> The economy is whacked by inflation right now, you better believe that the Fed has gotten religion in considering housing costs as part of their inflation measure. So...as long as housing costs keep rising, interest rates are going to stay high anyways
The Fed is completely incompetent. "Inflation is transitory" over and over. And interest rates cannot stay high. At 32T in debt and rates, we'll eventually have to pay 1.6T in just interest annually. In the last quarter of 2022, we paid $213B in interest alone.
The longer interest rates are this high, the more pain on the entire world, as there are ~20T in USD denominated debt in addition to the 32T in US debt. And about 190T in unfunded liabilities in the US! Already insolvent. The only solution is to print.
The US and the world cannot sustain higher interest rates as the world reserve currency and the high debt load. But the Fed has to do something to at least appear like they are in control and competent. And to tame inflation to avoid civil unrest and political backlash. Most people have seen inflation outpace their wage growth.
I bring this up because the ones in charge are the ones with assets. And those with assets don't really care about inflation.
That's a large part of my thesis. And I'll be holding tangible assets like real estate when the printer goes back in overdrive because there is no other choice.
> That's a large part of my thesis. And I'll be holding tangible assets like real estate when the printer goes back in overdrive because there is no other choice.
You and everyone else, which is part of the run up on real estate prices right now. There is no such thing as a sure bet, especially when almost everyone is taking the same bet.
Don't know where you get "everyone else". I'm not talking about primaries and those with primaries aren't just "holding"... they need a place to live. Most people do not have real estate investments.
Investors are not in RE as a pure buy and hold. Maybe a few foreign entities parking cash in the US. But outside of that, no they don't. They live in them. Or they rent them for a profit or near break even. Rents have/can/will go up even more.
There aren't many properties that were purchased at elevated levels that have no economic prospect to them and could thus flood the market like you insinuate - ie an airbnb bought for 800k that now can't service the debt because short term revenue dropped and long term local rental revenue is too low. Even then, those that bought aren't looking to take a major hit and didn't buy with lax lending like 08, so the prices are what they are. You need foreclosures and short sales to make meaningful drops nationwide.
My properties cash flowed before the pandemic. During. And after. I honestly don't care about values, I'll buy more if they plummet but values have never been a bet in my plan. I care about cash flow and risk in an economic downturn but I'll take the inflation hedge too. You make money when you buy. There are still places you can buy now and make money. I look at a lot of things but always at replacement cost and cash flow.
The thesis is that there is no escaping the debt load. About the only sure bet IS that the money printer will return in overdrive. There is NO choice. And I don't care if it's this year or next year, but it will return soon.
You need assets before and when that happens. Not cash on the sidelines waiting for a dip that probably won't happen.
Whatever asset though - IMO, it should be cash flowing and be able to weather an uncertain economic and financial climate.
You seem to think Fed is going to fight inflation and bring down housing prices and save everything and also create this buy opportunity in various assets. Perhaps they keep hiking and we finally get a commercial RE crash and the Fed member's banks and associates can have a feast. Sure. I'm surprised that didn't occur a long time ago. But we're not talking about commercial RE.
How does the US escape the debt load and maintain these interest rates and higher and get to 2% target inflation?
Every solution involves printing. And how do you print a shit ton and keep inflation at 2%? You can't. You have to inflate something.
Best to have that something than cash or a non inflation hedging asset.
The Fed is completely incompetent. "Inflation is transitory" over and over. And interest rates cannot stay high. At 32T in debt and rates, we'll eventually have to pay 1.6T in just interest annually. In the last quarter of 2022, we paid $213B in interest alone.
The longer interest rates are this high, the more pain on the entire world, as there are ~20T in USD denominated debt in addition to the 32T in US debt. And about 190T in unfunded liabilities in the US! Already insolvent. The only solution is to print.
The US and the world cannot sustain higher interest rates as the world reserve currency and the high debt load. But the Fed has to do something to at least appear like they are in control and competent. And to tame inflation to avoid civil unrest and political backlash. Most people have seen inflation outpace their wage growth.
I bring this up because the ones in charge are the ones with assets. And those with assets don't really care about inflation.
That's a large part of my thesis. And I'll be holding tangible assets like real estate when the printer goes back in overdrive because there is no other choice.