bsilver wrote:AFM wrote:This entire time I thought bsilver was just into precious metals instead he’s Bobby Silverstein
Oh, no! I'm outed. But there are a lot of Robert/Bob/Bobby Silversteins.
It would be interesting to see a short biography of this forum's posters.
I could post my linkedin profile I suppose. Not sure that's a great idea honestly. You could just take my word for it that I'm a world renowned Noble prize candidate economist.
The housing market is one of the best studied markets in this country so it's interesting that it's not entirely obvious what has been going on the last fifteen years. With mortgage rates as low as they have been, why are we experiencing, simultaneously, extremely low housing starts and extremely expensive new housing? If mortgage rates are low because everyone now realizes that housing assets are not as valuable as they were previously, wouldn't that result in low housing starts because of low demand? Then you would expect there to be less pressure on housing prices.
I think I can explain part of the weirdness - low housing starts combined with low mortgage rates (at least until just recently). This particular combination of symptoms would be consistent with banks being extremely restrictive about who they hand out mortgages to, while still charging low mortgage rates which apparently are somewhat out of their control - our t-bill rates of return have been hovering around zero for more than a decade as we try to goose a response out of the world investment market to recover from 2008 more quickly, so that drags down mortgage rates even if banks are trying to choke that flow down. Not being a housing expert myself I don't know. Macro economics is voodoo to me, tbh.
My personal theory is that the international investment market has been kind of waiting for our housing stock demand and supply to reequilibrate and it has taken a really long time (about 15 years???). So while that was going on you could set interest rates as low as you wanted and the investment market would just ignore you. It's only recently that interest rates have become a relevant monetary tool again. So mortgage rates were low because of that, but the banks were making sure that low mortgage rates didn't result in a lot of financial support going out the door, meaning housing starts were low.
That still doesn't explain expensive houses though. Choking off housing starts should translate to lower demand for materials, and that's not what's happened, so there must be some independent thing going on forcing commodity prices up. There has been an ongoing commodity price spike correlated with China's GDP growth (that started, actually, in the 1990s) that could be a main driver there, maybe.
Another way to explain it is that what we're seeing is not an overall reduction in financial support for housing investment, but rather a realignment of who owns the housing stock. The Republicans' huge tax giveaway to the rich under Trump included an increase in the standard deduction to 20k, which means most of the mortgage subsidy has been eliminated, creating an incentive to switch from owning to renting. So investors with intent to convert houses from resident owned to rented have swept across the country buying up all the housing stock, which might explain sustained demand for housing rehabilitation services causing the associated commodity prices to spike.
Yeah I don't know honestly. It's a stumper.
I've been taught all my life to value service to the weak and powerless.
