12 ms·

Which housing markets are most exposed to the coming interest-rate storm?

48 points by ethor 4y ago

once_inc 4y ago
Europe is doubly-screwed, because the central bank can't raise interest rates without causing instant defaults for most southern European countries, because their bonds become junk at any rate above 0%. They've painted themselves in a corner in 2008-2010 and are now presented with the bill.
- deleted 4y ago
  [deleted]
- simonebrunozzi 4y ago
  Instant defaults? Not necessarily. As long as you find enough buyers for govt bonds, these governments can keep going for several years. But yes, I agree that long term it's going to be a serious issue. Defaults wouldn't be "instant", though, as you say.
  - heurisko 4y ago
    Southern European states, such as Greece are already bankrupt--they are just in the European Union's debtor's prison. There is a fundamental schism in the EU, and that is they share a currency, without a common fiscal policy. It's a problem that will never go away, until member states cede power to set budgets, pensions, etc. to the EU, which I can't see happening. https://www.theguardian.com/commentisfree/2018/aug/26/greece-was-never-bailed-out---it-remains-a-debtors-prison-and-the-eu-still-holds-the-keys https://www.theguardian.com/commentisfree/2018/aug/26/greece...
- tmaly 4y ago
  the only other corner to paint would be direct loans from central bank to consumer. But if that happened, the prices would climb even higher.
chris_wot 4y ago
New Zealand? Hell, Australia is more screwed than any country. When the housing bubble bursts, it’s going to destroy the economy.
- slyall 4y ago
  New Zealanders are moving to Australia because the the wages are 30% high and the houses prices are lower or the same.
  - quickthrower2 4y ago
    Thats bonkers. Australia as an economic refuge for cost of living!
doubleg 4y ago
https://archive.ph/joUwS https://archive.ph/joUwS
quintes 4y ago
New Zealand. Housing market disaster. Didn’t read the article but upset enough about it
- deleted 4y ago
  [deleted]
chiefalchemist 4y ago
> For more than a decade homeowners benefited from ultra-low interest rates. Homeowners benefit from higher prices? How does that work? Low interest rates increase demand. Increased demand increases price. Higher prices mean a larger initial payment (i.e., 20% down). Higher prices typically mean higher assessed value (i.e., higher property taxes). These benefit homeowners how? Ultimately, it's about the total cost of the mortgage. That is the price of the home. The closing price is an illusion. Finally, a higher interest rate can always be refinanced in the future. The higher rate gives you a lower closing price. The re-fi lowers the total cost of the mortage.
- ivanbakel 4y ago
  A lot of the downsides you listed apply to house-buyers, not homeowners. If you already have a property, deposit size doesn't matter to you. Price increases are only a positive - it's the bank that's losing out. While you may pay more in property tax, I'm sure the savings on your mortgage interest more than offset any tax increases.
  - lotsofpulp 4y ago
    I would expect that more likely than not, the same dynamics allowing the interest rate to be low also cause the purchasing power of the currency to decrease. A homeowner not able to increase their income to offset this decrease in purchasing power may be experiencing a net loss of purchasing power even if their mortgage interest costs decrease.
    - chiefalchemist 4y ago
      Bingo! Inflation!! That too must be factored in. Cheap printed money === inflation
    - ivanbakel 4y ago
      In a developed service-based economy, relative purchasing power isn't that important in the short term. You might eventually notice the indirect impact of imports being more expensive, but I doubt that matters too much to the average person. You also have to account for the fact that house prices are rising - so even if you're losing purchasing power, you're still making nominal gains on your assets.
refurb 4y ago
Canada is proper screwed. Median sales price across the whole country is 2x the US. Plus Canada doesn’t get 30 year fixed mortgages. I’ve already seen people pissed that when they renew their 5 year mortgage the rate is higher than 2 weeks ago. In the past month the rates have gone up and the ‘burbs of Toronto are seeing double digit percent decreases. Gonna be fun to check prices in 6 months!
- orwin 4y ago
  Montreal prices seemed a bit high but not exeptionnal compared to the median income before Covid, did that change a lot?
  - refurb 4y ago
    Montreal was quite affordable alongside many other cities like Halifax, Calgary, etc. They’ve seen a run up but still aren’t that high - 400-500k up from 200-300k. Could see a correction, but it’s nothing like Ontario and BC where small towns are >$1M already.
fruitenjoyer 4y ago
donthellbanme 4y ago
random_moonwalk 4y ago
'In Australia, homeowners’ average debt as a share of income has swollen to 150%' - does this mean the monthly repayments are 1.5x the monthly income of owners? The number of > 100% debt as share of income is wild if I'm interpreting this correctly - how is this not indicative of a swathe of imminent defaults?
- plantain 4y ago
  That is not what it means.
- pestatije 4y ago
  It's a yearly number...they would have to spend all their income, including taxes, for 1.5 years to pay off their debt.
- HPsquared 4y ago
  There's an implicit "per year" in there. It's better expressed as a time: "100%" means "1 year's worth". There's no tipping-point.
- thedougd 4y ago
  No, it's a ratio of remaining debt to yearly income. Notice they say new home owners have a multiple of 4 to 5. On average a person making 100k a year has 150k or remaining debt.
  - random_moonwalk 4y ago
    Ah this makes way more sense!
  - em500 4y ago
