How Long Do You Think It Will Be?

[Joe Flacco]

That article is talking about drop in refi applications between 2016 and 2017.

 

[Randolph Kinney]

View attachment 35728

https://www.cnbc.com/2018/06/12/tudor-jones-stock-market-higher.html

Paul Tudor Jones is seeing this chart.

Paul Tudor Jones says rates would be much higher if he were running the Fed

• Hedge fund magnate Paul Tudor Jones says the Fed is well behind the curve when it comes to setting interest rates.
• The billionaire, who rarely does press interviews, tells CNBC the central bank's benchmark rate should be 150 basis points higher, or about double the current range.
• Tudor Jones also blasts fiscal policy, which he says is "from another galaxy."

"We've got 3.8 percent unemployment and negative real rates," he told CNBC's Andrew Ross Sorkin during an interview on "Squawk Box."

However, the big question in markets will be how much more Fed officials judge rates have to go to reach an equilibrium that is neither stimulative nor restrictive. Tudor Jones said he expects rates to keep rising.

In addition to his views on rates, Tudor Jones has said he thinks the Fed has been responsible for creating a bubble, telling clients in February that the Fed has an "obsession" with inflation targeting that is allowing risk assets to soar. The Fed believes inflation should run around 2 percent as a sign of a healthy economy, but Tudor Jones thinks that's too high and has caused the Fed to fall behind where it should be.

Fiscal policy, particularly the December tax cuts and spending that is expected to push the budget deficit past $1 trillion soon, isn't helping, he said.

"We've got fiscal policy that literally came from another galaxy and we have monetary laxity, and that brew is what has got the stock market so jacked up," he said.

https://www.cnbc.com/2018/06/12/pau...be-much-higher-if-he-was-running-the-fed.html

Sounds like Paul Tutor Jones is ringing the alarm bell over a hyper expansive monetary policy and a profligate fiscal spending policy that combines to kick inflation over the moon. GDP is growing over 4%+ and that means resource constraints will kick inflation into overdrive. When the FED finally reacts, it won't be 0.25% interest rate hikes of three a year, more like 0.50% hikes three times a year. Since the CPI has been changed to mute inflation, it won't appear so bad except that people will be protesting price increases.

As they say, brace yourself. Remember what Paul Volcker did?
https://www.cnbc.com/jeff-cox/

 

[Randolph Kinney]

• Consumer price index rose 2.8% in May from a year earlier
• Inflation-adjusted pay unchanged over 12-month period

U.S. inflation accelerated in May to the fastest pace in more than six years, reinforcing the Federal Reserve’s outlook for gradual interest-rate hikes while eroding wage gains that remain relatively tepid despite an 18-year low in unemployment.

The data “provide further evidence that inflation is moving towards the Fed’s objective,” and the central bank will continue on its gradual rate-hike path, said Kevin Cummins, an economist at NatWest Markets. The pay figures are “a reminder that you don’t need to necessarily get more aggressive in your approach because wages haven’t accelerated as much as they have in the past,” he said.

A separate Labor Department report on Tuesday illustrated how higher prices are pinching wallets: average hourly wages, adjusted for inflation, were unchanged in May from a year earlier, even as nominal pay accelerated to a 2.7 percent annual gain from 2.6 percent in April. For production and nonsupervisory workers, real average hourly earnings fell 0.1 percent from a year earlier.

https://www.bloomberg.com/news/arti...t-six-year-high-eating-away-at-wage-increases

A 2.7% wage increase did not give you more spending power since inflation was 2.8%. You lost ground.

 

[Joseph Butkus]

i was talking last night with another appraiser and the topic of the next crash came up.

interest rates are climbing (currently 4.89% on a 30 year fixed from my lender) so anyone who refi'd in the last 8-9 years won't be able to do so today and see any savings.

there is still a severely limited inventory of available housing which is causing short marketing times (off the top of my head i would say 50-75% of the comps i am using in my reports are on the market for 30 days or less) and bidding wars driving up the price of housing (i got one last week that was on the market for $249,000 and contract price of $272,000 after 4 days and another that was listed at $110,000 with a contract price of $143,000 after 9 days). currently in the county i reside the population is 1,256,000. there are currently 554 houses for sale on the MLS from $100,000-$250,000, the "starter house" range if you will. that means there is one house for sale for every 2,268 people.

the start of the repeal of DF is happening. they moved the limit from $50b to $250b for lending institutions to comply with reserves, stress tests and the like. institutions like american express and bb&t are no longer considered “systemically important” and subject to stricter oversight. small and midsized lenders are now exempt from reporting certain disclosures which can easily lead to discrimination without anyone to see that it is happening. banks will once again be allowed to play with higher risk investments which may pay off better but also have a better chance of failing. on top of that net income of commercial banks and saving institutions posted a 27.5% increase for Q1 2018 vs Q1 2017.

personally i am putting away every dollar i can to pick up rental properties sometime in the next 3-5 years when it hits the fan. that is my timeframe guess.what is yours?

When we start thinking crash of real estate is coming usually lasts 3 more years past where we start thinking crash. I know you think I am crazy but may actually double from this point.

 

[Addie]

This ending is so easy to see. The ending all started with the bitcoin craze when we look back on the 2020 recession. Endings last a few years. So have fun. Tomorrow your house and retirement fund will gain value as it will the next day and the next.

What the few of us are saying is; now is when you stop spending money and go into depression mode and save every Nickle as if you didn’t have a job. Make everyone think you have gone crazy. Let them go to the peak. You stay at base camp. When Sxxx hits the fan is when you start spending so much people think you’re crazy. You spend when times are bad, not good. You save when times are good, not bad. If you go into survival mode during bad times, you are way too late and you are 1 in a billion and like all others, did the exact opposite of what you‘re suppose to do.

 

[Joe Flacco]

I don't think you guys are the "few of us".

 

[George Hatch]

IMO, if the RE market were to level off in the next 6 months and enter decline that correction wouldn't amount to a crash. If the current trend continues on for 2 or 3 more years then we might be in for a more severe correction.

The p&i for a $328k mortgage at 4% is $1565.
The p&i for a $328k mortgage at 4.75% is $1711. That's a 9.5+% increase.

If the median increased another 2.5% to $336k in 1Q2019, the 2019 buyer will be paying $1752 for the same house that he could have gotten at $1565 in 1Q2018. That's an effective increase in their mortgage payment of 12%, only part of which is attributable to the RE market. I hope their income went up 12% to cover the difference.

The point is that rising interest rates coupled with price increases at the normal CPI inflation rate can compound pretty quickly.

 

[timd354]

IMO, if the RE market were to level off in the next 6 months and enter decline that correction wouldn't amount to a crash. If the current trend continues on for 2 or 3 more years then we might be in for a more severe correction.

Yes, a relatively small market correction in the near term would likely be beneficial in the long run

 

[Joe Flacco]

I'm seeing prices stabilizing in some of the areas that have been super hot in the city. Some other areas in the city still going and some places in the suburbs just starting to get going.

 

[Joe Flacco]

There doesn't need to be a decline to correct. You can correct through time just by being stable.