Buy a home or wait out this insanity?

[Dont_know_mind]

That whoosh you hear isn’t the Nike symbol, but the money coming out of bonds and cash.

I think it is a level 9/10 difficulty operation trying to market time a primary residence. It’s being short a house and then the emotional aspect of being priced out of a primary residence you can afford.

I would have a more modest goal if I was buying a primary residence and that is not to buy at the top. If you are short, you have to be prepared to be squeezed.

Everyone thinks about mean reversion at this stage. I think sometimes things don’t mean revert and a new mean is set. This could happen to US RE, or it could mean revert. I don’t know what will happen.

Here is the reason I have not sold any RE: What would I do with the cash? In terms of least to most attractive valuations to me currently are: bonds, cash, US stocks, US RE.

Every investor needs to figure out their preferences, risk tolerance and what is optimal for them.

[Random1]

I doubt there will be any downward trend in this housing market in near future . Hopefully history does not repeat itself.

[Tangler]

As WCI and others have said:
1. buy when you are ready in terms of job / life stability

2. don't buy more than you need (consumption item).

3. Remember that renting while you look is NOT wasting money. Part of what you pay for is freedom/flexibility.

4. Do not rush into anything. This is a big purchase. Make sure you are happy with the house prior to pulling the trigger.

5. Worry less. No one can time the market (RE or stock). Expect to see lots of cool homes for less than you paid right after you buy (Murphy's law or something) and expect the market to make you feel foolish in the short run. In the long run you will win.

[MPMD]

what i would add to this discussion is this piece which is short and worth your time: https://www.nytimes.com/2022/01/20/u...s-surging.html

it's so hard to not fight the last war and think this is just a bubble but i really don't think it is (read the article).

this is a supply issue and sub-prime lending has pretty much gone away.

my crystal ball says it will cool and stabilize but not go down by much if at all.

i think it is far, far more likely that affordable housing emerges as a massive political football than that housing prices go down.

bottom line for me is that i think people who try to wait this out are more likely to be hurt than helped.

[xraygoggles]

Everyone thinks about mean reversion at this stage. I think sometimes things don’t mean revert and a new mean is set. This could happen to US RE, or it could mean revert. I don’t know what will happen.

Not to de-rail this thread, but I find it interesting how you think there may not be a mean reversion in US RE - but you are under the assumption (I think) that international equities will revert...

[xraygoggles]

Mortgage rates are already above 5% for 30 year - wow that was fast! I swear I thought I saw last month they were around 3% or so.

[Turf Doc]

Mortgage rates are already above 5% for 30 year - wow that was fast! I swear I thought I

saw last month they were around 3% or so.

Now the question is if prices will go down to make up for it. The cynic in me says they won’t…

[CordMcNally]

Now the question is if prices will go down to make up for it. The cynic in me says they won’t…

It isn't connected in the fact interest rates going up directly make housing prices go down. It has more of an effect on demand which will then affect housing prices but I'm not sure it'll be immediate or necessarily in the short term (6-12 months).

[Dont_know_mind]

Not to de-rail this thread, but I find it interesting how you think there may not be a mean reversion in US RE - but you are under the assumption (I think) that international equities will revert...

I tend to think value mean reverts in all forms over time, but I don’t tend to invest on this basis except at extremes. I tend to think that a dollar can be invested anywhere worldwide.

So in terms of real estate, US RE to me actually seems cheap in terms of world RE. So at some stage in time, it may get re-rated up a valuation level and not revert back to the previous US mean- but mainly because it is actually mean reverting to the international mean (eg for livable cities pop>200k worldwide). But maybe it doesn’t occur this time or ever.

I don’t think my philosophy is inconsistent in stocks and RE. I tend to think US stocks have been faddishly popular worldwide and RE not really popular worldwide (but popular again locally). So US RE is better value relatively to me still (but I could be mistaken). I try to find the best value anywhere and avoid things that have been overvalued by popularity recently. Then I wait for the value to be realised. I am anti-momentum. Momentum can work well too, but it’s not me.

[bovie]

So in terms of real estate, US RE to me actually seems cheap in terms of world RE.

Hmm...

I try to find the best value anywhere and avoid things that have been overvalued by popularity recently. Then I wait for the value to be realised. I am anti-momentum. Momentum can work well too, but it’s not me.

Just be aware that momentum has had greater risk-adjusted returns (Sharpe) and tax efficiency than the market, value, and size factors.

Past tense, of course. But something to chew on.

[uksho]

Now the question is if prices will go down to make up for it. The cynic in me says they won’t…

I

it makes a big difference if you are buying a house priced in higher range
it’s almost $1000/ month ( 3.25 vs 5 %), 30 year 20 percent down payment for 1.2 M house

and rates have just started to go up !

( but it seems like there is no dearth of rich people , who have that much cash !)

[Dont_know_mind]

Hmm...



Just be aware that momentum has had greater risk-adjusted returns (Sharpe) and tax efficiency than the market, value, and size factors.

Past tense, of course. But something to chew on.

I've read the material on factors and maybe don't put enough weight on it.
I guess I tend to not like things that are very popular as it tends to not have good returns.

I probably would buy momentum if I thought it had a good enough return and I could do it.
I only like value when it's unpopular and I think there's a good return to be had from it.

[StarTrekDoc]

I've read the material on factors and maybe don't put enough weight on it.
I guess I tend to not like things that are very popular as it tends to not have good returns.

I probably would buy momentum if I thought it had a good enough return and I could do it.
I only like value when it's unpopular and I think there's a good return to be had from it.

Difference in primary housing.....gotta live somewhere. Ownership costs vs rental costs. Either way there's an expense there. The decision involves whether investment along in the cost with worthwhile and balanced with the troubles of ownership vs rental.

[Tangler]

Now the question is if prices will go down to make up for it. The cynic in me says they won’t…

The cynic in me says that the higher rates & inflation might wreck the economy and then the prices will drop as demand tanks.

Or the fed will chicken out and lower rates again which will worsen inflation.

[Turf Doc]

The cynic in me says that the higher rates & inflation might wreck the economy and then the prices will drop as demand tanks.

Or the fed will chicken out and lower rates again which will worsen inflation.

I feel like the latter is more likely... plus, as we've seen throughout the pandemic theres really two different worlds out there for workers. Unfortunately for physicians, they're competing with the ones who are doing really really well