    More specific, it's the outstanding debt to disposable (i.e., after tax) yearly income. Even more specific, I it's probably the total outstanding mortgage debt in a country divided by the total disposable household income in the country, including incomes of non-mortage holders and renters. If you think that denominator doesn't make much sense, I largely agree, but it's fairly standard to calculate it that way in macro-economic reports. So I believe the article writer actually misinterpreted that number, writing that it's 150% of homeowners income.
occz 4y ago
Truly worrisome to see Sweden at the top, but definitely not surprising.
- jdmoreira 4y ago
  Not surprising indeed. This has been a long time coming. A lot of families max leveraged themselves to be able to buy. I feel sorry for the people that will end up in a bad situation but I've been waiting for a long time to make my move, we will see how it plays out.
  - framtidsljus 4y ago
    Supply is still lower than demand, I don't see why that would suddenly change. (Still renting after looking for a house for years, while watching houses getting more expensive by the month)
    - jdmoreira 4y ago
      When people can't afford paying the interest of their 10 million sek house loan, supply and demand matters very little. It all depends on how high interest rates go.
- vegai_ 4y ago
  Yeah. Over here in Finland plenty of people look at images like this https://nordregio.org/wp-content/uploads/2020/02/0376_Nordic_DHI_2011_2017_web.png https://nordregio.org/wp-content/uploads/2020/02/0376_Nordic... with great jealosy, but perhaps some amount of financial conservatism isn't such a bad thing always. Only time will tell, of course. Sweden's model has worked pretty damned well so far and this threat has been visible for a long time.
  - ethor 4y ago
    Very interesting, thank you for sharing. Sweden, Norway, Denmark and Iceland have seemingly all chosen the same path, will Finland has remained conservative. The future will tell what was the best policy.
baybal2 4y ago
once_inc 4y ago
> Strong job markets, hordes of millennials nearing homebuying years and a shift to remote working have raised the demand for more living space. Millennials are now between 25 and 40. They should nearly all have been on the market for buying homes by now. edit: people misunderstood me, so I'll amend my point somewhat to clearer convey what I meant: most millennials have been on the housing market for years, but are unable to buy. Only the tail-end of the millennials haven't entered the market yet (because they live at home and are still in school). Entering the housing market != buying a house. Entering the housing market == intending to buy a house.
- deleted 4y ago
  [deleted]
- rowanajmarshall 4y ago
  Yes, they "should" have. But they aren't. The average first-time buyer in the UK is now about 32-34 years old, and it's worse in places like London.
  - sdevonoes 4y ago
    But, how on earth is someone in their 20s able to afford a mortgage for a decent house in Western Europe? Even for us, developers, who are supposed to be the top 10% earners, it's rather difficult to afford a mortgage. Let's say you are 28 and live in Germany working as a software engineer. You probably earn around 60K euro/year which means (for singles) around 3K/month after taxes. If you want to afford a house (not a flat) then prices start at around 600K EUR (unless you are OK with going to live to a town in the middle of nowhere in your 20s. There prices lower a bit) and usually mortgages are for around 30 years. In your 30s, you have some more money saved and probably earn more, and probably you don't care anymore if you have to go to live in a town (you are not in your 20s anymore, so the exiting city-center kind of life could not be so appealing to you anymore)
  - once_inc 4y ago
    That's not my point. People aged 25-30 first enter the housing market. Most of the millennials have been on the market for a while now, but haven't been able to buy because it is unaffordable to them. I know 40yo people that have been looking for a place to buy for years now.
andrewstuart 4y ago
Housing should not be a financial instrument. Governments everywhere do nothing about the insane house prices because all the politicians own multiple houses. They want nothing more than house prices to keep going up. I think: * people should be financially punished for owning more than two houses - via dramatically higher taxes * everyone who wants to own a house should have the means to buy one - yes that means teachers, firemen, policemen, the disabled, warehouse workers * the government should provide people with the deposit needed to buy a home * banks should be banned from requiring deposits - this is just a means of keeping house ownership for rich people, so it should be banned * any house that is rented must be offered for ownership to the long term renter * all international house ownership should be banned - you must be a citizen or permanent resident to own a home * corporations must be banned from owning homes in order to rent them * In Australia, the government - and this is hard to believe - gives money to investors who own multiple houses via tax breaks. This must be reversed into multiple home ownership leading to paying much more taxes. The goal is to crash house prices as far down as they possibly can be crashed. I loathe it that housing has divided our society into landlords an renters, and anyone who owns a house does not give a shit about those who don't. I welcome the economic conditions that will lead to housing markets being ruined and will party and celebrate those investors who own multiple houses suffering ruinous losses - I'll laugh. ... when you read the negative comments to this post .... probably those against own houses, those for do not own houses.
- pxue 4y ago
  The problem is fed has been artificially dampening the interest rate for so long that housing is the only non stock alternative inflation matching way to invest your money. I would be more than happy to park my downpayment in a US government bond if it matches/beats inflation every single year.
  - cudgy 4y ago
