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Are there reliable ways to estimate what % of any particular market is dominated by cash sales to Chinese/Russia/Middle East/other foreign buyers? I'm guessing that a further implosion in China will hurt most major cities in the US, DFW included. The market there has already begun to significantly deteriorate, which is why the pace of people trying to get their money out of the country into relatively safer assets abroad has held strong so far. I also personally believe that as things get far, far worse in China, the Communist party will greatly increase its capital control program.
2). I am one of those contending the area is going though a fundamental housing related adjustment, there is no solid counter argument that I've heard from anyone. Right now it's classic supply and demand and little else. Further, a run up in prices within a asset class or the price of a product does not necessarily equal a bubble*.
For centuries we've seen city by city real estate price runs ups and many of them held into the long term. Some permanently so far.
To your point about unforseen circumstances. Playing off a comment from Keynes long ago, there is always risk of economically ruinous cataclysm alien attack, comet/astroid impact, nuclear accident/attack, a biblical flooding event, a 9.0 earthquake etc. However, the risk of any of those things happening in a particular year is very low. History shows way less than 1%. There is always risk of other market breakdowns and failures. These happen regularly and for various reasons - war, government stupidity, banking and financial missteps top that list.
For me the takeaway is within the investment classes I participate in what are the best guess chances of a price breakdown that year.
I don't know what you think but I'd peg the chances of a local housing price breakdown at less than 1% for the balance of this year. Maybe 2 or 3% next year and as Keynes said, "in the long run we are all dead" 2018 is too far away.
I believe it's much more likely we will see a orderly decrease in the rate of increase over the next few years and prices will hold.
I am not arguing that there is no fundamental housing-related adjustment occurring. What I am saying is that there can be a fundamental housing-related adjustment and a bubble forming. Again, I have no idea if that is occurring, but the simple fact that there is a fundamental adjustment happening doesn't mean that prices haven't inflated too much. I think the potential for rising interest rates and the subsequent reduction in buying power should at least leave us open to this possibility. That isn't an argument that a major correction will occur, but it is a risk that is far greater than a 9.0 earthquake or a comet strike.
Quote:
Originally Posted by EDS_
1). A city that has the 9th largest population among cities and anchors the 4th largest MSA in the country is axiomatically a real city. Anyone whose "subjectivity" leads them to another conclusion should be corrected.
That's not true. You're misunderstanding what "subjective" means. One person may be using "real city" to mean a city with a high-density residential area within a downtown core while another may use it to mean a city with mostly glass and steel buildings downtown rather than masonry. Yet another may use it to only refer to cities with major public transportation systems. Maybe one person doesn't even have an objective standard of any sort, and they simply go off of feel.
It is ironic that you responded to a point about subjectivity by referencing objective data. By definition, subjectivity is a product of the mind. No amount of objective facts can disprove a subjective judgment.
3).1). A city that has the 9th largest population among cities and anchors the 4th largest MSA in the country is axiomatically a real city. Anyone whose "subjectivity" leads them to another conclusion should be corrected.
^^^Yeah, that. DFW (the metroplex as a whole, so yes, multiple "cities", but you get the idea) is a "big city". It may "underperform" in "big-cityness" compared to some other "big cities", but it's still an awfully big city.
No, it's not NY/LA/Chi, but it's smaller than those 3. My entirely subjective view is that DFW is kinda sorta the 5th largest "metro" in the US, but that maybe 7 or 8 other metros beat it out in "big-cityness". Obviously, we all can argue those points. BUT, it's ridiculous not to think of DFW as a "very large major metro", and yes, it's awfully cheap for housing compared to anything remotely similar. (I'm not familiar enough with Atlanta or Houston to compare housing costs or "big-cityness" of those places to here - they're about the only ones that might be comparably priced or cheaper, and they're both somewhat smaller than DFW).
