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Wall Street & AirBNB
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One of the headlines in today's Wall Street Journal reads:
"Meet your new Landlord: Wall Street"
Wall Street is creating REITs that are buying up single family houses all across the country. The goal is to turn every single house in America into a rental property. In communities where there is a shortage of housing they are buying up building lots and producing the housing themselves.
In February the Trump Administration expanded FHA mortgage insurance to include rental properties. It used to be in order to qualify for this insurance the property needed to be owner-occupied.
Now the banks can lend the money to investors instead.
The original purpose of FHA insurance program was to insure a steady supply of investors for small banks so they could make loans to people who wanted to buy their first house.
This will have a big impact on homeownership.
Renters don't buy custom kitchens.
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That is a temporary thing, as the millennials reach age 31 in 2020 housing sales will increase.
Young people rent, when they have kids they buy houses.
The REIT thing is going to fade the demographics do not favor that. Your big evil business thesis is going to fail.
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BTW the Air BNB is being attacked by the cities, it seems the cities like their room tax.
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Pat,
This has nothing to do with a "big evil business thesis". That observation is what is known in rhetoric as a "red herring".
You are right that some millennials will eventually become 31 years old with children. This just means Wall Street will have more young families to pick from as they establish rents for this new class of investment vehicle.
Custom cabinet makers depend on people being emotionally invested in their housing. Renters would rather have more pedestrian cabinets if it means their rent will be $100 less each month.
Cabinet shops will eventually have to compete with Wall Street similar to how large cabinet & millwork manufacturers had to learn to compete with China. This won't effect every cabinet shop but it will affect every cabinet shop's competition.
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Agree to disagree.
As I stated the rent prices that attracts the
REITs will change as renters turn into homeowners.
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This is a side effect of free money, QE, low rate government looking out for the big guy policies. This will not work when the reset comes. Even these guys don't have that much money when the debt is called in. I know you guys think I am crazy, but I don't just think a reset is on the way, but is needed for this reason among many others. It will not continue, because it simply can't. Just as no one saw Trump coming and thought globalism and diversity were a for sure thing, with no stopping and no slowing down- human beings, economies, governments, etc have cycles. And they affect one another. We are the end of one and the beginning of another. You can't cheat math, 2+2=179 only last for so long. It will end, with absolute certainty. The only question is timing.
For two posts in a row I agree with cabmaker, at least in this case that there is a problem. We probably severely disagree on what the solution is or how we think it will play out in real life. We've long been told that Wall Street is our friend and we need them healthy so America is healthy. But in reality Wall Street is not our friend, they've sold and bought America out from beneath our feet. A healthy Wall Street is important only within certain boundaries and channels- they've long since overstepped them a very, very long time ago.
This will end with pitchforks and worse.
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Nope things are getting better and about to get a lot better.
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"Nope things are getting better and about to get a lot better."
For whom ?
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KaliKid,
If you were an investor in residential rental properties things are better and about to get a lot better.
If you were a cabinetmaker in the Okanogan things are better and about to get a whole lot better. Your customers are wealthier and you're soon going to be able to sublet the barn to AirBNB.
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For most people.
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Pat,
Do you a believe a graph that shows you that the biggest spike in wages in decades happened during the heart of the financial meltdown? Cooked books my friend.
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For sure cooked books.
The downturn was going to happen either way, just that Greenspan exacerbated the problem.
The Leading economic indicators are a fact.
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Saw the same graph in 1999 & 2007, it was certain the good times would never end. But instead of fixing it we doubled and tripled down. As they say, I'm sure this time will be different. Talk to me in 2020. If I'm wrong, I will be happy to admit it, but I'm betting (literally) that I won't be. Each of us has minds and eyes to evaluate the data before them and bet accordingly. No doubt one of us will be eating crow. For the record I like mine on organic bread with swiss cheese if it comes to it.
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This is the one I should have posted
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IOW the Eeyore theory of the economy is just Not True, let it go, or just Look.
The trouble with cabinetmaking is that it depends on housing sales which are really low still.
But that does Not Apply to the rest of the economy.
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"Talk to me in 2020"
It's a bet.
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Alright, it's a deal. Lunch is on me in 2020 if we haven't seen a severe recession or hyperinflation (due to them quadrupling down) is not running rampant by 7/22/17. Might even drive down to your communist state (I don't go anywhere my 2nd amendment rights are withheld, but might just make an exception) and do it in person. You take care and stay healthy Pat.