    This is the key issue. By artificially lowering rates, the central banks have funneled money into assets like stocks and real estate, which results in artificially high prices for these assets. Meanwhile, bonds, cash, and other savings instruments are hammered. Now there is nowhere to place money except in commodities like real estate, oil, metals, etc which further exacerbates the problem of inflation. The idea that a few supposedly “smart” economists can effectively run the economy is absurd and needs to be reversed. There are fundamental checks and balances in economies that have been hampered by these central banks, resulting in the build up of asset prices beyond anything in recent history. Buckle up.
doctoboggan 4y ago
My wife and I are buying a house in Chicago in a few months. Is there anything we should be doing now to prepare for this impending "storm"?
- tacomonstrous 4y ago
  Chicago house values have been quite stable in certain neighborhoods. The South Loop condo that I sold 5 years ago has barely appreciated in value, while the condo I sold 4 years ago in the Boston area has gone up 70% since.
  - doctoboggan 4y ago
    My wife will be working in Portage Park, do you have any suggestions for good neighborhoods in the area we should consider?
    - Kon-Peki 4y ago
      Spend time outdoors while house shopping. You are close enough to O'Hare to have a lot of jets flying above you, yet they are already lined up for a specific runway - noise can change a lot from one block to the next. People put a lot of value in walkability and nearby amenities. As far as large American cities go, Chicago is extremely child friendly and child-focused. The attendance area for the neighborhood schools are small. Chicago Public Schools has an excellent mapping tool - don't trust the real estate listings. They lie. City employees in Chicago are required to live inside the city. The northwest side has a heavy concentration. On one block every third house will be a policeman or fireman. On another block it will be streets and san workers. Then teachers. Etc. It does affect the character of the block :)
      - doctoboggan 4y ago
        Thanks for the great advice, very helpful.
- bell-cot 4y ago
refurb 4y ago
No scoring system is perfect, but I would criticize a few things: - house price increase ignores the base which the increase occurred; Canada never had a 2008 crash, so even though their increase is smaller, it’s on a larger base (and now sits at 200% of US prices) - percent of variable rate; in Canada nobody gets a fix rate longer than 5 years, many doing floating for 1 year only; the US variable rate can be fixed for 5,7 or 10 years before floating So despite the US scoring “worse” on those two measures, I’d argue Canada is in a more precarious situation by the same measure
mabbo 4y ago
I bought my condo in 2015, in Toronto. It's value has doubled since then (similar units literally selling for twice as much in less than a week). And this is despite the fact that the best burrito place in the city moved from across the street! THAT'S WHY I MOVED HERE. In conclusion, the Toronto housing market is absolutely screwed when the crash comes.
- simonebrunozzi 4y ago
  Did you invest in the condo next to where the Burrito placed moved to?
MrDunham 4y ago
> Homes in America and Britain are selling faster than ever. I only made it this far in the article (roughly the third sentence) before I had to drop it come here to tell a story of a one week delay (likely) costing my family $200k. My mother just sold our childhood home she owned for 39 years. It’s 20 minutes south of San Jose/the Bay Area. Has she been one week earlier posting it she likely would’ve got $200,000 more. Here’s what happened… The house was listed originally at about $1.5 million (Great view but oh my God does it need reno - I digress). After a bidding war and a triggered ratchet (forget exactly what this is called but I’d never heard of it before) auto-bidding an extra $30k ish boost - she had a $1.7 million offer contingent only on the buyer selling their Cupertino house. She also had a back up offer in the mid $1.6M range. The sellers ended up not being able to sell their house in Cupertino where just a week or two earlier homes were flying out of inventory before they even made it onto the MLS. Backup offer also fell through. They ended up taking an offer they’d already rejected (buyers came back with a slightly better lowball offer) which was right at the listing price, $1.5 million. We’re hopeful it will close but the buyers may not be able to finance now with rate hikes. STORY 2 My stepfather is a private fiduciary and sells a lot of homes from estate sales for trusts he manages in the Bay. Literally in the last week or so they’ve gone from getting bids at hundreds of thousands over to bids at or below listing price (and accepting them). I say this because even looking at data over the last month would be stale as, at least in the few data points I have in Silicon Valley, the bottom seems to be rapidly dropping out of the market and it’s changing on a day by day basis.
morninglight 4y ago
> The goal is to crash house prices as far down as they possibly can be crashed. Wrong, the goal is to crash wages as far down as they possibly can be crashed. About 30 years ago we decided to compete economically with China. We knew they could not reach our level of prosperity. We overlooked the current situation where we sink to their level. Welcome to the future. .
alkonaut 4y ago
The diagram misses an important factor: normal interest level the last decade(s) and typical length of mortgages. The worst is what I have where markers have been considered so low risk that we have interest/-only mortgages or 100 year mortgages with ~1% interest. That makes no difference to the cost of the mortgage but it drives up the prices and means buyers take a lot more risk because a monthly $2k (say) is now a $1M instead of a much smaller figure somewhere where mortgages are 30 or 50 years and interests have central bank rate plus more than one percent. At least I fixed my interest rate at 2% for 5 years just now. But I fear it’ll be too short.

