The State of the Economy Thread - “Falling inflation, rising growth give U.S. the world’s best recovery”

[tshile]

No the next think I’m thinking is that you can predict this narrative to a T. Case in point - bring on the hyper inflation scare monsters. 
 

right behind them will be our favorite gold bugs/precious metal bugs. 

[tshile]

But in terms of real economic news - survey shows 50% of people that have maintained their job through the pandemic expect to seek a new job this year

 

thats apparently really high. Reasons cited that apparently stuck out as higher than normal were feeling detached from work environment and not liking the change in culture over the last year. 
 

so assuming the pandemic does actually wind down (in terms of people being hospitalized and returning to normalcy just a bit) it will be an interesting year for employers 

[CousinsCowgirl84]

Identity politics is a scary thing....

[EmirOfShmo]

Lumber prices are out of control. A common pine 2x4x8 stud is $6.70 here in RVA at Lowes. Prices look like they're 3X  the early 2019 prices. New housing prices are through the roof on a price per square foot. Not sure when or if they will fall. 

 

 

https://madisonsreport.com/2021/03/26/us-home-sales-feb-and-softwood-lumber-prices-march-2021/

 

Chicago lumber futures were up for a 4th consecutive session to trade above $1010 per thousand board, shy of a record high of $1,040 hit in mid-March as demand is outstripping supply. Since last spring lumber prices have risen 180% as the stay-at-home lifestyle has encouraged homeowners to expand or remodel their existing dwellings and low mortgage rates exacerbated the home-building spree. Meanwhile, recently wildfires in California and Oregon and the recent freezing temperatures in Texas had increased the number of homes needing to be built and limited domestic supply.

 

https://tradingeconomics.com/commodity/lumber

[gbear]

It will also be interesting as we now have an administration more committed to making the health insurance market places work better.  This will further uncouple emplyment and health insurance which should make it easier for employees to leave their current jobs.  I am not sure what the time frame is for that impact to be fully felt, but it is a challenge employers will have to confront.  

 

Those preassures will be offset to some extent by the increasing automation of jobs meaning less employees are needed to maintain current levels of production.  I know the Annual Capital Expenditures survey has started tracking robotics expenditures as they expect them to grow and potentially be a good leading indicator.  https://www.census.gov/data/experimental-data-products/robotic-equipment-expenditures.html 

 

I think predicting employment pressures for any given point more than a few months out at this point is an incredibly difficult task.  The rate of change for these pressures seems to be growing incredibly fast.

 

 

Edited April 6, 2021 by gbear

[tshile]

30 minutes ago, EmirOfShmo said:

Lumber prices are out of control

It’s been heading that way for a while. When I started building my house about 4 years ago I laughed at a fixed price contract when work didn’t start for 6 months. Randomly said to the pm one day “bet you blew your lumber budget on this one eh?” And he just shook his head and said “you have no idea”

 

I don’t bet on commodities but I’m kicking myself on this one cause I knew it 4 years ago. Wasn’t really in a good place to gamble with anything significant so I passed. Would have been a great bet though. 

Oh also looking at adding a building to my property 

 

it’s actually cheaper right now to order a pre cut package than to build your own cause the packages were put together with older lumber prices. 
 

I can actually include labor to have it all assembled and still be cheaper than buying raw lumber and building it myself. It’s insane. 

[Larry]

1 hour ago, tshile said:

But in terms of real economic news - survey shows 50% of people that have maintained their job through the pandemic expect to seek a new job this year

I'd suspect that a lot of employers used the economy as a cover to become more abusive to their employees. 
 

My roommate works in a major hospital. Health care workers. Heroes of the pandemic. All that news. 
 

Well, the hospital lost a lot of money, when they had to cancel all elective procedures. So, over the last year, working conditions (for the ones working) got a lot worse. And there's a shortage of nurses in a lot of places. 
 

And the hospital announces no raises at all this year. 
 

