<div class="bbWrapper"><blockquote data-attributes="member: 69618" data-quote="KAIZOS" data-source="post: 999299"
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Real estate is basically functioning as a pyramid scheme, with the need for housing as a way to force new entrants to be the greater fools.<br />
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Prices are not going up not based on value, but based on scarcity due to money devaluation (and eventually perverse incentives with restricting the supply of new houses). People en masse abandoned savings accounts for real estate as a way to protect against inflation. This is the reason billionaires row is half empty.<br />
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Houses are historically a bad investment. Illiquid, not divisible, high maintenance, depreciation, easily taxable, regulatory risks, need for (good) renters. This was before the money printer tho, since nowadays investment funds don't even care if it is rented or not. The price will increase anyway.<br />
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Another point; the housing market has a lot of systemic leverage in it. Practically everyone buys a house with leverage, either due to being unable to pay cash, or it not being a financially rewarding choice.<br />
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So what happens when the interest rates rise? The leverage dries up. New entrants are unable to buy in. Only big funds with access to cheap debt can still buy (blackrock etc.)<br />
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But the current people owning real estate will not sell as long as the money printer keeps going brrr, since it hedges against the inflation. They cant to sell the house, since they will lose the low interest mortage.<br />
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I think the market will become stuck due to this. No retail sellers due to money printer, no retail buyers due to high interest. Blackrock buys up the houses of people who are liquidated due to cost of living rising and unable to pay mortgage.<br />
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Meanwhile politicians are looking for ways to regulate and tax real estate. High housing prices give a lot of political pressure, and are a cookiejar for untapped wealth to confiscate. E.g. a californian bill that wants to tax 'house flippers'.<br />
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I also think that the more bitcoin will prove to be an inflation hedge / savings account, a lot of the monetary premium from real estate will flow out, since most of the money is just looking for a store of value.<br />
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Crime is also rising very fast in cities (where the most real estate money is being made), and will only get worse with inflation running rampant. Work from home on the rise. Thinking long term..<br />
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==== conclusion:<br />
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Real estate is very high risk right now due to<br />
1) bad investment qualities<br />
2) propped up due to inflation<br />
3) highly leveraged market<br />
4) regulations / taxes are coming<br />
5) increasing crime in cities and WFH<br />
6) rising mortgage interest rates
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</blockquote>Well thought out reply. I appreciate the time you put into it. I totally agree and understand what you're saying.<br />
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The whole topic still leaves so many questions. <br />
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The answer to all this seems obvious, but it's so much more complicated. The first domino to fall is definitely interest rates.<br />
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Higher rates -> Less borrowing -> Potentially lower housing prices (in theory).<br />
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A large piece comes down to companies and their continued employment to keep up with this insanity. I assume many businesses have been able to continue paying and raising wages due to EIDL loans and PPP grants. <br />
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A crap ton of money was given out and those loans keep getting pushed back by the feds. EIDL was going to be payable starting March but now it was pushed back another 6 months.<br />
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Many business owners I knew took lots of money. Probably more than they needed. Seemed like they spent it as if they didn't have to pay it back in my opinion. <br />
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The start of that loan repayment could be another domino for sure when that becomes active. Also student loans just recently started back up if I am not mistaken, so you need to watch for that as well. <br />
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This isn't a doom and gloom post as much as maybe a potential look out for opportunity. I know some of us in here invest in RE from what I have seen.</div>