And once again, if one looks at the Case-Schiller Home Price Indices for 20 major metros, DFW is actually below the median for annualized appreciation over the last 5 years, at 7.37%. Yes, I would agree that 7.37% is not sustainable over the long term. It's 7th out of 20 for the last 3 years, at 8.94%. BUT, over the last 10, it's at 2.82%, second only to Denver. I don't think an expectation of 3% annualized increases in home price over the long term is out of line (as TC80 and I think some others have noted upthread). S&P Dow Jones Indices
Certainly, continued low interest rates are helping to lift home prices at rate of appreciation above historical norms, but absent some other large outside event, I don't foresee prices crashing to earth any time soon. Even during the recent downturn, the impacts on DFW were mild compared to other cities.
Are there reliable ways to estimate what % of any particular market is dominated by cash sales to Chinese/Russia/Middle East/other foreign buyers? I'm guessing that a further implosion in China will hurt most major cities in the US, DFW included. The market there has already begun to significantly deteriorate, which is why the pace of people trying to get their money out of the country into relatively safer assets abroad has held strong so far. I also personally believe that as things get far, far worse in China, the Communist party will greatly increase its capital control program.
Chinese invested $300B including $30B in Texas. About $10B were spent in DFW.
$10B means 50k homes. The total home sales in 2014 was only 25k. 50k homes is a lot!
I am not arguing that there is no fundamental housing-related adjustment occurring. What I am saying is that there can be a fundamental housing-related adjustment and a bubble forming. Again, I have no idea if that is occurring, but the simple fact that there is a fundamental adjustment happening doesn't mean that prices haven't inflated too much. I think the potential for rising interest rates and the subsequent reduction in buying power should at least leave us open to this possibility. That isn't an argument that a major correction will occur, but it is a risk that is far greater than a 9.0 earthquake or a comet strike.
That's not true. You're misunderstanding what "subjective" means. One person may be using "real city" to mean a city with a high-density residential area within a downtown core while another may use it to mean a city with mostly glass and steel buildings downtown rather than masonry. Yet another may use it to only refer to cities with major public transportation systems. Maybe one person doesn't even have an objective standard of any sort, and they simply go off of feel.
It is ironic that you responded to a point about subjectivity by referencing objective data. By definition, subjectivity is a product of the mind. No amount of objective facts can disprove a subjective judgment.
1. I generally agree. But what is your rationale for a short term price decreases in DFW? Be specific if you can. Keep in mind people who are serial economic pessimists are proved correct about 1 quarter out of 20 at best. Or to play the Peter Schiff joke......."he's successfully predicted 22 of the last 3 recessions".
1a. You might note I gave a set of real world somewhat likely negatives that could impact DFW real estate.
2. I'm not misunderstanding anything. By your recent definitions subjective borders on schizophrenia. No one is/should be allowed the largesse to misrepresent beliefs as facts. That's what the object poster has been doing. He made up - and continues to commingle facts with hunches and feelings. That's jumping from the subjective to nonsense and false reality.
It is simply not possible for rents to be, "too high" in the area. When the poster is A. wrong are about his numbers and B. DFW has the second lowest rents of any very large metro in The US.
As an observer of life for a long time. It may be that a conclusion derived from bad numbers, emotion and faulty logic is good enough within the realm of physiology and not close to good enough for economics.
Chinese invested $300B including $30B in Texas. About $10B were spent in DFW.
$10B means 50k homes. The total home sales in 2014 was only 25k. 50k homes is a lot!
1. I generally agree. But what is your rationale for a short term price decreases in DFW? Be specific if you can. Keep in mind people who are serial economic pessimists are proved correct about 1 quarter out of 20 at best. Or to play the Peter Schiff joke......."he's successfully predicted 22 of the last 3 recessions".
I don't actually believe there will be a short-term price decrease. I think there is a larger possibility than is generally acknowledged by some on this board that there could be a mid-term (12-24 mos) modest price correction. Several events would have to occur to make that happen, but the main one would be rising interest rates. I probably wouldn't bet money that prices will be lower in 2017 or 2018 than they are today, however. I might take that bet if I were given 3-1 odds, though.
Btw, that is a funny joke about Schiff. A lot of people love to brag that they predicted such and such economic event, but I always wonder how many misses they had that they'd rather not mention.
Quote:
Originally Posted by EDS_
2. I'm not misunderstanding anything. By your recent definitions subjective borders on schizophrenia. No one is/should be allowed the largesse to misrepresent beliefs as facts. That's what the object poster has been doing. He made up - and continues to commingle facts with hunches and feelings. That's jumping from the subjective to nonsense and false reality.