There's a lot of "heroes" who really are not happy right now. 

[EmirOfShmo]

1 minute ago, tshile said:

It’s been heading that way for a while. When I started building my house about 4 years ago I laughed at a fixed price contract when work didn’t start for 6 months. Randomly said to the pm one day “bet you blew your lumber budget on this one eh?” And he just shook his head and said “you have no idea”

 

I don’t bet on commodities but I’m kicking myself on this one cause I knew it 4 years ago. Wasn’t really in a good place to gamble with anything significant so I passed. Would have been a great bet though. 

 

Yeah, it really hit home a couple of weeks ago. We're at the age where we're looking to downsize & get a master BR/BA on the 1st floor. We made an appointment at a new development near us. Bottom line - we're looking at $300/sqft for a new house. House around the corner just put up a for sale sign & they're selling at $191/sqft up about $25/sqft from a year ago. 

 

I read somewhere recently the lumber prices add an average of an additional $24k to the price of a new home.

[tshile]

1 minute ago, Larry said:

I'd suspect that a lot of employers used the economy as a cover to become more abusive to their employees. 

My current thought on how our private sector works:

every time there’s a shock we get told to do more with less ; that there is belt tightening required

 

but when things get better they never loses the belt. They’ve found a way to do more with less. The temporary solution to staying in business becomes the new operating model. 
 

planet money recently did a socialism 101 podcast. They focused on a form not often discussed where workers actually run the company. You know they respond to crisis? Vote to cut pay instead of lay each other off. Vote to move human capital around so people can fill gaps instead of losing jobs. And when it’s over they vote to restore things. 
 

first time I hear a true socialist model that sounded good. It made socialism a company-level thing while leaving a free market to compete. You can’t just vote raises in yourself whenever you want - competition for will drive you out of business if you’re reckless. But it certainly focused on protecting the livelihood of the workers over executive and investor profits. 

4 minutes ago, EmirOfShmo said:

we're looking at $300/sqft for a new house. House around the corner just put up a for sale sign & they're selling at $191/sqft up about $25/sqft from a year ago. 

Sqft Pricing is misleading because a kitchen will cost more than a closet per sq ft. I got mine built for around 125/sq ft. But that’s because I have a 1400 sqft basement that’s just drywall and flooring with 1 bath 😂 

 

but yeah. I have a couple developer clients. I see the pricing sheet updates. It’s out of control 

[TradeTheBeal!]

The simple answer regarding home prices is that the enormous upward transfer of wealth that occurred in 2020 has lead to the 1% re-investing that wealth into residential real estate with the intent of renting these homes, thus driving up prices.

 

In effect, this is the end of the concept of a “starter home”.  And I’m pretty sure that’s not a good thing.

[tshile]

4 minutes ago, TryTheBeal! said:

The simple answer regarding home prices is that the enormous upward transfer of wealth that occurred in 2020 has lead to the 1% re-investing that wealth into residential real estate with the intent of renting these homes, thus driving up prices.

 

In effect, this is the end of the concept of a “starter home”.  And I’m pretty sure that’s not a good thing.

Also you’re seeing disparities in wage growth. If you live around a major city that’s a quality economic center (like DC and its surrounding areas) you see wages going up significantly over the years for certain groups of people. They then can afford more, and as such bid prices up because supply is so much shorter than demand. And so you see people who can’t buy the house they want in Alexandria, moving further out and driving up prices further away. 
 

with covid there was a rush to buy homes because condo/apartment/city living has a lot less appeal compared to a large yard when things are shut down do to the pandemic. Last may npr interviewed a Redfin exec and he basically said they couldn’t possibly hire enough agents to meet the demand to buy houses around here - he said he needed to hire 100 people ‘today’ just to meet current demand and that’s impossible...

 

fixing the wage/wealth gap would help significantly here. 
 