48 points by ethor 4y ago

Europe is doubly-screwed, because the central bank can't raise interest rates without causing instant defaults for most southern European countries, because their bonds become junk at any rate above 0%. They've painted themselves in a corner in 2008-2010 and are now presented with the bill.

deleted 4y ago
[deleted]
simonebrunozzi 4y ago
Instant defaults? Not necessarily. As long as you find enough buyers for govt bonds, these governments can keep going for several years. But yes, I agree that long term it's going to be a serious issue. Defaults wouldn't be "instant", though, as you say.
- heurisko 4y ago
  Southern European states, such as Greece are already bankrupt--they are just in the European Union's debtor's prison. There is a fundamental schism in the EU, and that is they share a currency, without a common fiscal policy. It's a problem that will never go away, until member states cede power to set budgets, pensions, etc. to the EU, which I can't see happening. https://www.theguardian.com/commentisfree/2018/aug/26/greece-was-never-bailed-out---it-remains-a-debtors-prison-and-the-eu-still-holds-the-keys https://www.theguardian.com/commentisfree/2018/aug/26/greece...
tmaly 4y ago
the only other corner to paint would be direct loans from central bank to consumer. But if that happened, the prices would climb even higher.

chris_wot 4y ago

New Zealand? Hell, Australia is more screwed than any country. When the housing bubble bursts, it’s going to destroy the economy.

slyall 4y ago
New Zealanders are moving to Australia because the the wages are 30% high and the houses prices are lower or the same.
- quickthrower2 4y ago
  Thats bonkers. Australia as an economic refuge for cost of living!

doubleg 4y ago

https://archive.ph/joUwS https://archive.ph/joUwS

quintes 4y ago

New Zealand. Housing market disaster. Didn’t read the article but upset enough about it

deleted 4y ago
[deleted]

chiefalchemist 4y ago

> For more than a decade homeowners benefited from ultra-low interest rates. Homeowners benefit from higher prices? How does that work? Low interest rates increase demand. Increased demand increases price. Higher prices mean a larger initial payment (i.e., 20% down). Higher prices typically mean higher assessed value (i.e., higher property taxes). These benefit homeowners how? Ultimately, it's about the total cost of the mortgage. That is the price of the home. The closing price is an illusion. Finally, a higher interest rate can always be refinanced in the future. The higher rate gives you a lower closing price. The re-fi lowers the total cost of the mortage.