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One caveat, a mild recession does not count.
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Agreed.
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Does anyone know of a restaurant that serves crow? (8^())
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Family Man,
According to the Economist we saw at the Stiles Executive Briefing Conference, you're going to be wrong, by 10 years. He figures around 2030 we're going to see something that rivals the Great Depression (not "Great Recession"). He's stuck with this idea for two presentations that were 3 years apart, and even wrote a book to that effect. His name is Alan Beaulieu, CEO of ITR Economics. The next few years are supposedly rosey.
You two know more about this stuff than I ever will, but I'm betting he researches this more than you guys, as that's his business and industry.
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I read one of Alan's books, although it had more to do with forecasting based off of a changing chart of your sales. But he did have the idea of preparing for the disaster at 2030.
I think that he is off because of the millennials and beyond.
This chart says something.
BTW he is in his own words closer to an Austrian economist than anything else.
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Gary B,
So according to an economist at an event put on by folks who are there to sell you stuff, he says the next decade is rosey? I'm shocked! Shocked I tell you!
Do you often send money to Nigerian princes that email you also?
All joking aside, I would ask the "economist" if he predicted 2008? What was his view on oil three years ago- $140 or $35? Ask him what he thought bitcoin was going to do two years ago. Was he right? Did he talk to you about an inverted yield curve? What was his election prediction?
I would then ask him if he is so good with understanding financials what his salary was the last three years. My bet is we could take the average salary of those posting on this thread and would see him in the rear view mirror. He either is not making money or he's making enough money that if he really understood economics he really shouldn't be working any longer. Or perhaps he just loves his work!
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The missing element with economists of all stripes that I have listened to is demographics. This includes the Beaulieus.
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Pat,
I am curious about your reliance on demographics. I agree with you that many Millennials will eventually become 30 years old and that some of them will start families. I also agree that many of them will want to buy a house to raise that family in.
What makes you think they will have the financial ability to do this?
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Another influence on the cost of housing in major cities is foreign money. Places like Vancouver, Toronto, Seattle, London are all seeing massive spikes of non-owner occupied purchases by foreign nationals.
Many of these properties have been purchased sight unseen and will remain unoccupied. They are strictly viewed as investment vehicles or a way to launder revenue from criminal activities.
When Putin allows one of his cronies to process natural gas for sale to the Ukraine they need to have some way to legitimize the massive wealth that accrues from the transaction. A lot of this money finds it's way into New York Real estate. With this kind of money you can't just store it on pallets in warehouses like Walter White. An easier solution is to build a casino and then say you lost it when your casino(s) went bankrupt.
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cabmaker,
yeah, it's russian money driving up real estate prices! I know you are not that dense. Even if it fits your false political narrative. Living on the West Coast where you do, amongst cities (including Canadian) where Chinese who know their system is doomed with the amount of debt and money printing that has gone on in their country & they're trying to get their money out of the country while they still can.
I am in agreement though that the young folks are not going to be able to afford real estate. College debt, low wages, the only thing making money are real estate and the stock market (both only for now). We live in a world where the old saying it takes money to make money has never been truer due to the burden of debt & regulation. It's easy money for those with it and those without are stuck in a world where the costs of the goods it takes to survive- housing, food & transportation go up each day and their wages either go down or are eliminated entirely.
Of course our governments cannot deal with ending the easy money policy as they then cannot service their debt with a rise in rates. One percent interest rate hikes and you will begin to see the fabric begin to tear apart as the cost of servicing all time high debt. Then the demographics are actually against us as the boomers are retiring and are going to be calling in all those entitlements.
We have to take our medicine- there is no short cut around it. If you have a little bit of money, I hope you have used this easy money time and the little time we have left to grow it for you and yours because it simply cannot and will not continue. The math dictates it but even more so the people dictate it.
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FamilyMan,
Do you think money laundering exists?
Do you think any criminal enterprise money is making it's way into real estate transactions?