More likely some new movement will be born from people refusing to work a 40-50k/year job when it means either a 60+ minute commute or only being able to afford splitting a living situation with roommates. Who knows what/when they’ll be but people will generally only fall so far behind before they do something radical to change it up. 

[BatteredFanSyndrome]

1 hour ago, EmirOfShmo said:

Lumber prices are out of control. A common pine 2x4x8 stud is $6.70 here in RVA at Lowes. Prices look like they're 3X  the early 2019 prices. New housing prices are through the roof on a price per square foot. Not sure when or if they will fall. 

We did a cash-out refi in June 2020, with the intention of adding a screened in porch on the back of the house and finishing half of the basement with a family room/gym area.  That money has just been sitting in savings, because we can't stomach the thought of paying the current prices for material.

[BatteredFanSyndrome]

50 minutes ago, tshile said:

And so you see people who can’t buy the house they want in Alexandria, moving further out and driving up prices further away. 

I live in the eastern panhandle of WV, technically Harpers Ferry - 5 mins from the VA/MD lines.  It's always been a place people lived to travel to NOVA/DC/MD for work, but it's outrageous right now.  Every property that gets listed in my neighborhood creates a bidding war.  The day the homes hit the market, we see droves of MD and VA tags coming in to look at the houses.  Most everyone that lives here cannot believe the action.  They can't grasp how a less than attractive home can get $350k in here, yet it's happening reguarly - particularly if there is a view of the Shenandoah.  We've seen some of those shacks that haven't been updated in 40 years, get listed for $250k, and end up selling for $300k.  We'd guesstimate at least $100k in renovations to be livable.  The NOVA/Montgomery county money goes a lot further here, and it's made several of our neighbors talk about selling.  The problem is, if you don't want to get out of this area - your stuck having to overpay for another home here, so you're not really gaining anything.

[CousinsCowgirl84]

1 hour ago, TryTheBeal! said:

The simple answer regarding home prices is that the enormous upward transfer of wealth that occurred in 2020 has lead to the 1% re-investing that wealth into residential real estate with the intent of renting these homes, thus driving up prices.

 

In effect, this is the end of the concept of a “starter home”.  And I’m pretty sure that’s not a good thing.

What evidence do you have if that?  What you are suggesting doesn’t make any sense.  “Investors” are buying houses at 15-20 percent over asking so they can rent them to people that are too broke to buy a house?

 

 

its far more likely that record low interest rates, fewer people wanting to sell during Covid, and the Influx of massive amounts of money into the economy is responsible for the current housing bubble.

[TheDoyler23]

53 minutes ago, TryTheBeal! said:

In effect, this is the end of the concept of a “starter home”.  And I’m pretty sure that’s not a good thing.

 

I'm sitting in a house, built a few years after WW2 with government support to make sure returning GI's had more opportunities for housing and a robust middle class. The owner of this house in the 50's worked in a kitchen and his wife stayed home.  The house across the street now has four working adults and I bet they needed parental help to buy it. 

 

Entrance into middle class and having assets is a tremendous challenge for people who are just a few years younger than I am, and I'm still in my 30s. 

 

 

[BatteredFanSyndrome]

2 minutes ago, CousinsCowgirl84 said:

What evidence do you have if that?  What you are suggesting doesn’t make any sense.  “Investors” are buying houses at 15-20 percent over asking so they can rent them to people that are too broke to buy a house?

 

 

its far more likely that record low interest rates, fewer people wanting to sell during Covid, and the Influx of massive amounts of money into the economy is responsible for the current housing bubble.

I don't think it's one or the other.  I can attest to the NOVA/Montgomery County money coming into my own neighborhood, looking to pay cash and make AirBNB's out of the properties, because we have private river access and other amenities.  There is a lot of RE movement for a lot of different reasons right now.

[TradeTheBeal!]

7 minutes ago, CousinsCowgirl84 said:

What evidence do you have if that?  What you are suggesting doesn’t make any sense.  “Investors” are buying houses at 15-20 percent over asking so they can rent them to people that are too broke to buy a house?

