial at 42) is making. We watched our parents finance a nice home and never really had the set aside for retirement discussion. Their plan was work for a decent place for many years, get a decent pension and supplement with social security (being general here). Solid plan IMO - pension was a good deal on the receiving end. My generation is financing their dreams to enjoy now and forgetting the retirement part. It's risky business IMO. Might be some home equity to tap into later but feel like my generation is hoping their more lavish tastes go away in their late 60s bc SS ain't funding that life style. That or more likely their fingers are in their ears.

 

[BoDawg.sixpack]

The youngs don't like the physical labor and the olds can't do it anymore. Why don't the youngs like physical labor? Because of how the olds raise them.

The olds tell the youngs to go to college and then pay for it.

Last year there was roughly a million fewer college students enrolled compared to pre-pandemic. Definitely a trend towards certificates and vocational work here.

 

[Duggar Hall Desk]

White House gets too much credit when economy does well and too much blame when it doesn't.

 

[preacher_dawg]

I have more money in my account than ever before, but I still have a difficult time buying groceries for my family.

 

[thatsbaseball]

Whoa now. When I think of making sacrifices, I think of the WW2 generation, not boomers. Boomers essentially were the spoiled ones. Come on, man, I mean yall were the hippies bro.

LOL Yes but were were poor hippies. The generation before us boomers will never be duplicated in this country. I literally have a reverence towards them, they were and are my heroes. They loved us and raised us right but I promise you they weren't big spoilers and God bless them for that.

 

[pseudonym]

I have more money in my account than ever before, but I still have a difficult time buying groceries for my family.

This perfectly captures the experience of people living through an inflationary period.