Current issues with the market - Any ideas on avoiding the end?

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Kernel32 Sanders said:
Sadly, we've been in a bull market for so long (until recently) that it really screwed up expectations on what rational investments should actually be. Now us potential first time home buyers get totally fucked over on a chance to even give this a go without a serious burden of risk if things go south. If say you bought a few years ago and managed to refinance to a sub 3% rate... you effectively won the lottery in life. Gotta be great to make massive returns on a property and doing fuck all to get there.
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I'm not sure I would say "totally fucked over". Looking at current rates I see 30-years in the 6.0-6.5% range depending on d/p. For comparison, I was paying around 7% as a first-time homeowner in the 90's, and my parents' generation was paying similar or higher rates back in the 70's. Even with the recent rise, mortgage rates are still lower than historical averages.

To borrow your phrase: we've been in an artificial low-rate regime for so long that it really screwed up expectations on what rational interest rates should actually be. Remember that the lender on the other side of the transaction needs to guard against both inflation risk and repayment risk,

My advice to anyone considering buying their first home, basically agrees with your final paragraph. Prices are massively inflated right now, I would say wait a few months and see if prices start dropping. They should, because of reduction in demand - and already have started in some areas. And second, plan on holding it for 7-10 years or more like you said. Long-term investment, and don't bite off more than one can chew. If it means buying a smaller house, then buy a smaller house. Most people don't need a 3000-4000 sq. ft. McMansion.

But eventually one of two things will happen: either rates will continue rising (see early 1980's) and you'll be thrilled to have locked in that nice, low 6% rate while your new neighbor is paying 10% - or rates will drop again and you'll be able to refinance like I did a few years after the GFC.

FRED Mortgage Rates History.png
 
Joe Shmo said:
I'm not sure I would say "totally fucked over". Looking at current rates I see 30-years in the 6.0-6.5% range depending on d/p. For comparison, I was paying around 7% as a first-time homeowner in the 90's, and my parents' generation was paying similar or higher rates back in the 70's. Even with the recent rise, mortgage rates are still lower than historical averages.

To borrow your phrase: we've been in an artificial low-rate regime for so long that it really screwed up expectations on what rational interest rates should actually be. Remember that the lender on the other side of the transaction needs to guard against both inflation risk and repayment risk,

My advice to anyone considering buying their first home, basically agrees with your final paragraph. Prices are massively inflated right now, I would say wait a few months and see if prices start dropping. They should, because of reduction in demand - and already have started in some areas. And second, plan on holding it for 7-10 years or more like you said. Long-term investment, and don't bite off more than one can chew. If it means buying a smaller house, then buy a smaller house. Most people don't need a 3000-4000 sq. ft. McMansion.

But eventually one of two things will happen: either rates will continue rising (see early 1980's) and you'll be thrilled to have locked in that nice, low 6% rate while your new neighbor is paying 10% - or rates will drop again and you'll be able to refinance like I did a few years after the GFC.
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Of course, I was being a bit hyperbolic, and I appreciate your level-headed analysis. You are right that the interest rate is still, on the whole, better than in years past. Yet this doesn't change the current pricing of homes being the way they are. There are still too many deluded flippers and get-rich-quick types hoping to dump their properties on someone else.

I would just prefer that the property I purchase is not massively overvalued to begin with. Interest rates I can deal with, because we can always refi, like you said. I certainly don't want to be upside down on a house for ages. I think @Uncle June even mentioned how he bought right at the cusp of the last housing bubble back in 2007 and how long it took him to break even on that. That would be horrifying to me.
 
兄貴 Forevermore said:
What's the chance they end up hyperinflating (either maliciously or by retardation) and then just redemoninating to a new currency? I can see it happening in the west after the covid retardation.
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So long as the US Dollar remains the reserve currency, not that big a chance. There will be enough foreign demand for the US Dollar that all that excess shit can be dumped into other countries economies. The fact that we are approaching 10% inflation anyway given the US Dollars position in the global economy is by itself a stupefying example of economic mismanagement not seen in a very long time.
 
Kernel32 Sanders said:
Of course, I was being a bit hyperbolic, and I appreciate your level-headed analysis. You are right that the interest rate is still, on the whole, better than in years past. Yet this doesn't change the current pricing of homes being the way they are. There are still too many deluded flippers and get-rich-quick types hoping to dump their properties on someone else.

I would just prefer that the property I purchase is not massively overvalued to begin with. Interest rates I can deal with, because we can always refi, like you said. I certainly don't want to be upside down on a house for ages. I think @Uncle June even mentioned how he bought right at the cusp of the last housing bubble back in 2007 and how long it took him to break even on that. That would be horrifying to me.
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My situation certainly did suck. I think by 2010 when I bottomed out I my home's value was about $170k...down from $280k...I think I came back to value ~2014 but hard to say for sure. Didn't get an officially appraisal on it until last year ($335k). Also had a 6.5% to boot lol.

That being said every bit of me doesn't think we're in for a 2008 repeat. Home prices will surely drop stricly due to lower demand, but between low supply (historically speaking), runaway inflation (higher, out of control rent), foreign investors on the sidelines (ugh), and builders scaling back, to expect a substantial drop seems hard to justify. It'll vary by market but in my best guess...10-25% reductions seem reasonable, so most of the covid gains.