ivanbakel 4y ago
A lot of the downsides you listed apply to house-buyers, not homeowners. If you already have a property, deposit size doesn't matter to you. Price increases are only a positive - it's the bank that's losing out. While you may pay more in property tax, I'm sure the savings on your mortgage interest more than offset any tax increases.
- lotsofpulp 4y ago
  I would expect that more likely than not, the same dynamics allowing the interest rate to be low also cause the purchasing power of the currency to decrease. A homeowner not able to increase their income to offset this decrease in purchasing power may be experiencing a net loss of purchasing power even if their mortgage interest costs decrease.
  - chiefalchemist 4y ago
    Bingo! Inflation!! That too must be factored in. Cheap printed money === inflation
  - ivanbakel 4y ago
    In a developed service-based economy, relative purchasing power isn't that important in the short term. You might eventually notice the indirect impact of imports being more expensive, but I doubt that matters too much to the average person. You also have to account for the fact that house prices are rising - so even if you're losing purchasing power, you're still making nominal gains on your assets.

refurb 4y ago

Canada is proper screwed. Median sales price across the whole country is 2x the US. Plus Canada doesn’t get 30 year fixed mortgages. I’ve already seen people pissed that when they renew their 5 year mortgage the rate is higher than 2 weeks ago. In the past month the rates have gone up and the ‘burbs of Toronto are seeing double digit percent decreases. Gonna be fun to check prices in 6 months!

orwin 4y ago
Montreal prices seemed a bit high but not exeptionnal compared to the median income before Covid, did that change a lot?
- refurb 4y ago
  Montreal was quite affordable alongside many other cities like Halifax, Calgary, etc. They’ve seen a run up but still aren’t that high - 400-500k up from 200-300k. Could see a correction, but it’s nothing like Ontario and BC where small towns are >$1M already.

fruitenjoyer 4y ago

donthellbanme 4y ago

random_moonwalk 4y ago

'In Australia, homeowners’ average debt as a share of income has swollen to 150%' - does this mean the monthly repayments are 1.5x the monthly income of owners? The number of > 100% debt as share of income is wild if I'm interpreting this correctly - how is this not indicative of a swathe of imminent defaults?

plantain 4y ago
That is not what it means.
pestatije 4y ago
It's a yearly number...they would have to spend all their income, including taxes, for 1.5 years to pay off their debt.
HPsquared 4y ago
There's an implicit "per year" in there. It's better expressed as a time: "100%" means "1 year's worth". There's no tipping-point.
thedougd 4y ago
No, it's a ratio of remaining debt to yearly income. Notice they say new home owners have a multiple of 4 to 5. On average a person making 100k a year has 150k or remaining debt.
- random_moonwalk 4y ago
  Ah this makes way more sense!
- em500 4y ago
  More specific, it's the outstanding debt to disposable (i.e., after tax) yearly income. Even more specific, I it's probably the total outstanding mortgage debt in a country divided by the total disposable household income in the country, including incomes of non-mortage holders and renters. If you think that denominator doesn't make much sense, I largely agree, but it's fairly standard to calculate it that way in macro-economic reports. So I believe the article writer actually misinterpreted that number, writing that it's 150% of homeowners income.

occz 4y ago

Truly worrisome to see Sweden at the top, but definitely not surprising.

jdmoreira 4y ago
Not surprising indeed. This has been a long time coming. A lot of families max leveraged themselves to be able to buy. I feel sorry for the people that will end up in a bad situation but I've been waiting for a long time to make my move, we will see how it plays out.
- framtidsljus 4y ago
  Supply is still lower than demand, I don't see why that would suddenly change. (Still renting after looking for a house for years, while watching houses getting more expensive by the month)
  - jdmoreira 4y ago
    When people can't afford paying the interest of their 10 million sek house loan, supply and demand matters very little. It all depends on how high interest rates go.
vegai_ 4y ago
Yeah. Over here in Finland plenty of people look at images like this https://nordregio.org/wp-content/uploads/2020/02/0376_Nordic_DHI_2011_2017_web.png https://nordregio.org/wp-content/uploads/2020/02/0376_Nordic... with great jealosy, but perhaps some amount of financial conservatism isn't such a bad thing always. Only time will tell, of course. Sweden's model has worked pretty damned well so far and this threat has been visible for a long time.
- ethor 4y ago
  Very interesting, thank you for sharing. Sweden, Norway, Denmark and Iceland have seemingly all chosen the same path, will Finland has remained conservative. The future will tell what was the best policy.