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Without a doubt it does. But it surely isn't "Putin's cronies" driving up real estate costs in the US with it. If you would have said the Chinese, the Mexican drug cartels, the CIA using the cartels or a dozen other things (including the Clinton Foundation) I wouldn't have argued with you- even though outside of the average Chinese millionaire non are effecting the real estate market. But you continue to beat this Russian thing but there is nothing there- but it is your only hope, so you cling feverently to it to the extent you blame rising US housing costs on it. From the outside looking in it's hard to see if you are insane or are just acting like a two year old like the rest of the progressives who can't believe they didn't get their way. If you were smart you'd drop this Russian thing. It is not serving your narrative well. It will not lead to the outcome you hope. But you will not take my advice because SJW's always double down- always.
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"What makes you think they will have the financial ability to do this?"
This:
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Pat,
That does not back out the "haves". It schews your graph drastically. Nobody is arguing that there is not huge sums of money being made. Our difference is that it is concentrated to a very small minority whose "income" is outpacing cost of living increases.
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FamilyMan,
Much as you would like to see it happen this Russian connection is not going to go away.
There is a reason President Trump is tweeting about his ability to pardon his family or even himself.
Being the patriot that you are I am sure you agree the best thing to happen for our democracy would be to not allow the Russians or any other criminal enterprise to affect our elections.
You don't disagree with this do you?
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I don't know about the Russian thing nor care.
Foreign investment in real estate from hot money IIRC is less than 10% and shrinking.
By far and away the biggest driver of the cost of housing is land restrictions and regulations.
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Tim
Most of your comments are conjecture.
Income inequality is a stupid point. Especially when you consider how fast people move in and out of quintiles, this has been gone over this many times.
What really drives a lot of the inequality is inflation.
Todays dollar would buy 4 cents worth of goods in 1912.
Inflation is a tail wind to investors and a head wind to non investors. As investors invest ahead of the inflation, e.g. housing.
People argue that borrowers get to pay back loans with cheap money, but that does not negate the point.
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cabmaker, I am not only fine with you guys continuing to beat the russia drum I encourage it! Keep it up! It serves my side far better then your own. If you disagree then look at all three special elections since the presidential election. Compare DNC fundraising to RNC fundraising. Not that I don't want to also driving out a great many of the RNC.
Being the patriot I am I want to do all I can to destroy progressives power politically. For my children's future.
Pat,
I disagree that foreign nationals are not moving the needle drastically on real estate. 10% in a tight market can move the needle 50-100% in costs. You seem to be pointing at the "tight market" aspect. I agree. While a libertarian myself in this area, due to my location, it simply does not work in the cities though- for safety, environmental and just standard of living- to not have regulations/laws. Although we have overshot the correct amount by a long margin.
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There is no tight market. If the demand was higher more houses would be built.
Builders are building large houses because that is what is selling. (also a driver of "inequality")
Foreign investment is Not the reason why.
Wait until 2020 and you be eating...
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Familyman
Seventeen intelligence agencies have concluded that the Russians tried to interfere with our elections.
Donald Trump says that he agrees.
Donald Trump Jr. released emails he received that were from Russian intermediaries.
From Donald Trump Jr:
"June 3, 2016 10:36 a.m.
Rob Goldstone to Donald Trump Jr.
Subject: Russia - Clinton - private and confidential
Good morning
Emin just called and asked me to contact you with something very interesting.
The Crown prosecutor of Russia met with his father Aras this morning and in their meeting offered to provide the Trump campaign with some official documents and information that would incriminate Hillary and her dealings with Russia and would be very useful to your father.
This is obviously very high level and sensitive information but is part of Russia and its government's support for Mr. Trump - helped along by Aras and Emin.
What do you think is the best way to handle this information and would you be able to speak to Emin about it directly?
I can also send this info to your father via Rhona, but it is ultra sensitive so wanted to send to you first.
Best
Rob Goldstone"
FamilyMan,
Do you still think this story is "Fake News"?
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Pat,
you'd be right that there is no tight market in middle America. On the coasts, at least the west coast, you'd simply be dead flat wrong. Most things you and I disagree on can come down to how facts are interpretted. On this you are just flat out wrong. It is drastically tight. Crazy tight. Insane tight. And it has made prices crazy, crazy high. My own GC's just look at me, shake their head, smile and say, "I can't believe what I'm getting for this, it's insane." That is from the builders themselves. On most things I can see your view point, although not agree, on this I think you're really out of touch and completely, utterly wrong.
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cabmaker,
First yes, it's fake news. It was not 17, but three. Three who were still controlled by Obama appointees and who have become extremely political.