It is simply not possible for rents to be, "too high" in the area. When the poster is A. wrong are about his numbers and B. DFW has the second lowest rents of any very large metro in The US.
As an observer of life for a long time. It may be that a conclusion derived from bad numbers, emotion and faulty logic is good enough within the realm of physiology and not close to good enough for economics.
Perhaps we are referencing different things. I am not referring to a person who says rents are too high or Dallas doesn't have X, where X is some objective criterion. Rather, I am referencing a person who simply says "Dallas doesn't feel like a real city." That is inherently a subjective belief that cannot be disproved with any amount of objective data.
I don't actually believe there will be a short-term price decrease. I think there is a larger possibility than is generally acknowledged by some on this board that there could be a mid-term (12-24 mos) modest price correction. Several events would have to occur to make that happen, but the main one would be rising interest rates. I probably wouldn't bet money that prices will be lower in 2017 or 2018 than they are today, however. I might take that bet if I were given 3-1 odds, though.
Btw, that is a funny joke about Schiff. A lot of people love to brag that they predicted such and such economic event, but I always wonder how many misses they had that they'd rather not mention.
Perhaps we are referencing different things. I am not referring to a person who says rents are too high or Dallas doesn't have X, where X is some objective criterion. Rather, I am referencing a person who simply says "Dallas doesn't feel like a real city." That is inherently a subjective belief that cannot be disproved with any amount of objective data.
1. Your argument is reasonable and logical. High interest rates decrease home buying power for certain. The next point would be historically speaking housing demand generally remains strong as rates begin to rise only slowing much after rates have risen significantly. Although this recovery is so slow and weak and rates have been so low for so long history may be void in this context. The next point would be what do you see that may drive interest rates much higher? I'm not claiming a sharp rise in rates is impossible - I just don't see any macroeconomic pressures in that direction on the horizon.
2. Apologies, I mostly misunderstood your point about subjectivity.
ETA - So far as serial pessimists Schiff, Albert Edwards, Meredith Whitney, Nouriel Roubini and many others fall into two camps. People like Schiff and Edwards who are rarely right about anything. And Whitney and Roubini who were very right for a while but then their pessimism drove them to be very wrong. Roubini was right leading into the '08 bust and very wrong all the time since. Whitney pretty much the same.
That is inherently a subjective belief that cannot be disproved with any amount of objective data.
Well whether or not someone says their rent is "high" is also totally subjective and also cannot be disproved. They usually aren't saying it's "high" compared to some other place, it's "high" compared to what they used to pay or what they think they should pay.
Heck, even if rent was falling, a person could still think "Dallas is becoming less affordable" because their food, transportation, or medical costs were rising.
The next point would be historically speaking housing demand generally remains strong as rates begin to rise only slowing much after rates have risen significantly. Although this recovery is so slow and weak and rates have been so low for so long history may be void in this context.
Why do you think the bolded text is the case? I'm genuinely asking because I don't know. A couple possibilities that come to my mind:
1. Rates are generally increased in response to economic expansion, and economic expansion is generally good for the housing market.
2. Banks are good at foreseeing rising rates from the fed, so the increase in fed rates isn't perfectly reflected in an increase in the rate Joe Homebuyer sees.
I do agree that this recovery has been slow and weak, although it has been pretty long. That aspect makes it difficult to predict what will happen with rates, as evidenced by the wild speculation about when the Fed was going to first hike rates and how aggressive they would be.
Quote:
Originally Posted by EDS_
The next point would be what do you see that may drive interest rates much higher? I'm not claiming a sharp rise in rates is impossible - I just don't see any macroeconomic pressures in that direction on the horizon.
My opinion isn't based on any macroeconomic indicators; it's simply based on how long rates have been extremely low, couples with what I believe the Fed would do if we saw another year or two of economic expansion. I just can't believe that we would have such a long expansion with rates remaining as low as they are. I do think the Fed is being intentionally conservative with hikes, however, out of fears that this recovery has been far less than convincing.
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