baybal2 4y ago

once_inc 4y ago

> Strong job markets, hordes of millennials nearing homebuying years and a shift to remote working have raised the demand for more living space. Millennials are now between 25 and 40. They should nearly all have been on the market for buying homes by now. edit: people misunderstood me, so I'll amend my point somewhat to clearer convey what I meant: most millennials have been on the housing market for years, but are unable to buy. Only the tail-end of the millennials haven't entered the market yet (because they live at home and are still in school). Entering the housing market != buying a house. Entering the housing market == intending to buy a house.

deleted 4y ago
[deleted]
rowanajmarshall 4y ago
Yes, they "should" have. But they aren't. The average first-time buyer in the UK is now about 32-34 years old, and it's worse in places like London.
- sdevonoes 4y ago
  But, how on earth is someone in their 20s able to afford a mortgage for a decent house in Western Europe? Even for us, developers, who are supposed to be the top 10% earners, it's rather difficult to afford a mortgage. Let's say you are 28 and live in Germany working as a software engineer. You probably earn around 60K euro/year which means (for singles) around 3K/month after taxes. If you want to afford a house (not a flat) then prices start at around 600K EUR (unless you are OK with going to live to a town in the middle of nowhere in your 20s. There prices lower a bit) and usually mortgages are for around 30 years. In your 30s, you have some more money saved and probably earn more, and probably you don't care anymore if you have to go to live in a town (you are not in your 20s anymore, so the exiting city-center kind of life could not be so appealing to you anymore)
- once_inc 4y ago
  That's not my point. People aged 25-30 first enter the housing market. Most of the millennials have been on the market for a while now, but haven't been able to buy because it is unaffordable to them. I know 40yo people that have been looking for a place to buy for years now.

andrewstuart 4y ago

Housing should not be a financial instrument. Governments everywhere do nothing about the insane house prices because all the politicians own multiple houses. They want nothing more than house prices to keep going up. I think: * people should be financially punished for owning more than two houses - via dramatically higher taxes * everyone who wants to own a house should have the means to buy one - yes that means teachers, firemen, policemen, the disabled, warehouse workers * the government should provide people with the deposit needed to buy a home * banks should be banned from requiring deposits - this is just a means of keeping house ownership for rich people, so it should be banned * any house that is rented must be offered for ownership to the long term renter * all international house ownership should be banned - you must be a citizen or permanent resident to own a home * corporations must be banned from owning homes in order to rent them * In Australia, the government - and this is hard to believe - gives money to investors who own multiple houses via tax breaks. This must be reversed into multiple home ownership leading to paying much more taxes. The goal is to crash house prices as far down as they possibly can be crashed. I loathe it that housing has divided our society into landlords an renters, and anyone who owns a house does not give a shit about those who don't. I welcome the economic conditions that will lead to housing markets being ruined and will party and celebrate those investors who own multiple houses suffering ruinous losses - I'll laugh. ... when you read the negative comments to this post .... probably those against own houses, those for do not own houses.

pxue 4y ago
The problem is fed has been artificially dampening the interest rate for so long that housing is the only non stock alternative inflation matching way to invest your money. I would be more than happy to park my downpayment in a US government bond if it matches/beats inflation every single year.
- cudgy 4y ago
  This is the key issue. By artificially lowering rates, the central banks have funneled money into assets like stocks and real estate, which results in artificially high prices for these assets. Meanwhile, bonds, cash, and other savings instruments are hammered. Now there is nowhere to place money except in commodities like real estate, oil, metals, etc which further exacerbates the problem of inflation. The idea that a few supposedly “smart” economists can effectively run the economy is absurd and needs to be reversed. There are fundamental checks and balances in economies that have been hampered by these central banks, resulting in the build up of asset prices beyond anything in recent history. Buckle up.

doctoboggan 4y ago

My wife and I are buying a house in Chicago in a few months. Is there anything we should be doing now to prepare for this impending "storm"?

