Question on past market status vs current

[Kaiber_Investor]

When the market last crashed in 2007-2008, before the crash took place, where there as many positive outlooks based on user data, unemployment...and really anything else that would have one believe of a continued bullish market ahead.

Currently trying to gauge the market, especially the housing market. Like many others I'm having my reservations especially with seeing how the prices are rising to what I believe are unsustainable levels based on the ratio of house price increase / to consumer wage increase. More specifically in the California region. Thank you for any input.

[CM]

You must live somewhere, so you only need to decide whether it is smarter to rent or to buy. Here is one handy tool to help you with that decision:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=5&ref=patrick.net&oref=slogin&oref=slogin&oref=slogin.

Here is a useful blog post on the decision: http://affordanything.com/2015/11/24/is-renting-better-than-buying-should-i-rent-or-buy/.

 

[CM]

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[Dicast]

It is easy to know when things feel like they are moving up too fast and that the market has gotten ahead of itself.  I think we could be easily there right now.  The problem is, I had the same thoughts over the last 2 years and it would have really sucked to be out of the market during that time.  It is near impossible to know when the market will correct prior to the actual event.

Your status states you are a resident.  Are you planning to stay in the same area for a long time or is this a quick turn around buy/sell event?  If you plan to be wherever you are for 10 years then I don't think you should worry about the market.  If it is 5 or less, just rent and give yourself the option to move on.

[Hatton]

Just remember the so called experts always think the market is over/under valued, interest rates will drop/rise, you should buy puts/calls, you should buy gold/silver/Bitcoin. Just invest monthly with some sort of plan and try your best to ignore the noise.  Yes we may have a correction or a bear market soon or it may be 3 years away.  Real estate is very local.  Try to minimize the number of life time transactions and you will be ok

[jfoxcpacfp]

Slight disagreement with @Dicast. It is not easy to "know", it is easy to "feel" when things feel like they are moving up too fast and that the market has gotten ahead of itself. Those who invest with their emotions, rather than by sticking to a plan, are those who have sub-optimal results as short- and long-term investors. That is 90%+ of investors, which is scary indeed. I have seen the evidence for 35 years of preparing Schedule D's.

Bear markets have occurred, on average, every 5.5 years since the end of WWII. The last one, overshadowed by 2007 and mostly forgotten, was in 2011. The problem is that it has been so long since the last "big" one that many of today's new attendings haven't really "felt" the experience and don't understand the gut-wrenching, helpless, lemming-like desire to DO SOMETHING. They think they are really investing by a plan because everything is going along so swell.

Understanding your purpose in owning equities, their long-term history and having a plan matter. The plan is the starting point. A portfolio is not a plan.

[Zaphod]

jfoxcpacfp wrote:

Slight disagreement with @dicast. It is not easy to “know”, it is easy to “feel” when things feel like they are moving up too fast and that the market has gotten ahead of itself. Those who invest with their emotions, rather than by sticking to a plan, are those who have sub-optimal results as short- and long-term investors. That is 90%+ of investors, which is scary indeed. I have seen the evidence for 35 years of preparing Schedule D’s.

Bear markets have occurred, on average, every 5.5 years since the end of WWII. The last one, overshadowed by 2007 and mostly forgotten, was in 2011. The problem is that it has been so long since the last “big” one that many of today’s new attendings haven’t really “felt” the experience and don’t understand the gut-wrenching, helpless, lemming-like desire to DO SOMETHING. They think they are really investing by a plan because everything is going along so swell.

Understanding your purpose in owning equities, their long-term history and having a plan matter. The plan is the starting point. A portfolio is not a plan.

Click to expand...

Have on average lasted that long. However, they have gotten longer between them as time has gone on and shorter in duration. The slope of this market expansion is also well below that of most recoveries, which is to be expected of a once in a generation depression level event. The expansion certainly could run significantly longer, and any crazy extrinsic noncontrollable event (meteor, who knows) can happen to make it end on a dime.

You dont control any of that, and importantly its not that big a deal compared to your savings rate and consistentcy. Obviously spending is important or you dont have a savings rate. Focus on the things you can control.

 

[Zaphod]

Kaiber_Investor wrote:

When the market last crashed in 2007-2008, before the crash took place, where there as many positive outlooks based on user data, unemployment…and really anything else that would have one believe of a continued bullish market ahead.

Currently trying to gauge the market, especially the housing market. Like many others I’m having my reservations especially with seeing how the prices are rising to what I believe are unsustainable levels based on the ratio of house price increase / to consumer wage increase. More specifically in the California region. Thank you for any input.

Click to expand...

To answer your question about economic indicators etc...no the data was not coming in the same way it is now and there were actually quite a few people who saw the slowdown and some sort of correction coming, some even saw the extent of implications and contagion risk. It may not have been as clear in early 2007, but there were obvious (now of course) cracks and those that were on the pulse of the macro situation. Those that knew housing were a little quicker and more cautionary.

We really dont have anything other than high asset valuations, basically across the board today. If there is a catalyst of some sorts, sure it could crash, but its very rare to just happen over night. A 10% draw down btw is just standard operating procedure even during a raging bull and should be entirely expected.

Calculated Risk is a macro blog with a bias toward housing and real estate market and is a great resource.