Economics

  • Thread starter Rallywagon
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Eunos_Cosmo
You mean if you were young and already owned a house/real estate? How old were you when you bought your first piece of property? Just curious.
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I was tardy to the game of home ownership, and should have done it much sooner. I frittered away much of my youth in globetrotting adventure-seeking. I bought my first house when I was ~36 for the price of 64K. It is now worth north of 900K.

IMHO tech stocks stand to drop much more than they have done so far. I'd wait to buy these.

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The market is continuing to crash. There is no sign of capitulation - a bottom. If it continues to crash after going through Dow 23000, we are at a crossroads.

When economic activity significantly slows and the layoffs come, it's a bad sign.
 
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Dotini
I was tardy to the game of home ownership, and should have done it much sooner. I frittered away much of my youth in globetrotting adventure-seeking. I bought my first house when I was ~36 for the price of 64K. It is now worth north of 900K.

IMHO tech stocks stand to drop much more than they have done so far. I'd wait to buy these.

Edit:
The market is continuing to crash. There is no sign of capitulation - a bottom. If it continues to crash after going through Dow 23000, we are at a crossroads.

When economic activity significantly slows and the layoffs come, it's a bad sign.
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Yeah...see...us "young'uns" don't have the luxury of dirt cheap real estate. I'm certain your starter house has out-accelerated inflation, wages, and everything else (by a large margin!) as older generations crafted the whole "real estate is the investment" while buying up all of it.
 
Eunos_Cosmo
Yeah...see...us "young'uns" don't have the luxury of dirt cheap real estate. I'm certain your starter house has out-accelerated inflation, wages, and everything else (by a large margin!) as older generations crafted the whole "real estate is the investment" while buying up all of it.
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I'm trying to add up the numbers on this one. I keep trying to bump @Dotini over age 80 to make that work out.
 
Eunos_Cosmo
Per this, I'm guessing Dotini bought his house sometime in the 1970s...which would validate your math.
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Yea if you really want to see the astronomical house price numbers, you have to go to the other side of the insane inflation in the 70s.
 
Eunos_Cosmo
Per this, I'm guessing Dotini bought his house sometime in the 1970s...which would validate your math.
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I bought my first house in '86, and my most recent about 20 years ago. I still own both.

Today, if I were young, I might put 20% of my mad money into oil producers with zero debt load, and 5% into gold mining. With the remaining 75%, I'd double it by folding it in half and putting it into my pocket. :D
 
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Danoff
Yea if you really want to see the astronomical house price numbers, you have to go to the other side of the insane inflation in the 70s.
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Well yes - it's true that the "insane inflation" period exaggerated the apparent increase in real estate prices. But the rules of supply & demand always hold sway. If you own property in some small town area of the US that has seen no increase in population for decades - or maybe an actual decrease - you're not going to see much, or any effective price increase even over decades. A lot of Trump voters are in that position & are likely to have been left behind in the growth of assets compared to urbanites. Then there are city dwellers (Democrats voters) who live in cities that have been on a downward trajectory for years. Examples: Detroit, Cleveland & Buffalo - cities that I know very well.

The comparison of Buffalo to nearby Toronto is interesting. Buffalo's population peaked in 1950, like many former industrial cities, at which time it was the 15th largest city in the US. Buffalo's population has declined in every census since 1950 when its population was 580,000. In 2006, Buffalo's population was equivalent to its population in 1890, essentially reversing it 120 years. In 2008, the United Nations rated the Buffalo-Niagara Falls area as being one of the worst cities in the world in terms of economic inequality and racial bias, stating that 40% of Hispanic, black and ethnically mixed households earned less than $15,000, versus 15% of white households.

Over the same period, since 1950, Toronto's population has grown about 600%. As a consequence, real estate prices have sky-rocketed. But the likelihood is that real estate will continue to be a good investment for young people (if they can get a foot in the door) as future growth is almost certain. The main driver for Toronto's growth & prosperity ? Immigration. Toronto is the most diverse city in the world. Approximately 50% of the residents of the GTA were born outside Canada. The majority of that immigration in the last two decades has been from Asia.

In the last few years, Buffalo has started to experience a revitalization. Rock bottom real estate prices have encouraged a gradual influx of educated millennials. The possibility exists that millennials getting into the market now will see a steady growth in their property prices over the coming decades ... that is, if the corona virus doesn't wipe everyone out. :ill:
 
I'm not sure how most younger people get into real estate, especially in areas that have jobs that younger people are filling. In Michigan, we bought our house really cheap, but that was mostly due to the economy in Michigan being an absolute dumpster fire. We also lived in the middle of nowhere which helped too. Since moving to Utah though, I'm not sure how anyone does it. A listing popped up on Facebook the other day for a house that was pretty much a dump and clocked in a $600,000. It was 1,200 sq ft, no basement, detached garage, no central air, and was in a neighborhood that had poor schools and a high-ish crime rate. If you want to live somewhere that has decent schools and average crime statistics, tack on another $100-$150k for that same house. Where I live, Holladay, houses routinely go for over $1 million and I can't even remotely understand why.