tacomonstrous 4y ago
Chicago house values have been quite stable in certain neighborhoods. The South Loop condo that I sold 5 years ago has barely appreciated in value, while the condo I sold 4 years ago in the Boston area has gone up 70% since.
- doctoboggan 4y ago
  My wife will be working in Portage Park, do you have any suggestions for good neighborhoods in the area we should consider?
  - Kon-Peki 4y ago
    Spend time outdoors while house shopping. You are close enough to O'Hare to have a lot of jets flying above you, yet they are already lined up for a specific runway - noise can change a lot from one block to the next. People put a lot of value in walkability and nearby amenities. As far as large American cities go, Chicago is extremely child friendly and child-focused. The attendance area for the neighborhood schools are small. Chicago Public Schools has an excellent mapping tool - don't trust the real estate listings. They lie. City employees in Chicago are required to live inside the city. The northwest side has a heavy concentration. On one block every third house will be a policeman or fireman. On another block it will be streets and san workers. Then teachers. Etc. It does affect the character of the block :)
    - doctoboggan 4y ago
      Thanks for the great advice, very helpful.
bell-cot 4y ago

refurb 4y ago

No scoring system is perfect, but I would criticize a few things: - house price increase ignores the base which the increase occurred; Canada never had a 2008 crash, so even though their increase is smaller, it’s on a larger base (and now sits at 200% of US prices) - percent of variable rate; in Canada nobody gets a fix rate longer than 5 years, many doing floating for 1 year only; the US variable rate can be fixed for 5,7 or 10 years before floating So despite the US scoring “worse” on those two measures, I’d argue Canada is in a more precarious situation by the same measure

mabbo 4y ago

I bought my condo in 2015, in Toronto. It's value has doubled since then (similar units literally selling for twice as much in less than a week). And this is despite the fact that the best burrito place in the city moved from across the street! THAT'S WHY I MOVED HERE. In conclusion, the Toronto housing market is absolutely screwed when the crash comes.

simonebrunozzi 4y ago
Did you invest in the condo next to where the Burrito placed moved to?

MrDunham 4y ago

> Homes in America and Britain are selling faster than ever. I only made it this far in the article (roughly the third sentence) before I had to drop it come here to tell a story of a one week delay (likely) costing my family $200k. My mother just sold our childhood home she owned for 39 years. It’s 20 minutes south of San Jose/the Bay Area. Has she been one week earlier posting it she likely would’ve got $200,000 more. Here’s what happened… The house was listed originally at about $1.5 million (Great view but oh my God does it need reno - I digress). After a bidding war and a triggered ratchet (forget exactly what this is called but I’d never heard of it before) auto-bidding an extra $30k ish boost - she had a $1.7 million offer contingent only on the buyer selling their Cupertino house. She also had a back up offer in the mid $1.6M range. The sellers ended up not being able to sell their house in Cupertino where just a week or two earlier homes were flying out of inventory before they even made it onto the MLS. Backup offer also fell through. They ended up taking an offer they’d already rejected (buyers came back with a slightly better lowball offer) which was right at the listing price, $1.5 million. We’re hopeful it will close but the buyers may not be able to finance now with rate hikes. STORY 2 My stepfather is a private fiduciary and sells a lot of homes from estate sales for trusts he manages in the Bay. Literally in the last week or so they’ve gone from getting bids at hundreds of thousands over to bids at or below listing price (and accepting them). I say this because even looking at data over the last month would be stale as, at least in the few data points I have in Silicon Valley, the bottom seems to be rapidly dropping out of the market and it’s changing on a day by day basis.

morninglight 4y ago

> The goal is to crash house prices as far down as they possibly can be crashed. Wrong, the goal is to crash wages as far down as they possibly can be crashed. About 30 years ago we decided to compete economically with China. We knew they could not reach our level of prosperity. We overlooked the current situation where we sink to their level. Welcome to the future. .

alkonaut 4y ago

The diagram misses an important factor: normal interest level the last decade(s) and typical length of mortgages. The worst is what I have where markers have been considered so low risk that we have interest/-only mortgages or 100 year mortgages with ~1% interest. That makes no difference to the cost of the mortgage but it drives up the prices and means buyers take a lot more risk because a monthly $2k (say) is now a $1M instead of a much smaller figure somewhere where mortgages are 30 or 50 years and interests have central bank rate plus more than one percent. At least I fixed my interest rate at 2% for 5 years just now. But I fear it’ll be too short.