I've said it before, but even if you bought at the peak like I did, at the worst possible point, you should purchase with at least a 10 year timeframe. This will give you enough time to recover any lost equity plus additional for closing costs (ONLY if you HAVE to sell of course, longer is always better). Don't forget that you're also paying down principle and gaining equity every month regardless of your home's value declining. Given how slow the housing market moves, you may never become underwater.

I ultimately kept mine and still use it as a rental and plan to pay it off next year. Bought my forever home in 2015 and have ~$200k in equity in it. You win some you lose some.
 
So I saw a lot of talk in the thread about using gold as a store of wealth, but last time the US economy really shat the bed the government just made it illegal to own and stole it all. See here. Admittedly, at the time the dollar was backed by gold and the US was running out of it, but is there really any guarantee the state wouldn‘t just seize all your previous materials if suit went bad. I mean, it wasn’t like society had collapsed in the Great Depression, so it doesn’t seem like one of those, “well if that happens you were fucked anyway” sorta deals.
 
TracdacianTortoise said:
So I saw a lot of talk in the thread about using gold as a store of wealth, but last time the US economy really shat the bed the government just made it illegal to own and stole it all. See here. Admittedly, at the time the dollar was backed by gold and the US was running out of it, but is there really any guarantee the state wouldn‘t just seize all your previous materials if suit went bad. I mean, it wasn’t like society had collapsed in the Great Depression, so it doesn’t seem like one of those, “well if that happens you were fucked anyway” sorta deals.
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if you want to use gold or other commodities as safe wealth storage, get actual physical gold and keep it in your home. even if govt wants to seize gold, theyre not going to come to your house and rip up the floors to see if you have anything hidden away somewhere.
 
Uncle June said:
My situation certainly did suck. I think by 2010 when I bottomed out I my home's value was about $170k...down from $280k...I think I came back to value ~2014 but hard to say for sure. Didn't get an officially appraisal on it until last year ($335k). Also had a 6.5% to boot lol.
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In my neighborhood things bottomed out immediately and it took until 2014 before they were back to pre-housing crisis levels.

Now, where my friend lives it took until literally summer of last year. That's a weird massively overbuilt suburban hell with few jobs and not much else going for it though. Gotta take local market into account.
 
TracdacianTortoise said:
So I saw a lot of talk in the thread about using gold as a store of wealth, but last time the US economy really shat the bed the government just made it illegal to own and stole it all. See here. Admittedly, at the time the dollar was backed by gold and the US was running out of it, but is there really any guarantee the state wouldn‘t just seize all your previous materials if suit went bad. I mean, it wasn’t like society had collapsed in the Great Depression, so it doesn’t seem like one of those, “well if that happens you were fucked anyway” sorta deals.
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Everyone who buys gold now knows about that risk so it won't happen again. Or it will but it will just be the saps dumb enough to store it in a bank.
 
Just felt like posting this, Cramer the retard of Wall Street, having a meltdown back in the day.



This is what happens when boomers get hit in the wallet. I wonder if this is how Europe feels right now.
 
Retink said:
Just felt like posting this, Cramer the retard of Wall Street, having a meltdown back in the day.


cramer1.mp4
This is what happens when boomers get hit in the wallet. I wonder if this is how Europe feels right now.
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All I'm getting from this is that we're about to enter a bull market. When was the last time Cramer was right about something?

Still, I can't help but laugh at wall street parasites whining about a hard economy.
 
Audit said:
All I'm getting from this is that we're about to enter a bull market. When was the last time Cramer was right about something?

Still, I can't help but laugh at wall street parasites whining about a hard economy.
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Good point lol.

Though I am rather bullish on international at the moment. US and international have regularly swip swapped throughout the years on who has the better performance.

US has has a ridiculous run since 2009, with international lagging. I feel like the cards are going to change hands for the next decade as the US sorts out it's crises. This is not financial advice of course.

That being said I'm a Boglehead at heart and will continue to pour money into both VTI and VXUS. Just make sure you keep a diversified portfolio and you'll be better off than any wall street hack.
 
I had 412p for next friday that hit the stop loss during jackon's hole by two dollars. they sold for 4 each and are now worth 17 each. GOD DAMNIT. That shows why you really need balls of steel with options and not not usually use limits if you have a thesis. I read a million words about how the rally was fake and caused mostly by short sellers covering and even talked to some MMs types about it that agreed. And yet I still set a fucking stop loss 2 dollars two high that cost me about 5K.
 
Uncle June said:
That being said I'm a Boglehead at heart and will continue to pour money into both VTI and VXUS. Just make sure you keep a diversified portfolio and you'll be better off than any wall street hack.
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What about vt? I prefer Schwab's offerings. SCHF.
 
tehpope said:
What about vt? I prefer Schwab's offerings. SCHF.
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VT is a great choice, though it's slightly cheaper to buy VTI/VXUS separately. Plus I tend to keep a slightly lower international ratio.

That being said, the tax differences are minor at best, so if simplicity is your thing by all means you can go VT.

I once used Schwab and I have to say they're my least favorite of them, Vanguard and Fidelity. Nothing in particular against them, I just prefer Vanguard's simplicity more.
 
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