Thus young people end up renting, and even that is ridiculous. I pay nearly $2,000 a month in just rent, plus all the utilities, and whatever association fee we have. The complex is 100% full too with a waiting list. I'm not sure how I'd be able to save for a house even if I wanted to buy one. I could live way outside the city of course, but that comes with another set of challenges, mainly property taxes. Houses outside SLC metro have a ton of land associated with them and while they run slightly cheaper than houses in the city, the property taxes are probably double. So in the end, it all sort of levels out and you're stuck with an hour plus commute into the city.

I can't see millennials being able to afford housing anytime soon in areas with jobs unless they inherit a decent sum of money, hit it big in the stock market, or win something.
 
Most of the Millennial that I know that own a house in my area are dual income, no kids, with at least one person working in the tech industry, or have good non-tech income but willing to live an hour outside of the city. A few years back, I think a single tech person could still buy, but it's getting hard for them even now.
 
I am going to go ahead, step in the crap and say that I disagree that millenials, especially millenials in IT are going to struggle buying a house. I say this speaking from experience. 6 years ago, we purchased a nice house in a decent neighborhood for 88k. 3 bedroom, 2 bath, 2 car garage that was deep enough to park 4 cars in. A yard that backed up to woods. At 88k, we were paying $750 a month on mortgage/insurance/taxes.
Now this of course is very dependent on the cost of living. Lansing Michigan isnt exactly a high income section of the state, but if your willing to drive 30, 40 minutes.to/from work, chances are you can find housing most places similar.
What I find most interesting about this is that we had that house with that monthly payment. While shopping for a new house, as we recently sold ours, we moved into a 2 bedroom single bath apartment, with a third of the square footage and no garage, and that is costing us 1030 a month. And it's not exactly the nicest apartment complex around.
Point being, if you can afford an apartment payment of between 700 and 1400 a month, chances are you can afford a home somewhere around you as long as youre realistic about it and are not expecting something that's 2000+ sqft and 10 acres.
 
Michigan is a pretty reasonable place to live in terms of cost of almost everything (except car insurance). When I was working outside Grand Rapids buying a house wasn't really an issue because they were pretty affordable. I think I paid something like $155k for my house near Allegan. In Salt Lake though, I've run numerous calculators that suggest in order for me to buy a house I'd need something like $40k to put down and my payments would be around $2,000 a month without factoring in taxes, PMI, and insurance. I get SLC is way overpriced though,
 
Around Chicago that $88k home will be over $300,000 currently and it will be built around the 1950s. And there's no way the garage will fit 2 cars. You can go a bit further out, but if you work downtown your commute will be 1.5+ hours.
 
Rallywagon
I am going to go ahead, step in the crap and say that I disagree that millenials, especially millenials in IT are going to struggle buying a house. I say this speaking from experience. 6 years ago, we purchased a nice house in a decent neighborhood for 88k. 3 bedroom, 2 bath, 2 car garage that was deep enough to park 4 cars in. A yard that backed up to woods. At 88k, we were paying $750 a month on mortgage/insurance/taxes.
Now this of course is very dependent on the cost of living. Lansing Michigan isnt exactly a high income section of the state, but if your willing to drive 30, 40 minutes.to/from work, chances are you can find housing most places similar.
What I find most interesting about this is that we had that house with that monthly payment. While shopping for a new house, as we recently sold ours, we moved into a 2 bedroom single bath apartment, with a third of the square footage and no garage, and that is costing us 1030 a month. And it's not exactly the nicest apartment complex around.
Point being, if you can afford an apartment payment of between 700 and 1400 a month, chances are you can afford a home somewhere around you as long as youre realistic about it and are not expecting something that's 2000+ sqft and 10 acres.
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At that price you wouldn't be able to afford a property within 4 hours of Sydney, a House would probably add another 4 to that.

I lived in a coastal town on the east coast of Australia(NSW) the in the early to mid 2000s very far from decent job prospects and population centers and back then what you paid is about how much houses where of that size, Australian House prices are insane everywhere in comparison.
 
Just for fun, since we are out house shopping anyway, I decided to take a look around the Chicago area. Just as it so happens, my ex wife has family in the sprawl, and my cousin lived downtown for many years until this past October, so I am well familiarized with both some of the suburbs and downtown. As it turns out I have found a number of not to shabby sub 100k houses in the Elwood area, and found a good number of houses below 150k all over the place throughout the sprawl and around the downtown area. These ranges, as you would expect, from 2 bedroom condos to houses on an acre lot. I didnt think to look at property taxes though, so that may be a prohibitive factor.
 