But I will say it again, please keep beating the drum. It's helping. But my time is not unlimited so I myself will not be discussing Russia with you anymore. It simply does not matter to me- can I make that any more clear? It does not matter to us deplorables, and it will not turn our support. But keep spending your energy on something that does matter to 74% of America- I'm sure it will bear great for you!
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I would be happy to be wrong, no problemos.
What you are talking about is caused by the building restrictions I mentioned.
For sure a secondary factor is from demand because of Starbucks, Boeing, Microsoft, etc.
Also the very definition of inflation: an increase in the money supply and an increase in demand. This too has something to do with demographics.
But the overarching cause is land restrictions. Texas does not high housing inflation. With the exception of Austin (to some degree), but this is because of " boil down to Austin's relative unwillingness--thanks to NIMBYism and regulations--to build more housing."
Houston is known for it's lack of regulations and does not have housing inflation, despite it's past windfall from the oil patch.
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"June 3, 2016 10:36 a.m.
Rob Goldstone to Donald Trump Jr.
Subject: Russia - Clinton - private and confidential
Good morning
Emin just called and asked me to contact you with something very interesting.
The Crown prosecutor of Russia met with his father Aras this morning and in their meeting offered to provide the Trump campaign with some official documents and information that would incriminate Hillary and her dealings with Russia and would be very useful to your father.
This is obviously very high level and sensitive information but is part of Russia and its government's support for Mr. Trump - helped along by Aras and Emin.
What do you think is the best way to handle this information and would you be able to speak to Emin about it directly?
I can also send this info to your father via Rhona, but it is ultra sensitive so wanted to send to you first.
Best
Rob Goldstone"
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FamilyMan,
Just for perspective want to get my head around what constitutes "Fake News" in your world.
Is the above email released by D o n a l d T r u m p J r. just another example of "Fake News"?
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That email has nothing to do with Russia interfering with who won our election. NOTHING. Everyone takes the dirt on their opponent from all sources. That's all this is. That's it. And everyone single person, as dumbed down as America is, understands that. Only 24% of America cares about the Russia story- and they are the hardest core progressives and globalists.
What's fake is the outrage that is pushed by the mainstream media. The more it's pushed the more you are pushing the 76% who see right through it away.
If you cannot grasp this you do not understand what is going on this country and you will not understand what is coming.
That's all I'm discussing Russia with you. You will either get what I am saying and stop because you are smart, no matter how much you disagree or don't like it, or you can keep going at your own causes peril.
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FamilyMan,
Why do you think Trump was tweeting yesterday about how everybody agrees he has the right to pardon his family and even himself?
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Seems like the problem with Trump is he hasn't been a life long politician so hasn't learned how to keep things under the radar. That and he likes all the media attention he can get, good or bad. This last election represents how bad politics has become, there was no lesser of two evils!
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I never could understand why people hated Hillary. Or Bill Clinton either for that matter.
When Clinton was President we weren't wasting blood & treasure in wars all over the world and we ended up with a budget surplus.
What is not to like about that?
Everybody I ever polled who hated Hillary sputtered something about "Benghazi!!!"
Whenever I asked they couldn't tell me which continent Benghazi was on, much less what country it is in.
The problem is that politics are served up with slogans that can neatly fit on a baseball hat or rhyme when chanted at a campaign rally.
What we need is something similar to a driver's license test before you can go into the polls. Voting based on red meat slogans does not give us great politicians.
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Since we're discussing politics, I intuited that Hillary was a liar as was/is her husband.
I didn't like the way she laughed about Gaddafi's murder, that she orchestrated. "
I did not like the fact that she IS a warmonger.
I did not like the fact that every where these two went resembled the House of Cards.
I'm not happy Trump won, but I'm ecstatic that Hillary lost.
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We didn't spend a lot of blood & treasure fighting foreign wars under Bill Clinton and we ended up with a budget surplus.
That would seem to be a dream candidate for libertarians and conservatives alike.
A lot of people did not support Hillary's stand on Planned Parenthood but half the country did. It cracks me up when political parties that barely squeak past their election throw their weight around and act like they have a mandate. Trump won about 48% of the popular vote. How is that a mandate?
So they were conniving.
Get over it.
Name me one legislator from either party that is not conniving. I will spot you even every governorship and every mayoral election. Name me one incumbent that is not conniving.
I don't know much about Gaddafi.
Was he a good guy or a bad guy?
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