 

 

its far more likely that record low interest rates, fewer people wanting to sell during Covid, and the Influx of massive amounts of money into the economy is responsible for the current housing bubble.

Good point, Einstein.  There’s clearly no money in being a landlord.

[CousinsCowgirl84]

10 minutes ago, TryTheBeal! said:

Good point, Einstein.  There’s clearly no money in being a landlord.

 Probably less than you imagine. My net on renting two properties is around 300/mo. That doesn’t include maintenance costs. I am paying down my mortgages and the houses are appreciating in value l, but buying at the top of the bubble like you are suggesting doesn’t make economic sense.

 

  The main benefit is to spread your money across different types of assets. You will gain the appreciation from the house and the rent money will pay down the mortgage but it isn’t super lucrative in the short term.

 

 

 

paying over asking with a high mortgage would make your net profit even smaller.

 

In short, if you are super rich there are better places to it your money than the housing market when the housing market is red hot.

Edited April 6, 2021 by CousinsCowgirl84

[TradeTheBeal!]

16 minutes ago, CousinsCowgirl84 said:

 Probably less than you imagine. My net on renting two properties is around 300/mo. That doesn’t include maintenance costs. I am paying down my mortgages and the houses are appreciating in value l, but buying at the top of the bubble like you are suggesting doesn’t make economic sense.

 

  The main benefit is to spread your money across different types of assets. You will gain the appreciation from the house and the rent money will pay down the mortgage but it isn’t super lucrative in the short term.

 

 

 

paying over asking with a high mortgage would make your net profit even smaller.

 

In short, if you are super rich there are better places to it your money than the housing market when the housing market is red hot.

Correct, it is a long-term investment.

 

Who says we’re at the top of the bubble?  If you’re saying that...then it should be very clear to all concerned that this absolutely isn’t the case.

[TradeTheBeal!]

Answer me this @CousinsCowgirl84, if property management is such a poor investment for you and we’re at the top of the bubble...then why aren’t you selling your properties right now today?  

 

This should be interesting...

[TheDoyler23]

15 minutes ago, TryTheBeal! said:

Who says we’re at the top of the bubble?  

 

Until we have an abundance of supply or much higher interest rates, the demand is ever crushing here in the DMV. All the more reason for investors to keep buying the bottom half of the market.  

[TradeTheBeal!]

5 minutes ago, TheDoyler23 said:

 

Until we have an abundance of supply or much higher interest rates, the demand is ever crushing here in the DMV. All the more reason for investors to keep buying the bottom half of the market.  

Nailed it.

[CousinsCowgirl84]

23 minutes ago, TryTheBeal! said:

Answer me this @CousinsCowgirl84, if property management is such a poor investment for you and we’re at the top of the bubble...then why aren’t you selling your properties right now today?  

 

This should be interesting...

I didn’t say it was a poor investment. I said it doesn’t make sense to invest in houses right now. When the market is super hot. That it’s not super lucrative in the short term. There’s nuance to investing.

 

As to why I am not selling, number one there is a difference between not selling when the market is super hot and suggesting investors are buying houses at record prices. There are transaction costs and I bought after the housing collapse.  I am, as I pointed out, fully recouping my costs. But that’s not likely if you are paying outrages prices for houses to rent. You need your mortgage to be relatively low, not relatively high, which would be the case right now. I know you aren’t this dense. You must understand the point I am making.

 

 

28 minutes ago, TryTheBeal! said:

 

Who says we’re at the top of the bubble?  If you’re saying that...then it should be very clear to all concerned that this absolutely isn’t the case.

why do you think it’s clear we aren’t at the top of the bubble?

 

I think it is clear we are in a bubble.  When it pops of course depends on a lot of factors.

Edited April 6, 2021 by CousinsCowgirl84

[skinsmarydu]

Popcorn for lunch? 

[TradeTheBeal!]

Live look-in at the CC84 real estate seminar!