Because of the slowdown in economic activity that will accompany the coronavirus epidemic emergency, why not defer all real estate purchases until prices decline?
 
Rallywagon
I am going to go ahead, step in the crap and say that I disagree that millenials, especially millenials in IT are going to struggle buying a house. I say this speaking from experience. 6 years ago, we purchased a nice house in a decent neighborhood for 88k. 3 bedroom, 2 bath, 2 car garage that was deep enough to park 4 cars in. A yard that backed up to woods. At 88k, we were paying $750 a month on mortgage/insurance/taxes.
Now this of course is very dependent on the cost of living. Lansing Michigan isnt exactly a high income section of the state, but if your willing to drive 30, 40 minutes.to/from work, chances are you can find housing most places similar.
What I find most interesting about this is that we had that house with that monthly payment. While shopping for a new house, as we recently sold ours, we moved into a 2 bedroom single bath apartment, with a third of the square footage and no garage, and that is costing us 1030 a month. And it's not exactly the nicest apartment complex around.
Point being, if you can afford an apartment payment of between 700 and 1400 a month, chances are you can afford a home somewhere around you as long as youre realistic about it and are not expecting something that's 2000+ sqft and 10 acres.
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What you talked about is super dependent on the location. I suspect that average tech salaries don't vary as much as house prices when looking across the nation, meaning for example, a tech person in the mid-west would probably make less than in one of the tech hub cities, but not to the same percentage difference as the house costs would.

In Seattle, the real estate prices are nutty. Within city limits, current median home price is estimated to be over $750k, and that's not a mansion. I recently went to a friend's housewarming party; house is pretty average in a decent neighborhood in the north side. ~1500 sq ft, 3 beds, 2 baths, no garage or carport, small yard, built in 1920s, good condition, relatively up to date though it's been a while since last remodel: $800k, and sold within the week of listing with multiple bids and escalation clause. The cheapest single family home on land (not houseboat, not a land lot) listed on Redfin right now is ~$400k for something less than 1000 sq ft. If you're wiling to spend a couple hours commuting in from some of the further suburbs/cities, then you'll start getting homes in the $300k range.

For those who can and want to live away from one of the major tech cities, it's wayyyyy cheaper to buy a house there, and correspondingly, they'll have that much more disposable income that isn't being sunk into a mortgage. But at least where the tech world has concentrated, housing prices have gotten crazy expensive, and good luck buying if you yourself don't work in tech.
 
mustafur
At that price you wouldn't be able to afford a property within 4 hours of Sydney, a House would probably add another 4 to that.

I lived in a coastal town on the east coast of Australia(NSW) the in the early to mid 2000s very far from decent job prospects and population centers and back then what you paid is about how much houses where of that size, Australian House prices are insane everywhere in comparison.
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Do Australian banks have a loan-to-income ratio to adhere to? After our housing bubble burst, our central bank capped mortgages at 3.5 times the combined salaries of the applicants, who also need to have a 20% (or 10% for first time buyers) deposit.
 
DK
Do Australian banks have a loan-to-income ratio to adhere to? After our housing bubble burst, our central bank capped mortgages at 3.5 times the combined salaries of the applicants, who also need to have a 20% (or 10% for first time buyers) deposit.
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The deposits are the same case but the loan to income ratio is much higher then 3.5 times(atleast in major cities), That's for sure and most home buyers are buying their 2nd or beyond house, which means most are investors, I do suspect we are going in the direction of Ireland we just haven't had the crash yet.
 
Rallywagon
Just for fun, since we are out house shopping anyway, I decided to take a look around the Chicago area. Just as it so happens, my ex wife has family in the sprawl, and my cousin lived downtown for many years until this past October, so I am well familiarized with both some of the suburbs and downtown. As it turns out I have found a number of not to shabby sub 100k houses in the Elwood area, and found a good number of houses below 150k all over the place throughout the sprawl and around the downtown area. These ranges, as you would expect, from 2 bedroom condos to houses on an acre lot. I didnt think to look at property taxes though, so that may be a prohibitive factor.
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Elwood is out in that 1.5 hour commute area. I see one house under $100k, and it's not exactly appealing. At that price, everything looks like it's ready for replacement. Our definition of not too shabby probably varies. Though yeah the situation could be worse. There's a net population decrease in Illinois, which probably helps.
 
Rallywagon
I am going to go ahead, step in the crap and say that I disagree that millenials, especially millenials in IT are going to struggle buying a house. I say this speaking from experience. 6 years ago, we purchased a nice house in a decent neighborhood for 88k. 3 bedroom, 2 bath, 2 car garage that was deep enough to park 4 cars in. A yard that backed up to woods. At 88k, we were paying $750 a month on mortgage/insurance/taxes.
Now this of course is very dependent on the cost of living. Lansing Michigan isnt exactly a high income section of the state, but if your willing to drive 30, 40 minutes.to/from work, chances are you can find housing most places similar.
What I find most interesting about this is that we had that house with that monthly payment. While shopping for a new house, as we recently sold ours, we moved into a 2 bedroom single bath apartment, with a third of the square footage and no garage, and that is costing us 1030 a month. And it's not exactly the nicest apartment complex around.
Point being, if you can afford an apartment payment of between 700 and 1400 a month, chances are you can afford a home somewhere around you as long as youre realistic about it and are not expecting something that's 2000+ sqft and 10 acres.
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3 bed 3 bath + 2 car garage within 2 hours of San Francisco is going to be at least $1m. For $100k you're looking at a beat down trailer in Modesto, a 2 hour drive without traffic - which is probably something like a 3.5-4 hour commute each way. A parking space is more expensive than your house in the bay area.

Unfortunately most career-friendly cities (for young people anyways) have become this way. I love Michigan, but I don't see career opportunity there like I have here. Especially if you're in STEM fields, you're probably going to end up on one of the coasts....That's a real compromise I know. I've had friends and coworkers give up (especially on the onset of starting a family) and move away because it's just too brutal here.

I was making the numbers work on a 800SF (:lol:) single family home (with a garage!) listed for $600k....but I just couldn't shake the fact that I would get crushed with negative equity in a downturn.
 
China factory activity shrinks to weakest on record.

106418530-1583115239810caixinpmi.png


https://www.cnbc.com/2020/03/02/chi...ruary-manufacturing-pmi-amid-coronavirus.html
 
Australian interest rates dropped to 0.5%, just for reference before this trend to low interest rates our lowest since WW2 was 4.5%

Negative is coming.
 
That's common with the market though. There's a big selloff, which drops prices, which in turn causes people to invest on the cheap. The stock market as a whole isn't super stable right now and it will probably be this way through November, at least in the US. Markets in other countries might respond completely differently.

I know I certainly did a fair share of buying and sell over the past few days and my meager investments are peanuts to those with a ton of cash to play with.
 
Joey D
That's common with the market though. There's a big selloff, which drops prices, which in turn causes people to invest on the cheap. The stock market as a whole isn't super stable right now and it will probably be this way through November, at least in the US. Markets in other countries might respond completely differently.

I know I certainly did a fair share of buying and sell over the past few days and my meager investments are peanuts to those with a ton of cash to play with.
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I've mostly been holding my breath, but my IRA's swings have been wild (lost $10k in 5 days :ill:). I don't have much faith in the broad fundamentals of the market looking through the rest of 2020. I'm trying to position my portfolio to be more defensive. Right now I'm in a 60/40 split of stocks to bonds, and I'm thinking of reversing that - at the risk/promise of absolutely meager gains in the bond market.
 
Eunos_Cosmo
I've mostly been holding my breath, but my IRA's swings have been wild (lost $10k in 5 days :ill:). I don't have much faith in the broad fundamentals of the market looking through the rest of 2020. I'm trying to position my portfolio to be more defensive. Right now I'm in a 60/40 split of stocks to bonds, and I'm thinking of reversing that - at the risk/promise of absolutely meager gains in the bond market.
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I think you'll end up fine, stuff like this happens during an election year. If Trump wins in November, I fully expect the markets to skyrocket even to even more of an overvalued level. If that happens, I'm bailing out and putting everything in "safe" stocks until the market corrects itself again. But ya, looking at my investments, since last Monday I lost nearly $30k which is a hard pill to swallow.
 
Joey D
I think you'll end up fine, stuff like this happens during an election year. If Trump wins in November, I fully expect the markets to skyrocket even to even more of an overvalued level. If that happens, I'm bailing out and putting everything in "safe" stocks until the market corrects itself again. But ya, looking at my investments, since last Monday I lost nearly $30k which is a hard pill to swallow.
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I haven't looked.... but I'm guessing I can top that number. And I actually sold some before all of this.
 
What does it signify when the US 10 year treasury note has dropped to 0.7%?

What does it mean when the price of oil drops to $40/barrel and soon goes to 30$?

Is the FRA/OIS spread something to be concerned about?
The FRA-OIS spread is the difference between 3- month Libor (the inter-bank lending rate) and the overnight index rate (the risk-free rate set by central banks). ... As such, bank balance sheets have become stretched, and there is less short-term capital available to keep funding markets liquid, and funding costs down
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