All by design

Deflation coming soon

& no that's not a good thing

Mr. Fingerbottom said:

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All by design

Deflation coming soon

& no that's not a good thing

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Deflation would require a removal of currency from circulation. That ain't happening. What MAY show up, though, is a recession which drives SOME prices down as common folks lose the disposable income to buy non-necessities.

Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

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Damn! We are sitting at 2.5 and thought WE had gotten a great rate!

yeah we are at 2.5% and 4 years into a 15 year note, I don't see us going anywhere for a while. We have enough equity in the house to pay cash in a less expensive area but my current job wouldn't support a move to one of those areas.

Retired Engineer here . Not well versed in finance , money supply , etc. I invested consistently well and diversified but do not understand all the inner workings

Can I ask you to walk us thru what the deflationary period and unwinding those derivatives looks like in financial laymen's terms .

We moved in early September at what turned out to be the bottom of the 10 year treasury. We sold a 2.75% and bought a 5.5% but we freed up a ton of equity and paid for college for our youngest and invested a ton of money so all told a good outcome. Really didn't think we'd see rates start climbing again but here we are.

Tree Hugger said:

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yeah we are at 2.5% and 4 years into a 15 year note, I don't see us going anywhere for a while. We have enough equity in the house to pay cash in a less expensive area but my current job wouldn't support a move to one of those areas.

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Been looking too. Curious... what areas were you looking at?

AgGrad99 said:

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Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

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I'll stay in this one a little longer. But at some point, we'll all just use the equity to pay something off in cash, and not worry about interest rates.


When I bought my first house, I think my rate was 8.25% or something along those lines. But houses weren't near as expensive as they are now. New buyers get a double whammy of high interest and high prices. It's the younger generation that will hurt for a little while...and I dont envy them in that regard.

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I think we'll see house prices flatten out over the next 10-15 years as the boomers homes are sold off for various reasons. Like everything else they are the biggest generation so they're own the most houses and as they sell them that has to impact prices. At that point we'll see a good opportunity for the younger generation to get into home ownership. A bit later than my generation X but they won't be locked out forever.

LOYAL AG said:

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AgGrad99 said:

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Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

---

I'll stay in this one a little longer. But at some point, we'll all just use the equity to pay something off in cash, and not worry about interest rates.


When I bought my first house, I think my rate was 8.25% or something along those lines. But houses weren't near as expensive as they are now. New buyers get a double whammy of high interest and high prices. It's the younger generation that will hurt for a little while...and I dont envy them in that regard.

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I think we'll see house prices flatten out over the next 10-15 years as the boomers homes are sold off for various reasons. Like everything else they are the biggest generation so they're own the most houses and as they sell them that has to impact prices. At that point we'll see a good opportunity for the younger generation to get into home ownership. A bit later than my generation X but they won't be locked out forever.

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True. I tell me nieces and nephews to hold off a bit, because once the Boomers die off, there's going to be a lot of houses and real estate available at a much better price than now.

Nothing wrong with having dual purpose rooms for families. Going to be common place where beds will be in living rooms and bunk beds next to dining tables.

AgFan1974 said:

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Tree Hugger said:

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yeah we are at 2.5% and 4 years into a 15 year note, I don't see us going anywhere for a while. We have enough equity in the house to pay cash in a less expensive area but my current job wouldn't support a move to one of those areas.

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Been looking too. Curious... what areas were you looking at?

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Currently in Eugene, OR after a move from TX in 2020.

We've thrown around the idea of moving to NC to be closer to my wife's mom and sister. Really have no interest in moving back to DFW although my parents and a bunch of friends are there.

LOYAL AG said:

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AgGrad99 said:

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Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

---

I'll stay in this one a little longer. But at some point, we'll all just use the equity to pay something off in cash, and not worry about interest rates.


When I bought my first house, I think my rate was 8.25% or something along those lines. But houses weren't near as expensive as they are now. New buyers get a double whammy of high interest and high prices. It's the younger generation that will hurt for a little while...and I dont envy them in that regard.

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I think we'll see house prices flatten out over the next 10-15 years as the boomers homes are sold off for various reasons. Like everything else they are the biggest generation so they're own the most houses and as they sell them that has to impact prices. At that point we'll see a good opportunity for the younger generation to get into home ownership. A bit later than my generation X but they won't be locked out forever.

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Boomers own 50% of the homes but make up only 20% of the population. Over the next decade we'll see 4-5 million homes per year going on the market from boomers as they die or move to retirement centers etc. That's a whole lot of homes. That is 3-4x what was being sold each year during housing bubble pre-2008. Downward pressure is coming.

Deflation can spiral and quickly, all non-liquid assets devalue, and the real cost of debt increases. If you have debt, this can be crushing. Most companies carry debt, this is where the real pain comes in. Once jobs start getting cut, and salaries start dropping, anybody with a mortgage or a car payment could quickly find themselves in over their head. We've seen expectations for car loans get insane the last decade, even going out to 8 year loans, which is crazy.

The risks of deflation are substantial, and our economic system is very scared of this happening. This is why it's designed to maintain 1-2% rate of inflation, that is the target. For better or worse, this is the system we live in.

I've got a CD that matures in about 10 days. Would you folks hold off for rates to go up to reinvest in another CD?

Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

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Mine has been paid off for a long time. Moving upwards just means higher property taxes, higher insurance and a mortgage north of 7%.

Yeah, thats a no for me Dawg.

kb2001 said:

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Deflation can spiral and quickly, all non-liquid assets devalue, and the real cost of debt increases. If you have debt, this can be crushing. Most companies carry debt, this is where the real pain comes in. Once jobs start getting cut, and salaries start dropping, anybody with a mortgage or a car payment could quickly find themselves in over their head. We've seen expectations for car loans get insane the last decade, even going out to 8 year loans, which is crazy.

The risks of deflation are substantial, and our economic system is very scared of this happening. This is why it's designed to maintain 1-2% rate of inflation, that is the target. For better or worse, this is the system we live in.

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In that world, interest rates will be able to fall to try and stimulate economic activity (some inflation) and the value of bonds go up. I would think stocks get crushed for a while but eventually recover long term.

Trump needs to put this out in speech, or starting next week, the interest rates will be his fault.

Mathguy64 said:

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Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

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Mine has been paid off for a long time. Moving upwards just means higher property taxes, higher insurance and a mortgage north of 7%.

Yeah, thats a no for me Dawg.

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My company is begging me to relocate but it doesn't make a lot of financial sense for me. I will stay a few more years and make a decision then and most likely keep this as a rental. With a note of $1200 and the home able to rent for $3500, its a no brainer.

Mr. Fingerbottom said:

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All by design

Deflation coming soon

& no that's not a good thing

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deflation is great news for savers and retirees on fixed income

Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

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The problem we are facing is HELOC rates are still 8-10%. We have no desire to move away from our 2.5% rate but we also have some substantial updates we'd like to make. There seems to be no indication banks intend to lower prime rates. So we question whether we should suck it up and deal with the rates now or wait for a little deflation and hope construction costs decrease.

LMCane said:

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Mr. Fingerbottom said:

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All by design

Deflation coming soon

& no that's not a good thing

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deflation is great news for savers and retirees on fixed income

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And terrible for anyone holding a ton of debt. I.e the US Government which is why deflation will be avoided at all costs.

I think most of us will agree the reported CPI and PPI numbers haven't come close to matching the reality of actual cost of living increases. I wonder if there will be some carryover that causes the CPI and PPI to run a bit hotter than reality as the cost of living trajectory slows down and the inflation models try to normalize closer to reality?

Unfortunately, I'm in a situation where I have to relocate soon. The good news is I have enough money to pay cash, or mostly cash. But that doesn't do me much good when there are no houses for sale, unless I buy a POS that won't sell right now and sure as hell won't sell once things normalize.

LOYAL AG said:

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AgGrad99 said:

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Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

---

I'll stay in this one a little longer. But at some point, we'll all just use the equity to pay something off in cash, and not worry about interest rates.


When I bought my first house, I think my rate was 8.25% or something along those lines. But houses weren't near as expensive as they are now. New buyers get a double whammy of high interest and high prices. It's the younger generation that will hurt for a little while...and I dont envy them in that regard.

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I think we'll see house prices flatten out over the next 10-15 years as the boomers homes are sold off for various reasons. Like everything else they are the biggest generation so they're own the most houses and as they sell them that has to impact prices. At that point we'll see a good opportunity for the younger generation to get into home ownership. A bit later than my generation X but they won't be locked out forever.

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I think you're right.

I've been talking with my boys about this. Maybe they can't afford a house in Austin, but they can in Midlothian or Waco. Buy a small house there as a rental, and start earning equity. When the market conditions change down the line, they won't be so far behind, and can put that equity to work.

Logos Stick said:

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LOYAL AG said:

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AgGrad99 said:

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Hoyt Ag said:

---

1.99%

I'm stuck with this house forever.

---

I'll stay in this one a little longer. But at some point, we'll all just use the equity to pay something off in cash, and not worry about interest rates.


When I bought my first house, I think my rate was 8.25% or something along those lines. But houses weren't near as expensive as they are now. New buyers get a double whammy of high interest and high prices. It's the younger generation that will hurt for a little while...and I dont envy them in that regard.

---

I think we'll see house prices flatten out over the next 10-15 years as the boomers homes are sold off for various reasons. Like everything else they are the biggest generation so they're own the most houses and as they sell them that has to impact prices. At that point we'll see a good opportunity for the younger generation to get into home ownership. A bit later than my generation X but they won't be locked out forever.

---

Boomers own 50% of the homes but make up only 20% of the population. Over the next decade we'll see 4-5 million homes per year going on the market from boomers as they die or move to retirement centers etc. That's a whole lot of homes. That is 3-4x what was being sold each year during housing bubble pre-2008. Downward pressure is coming.

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Theres a LOT of pent up demand, though, and consumer preferences matter. Also, inflation isn't yet fully realized off of the monetary supply increases. If there is a softening of the market, I expect it'll vary drastically by location.

Normal places (not Texas with the population bloom) will probably see significant slow down in residential construction with boomer sourced inventory replacing builder sourced.

Huge variable: if mass deportation occurs, pent up demand could be satisfied far more rapidly.

Logos Stick said:

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LOYAL AG said:

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AgGrad99 said:

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Hoyt Ag said:

---

1.99%

I'm stuck with this house forever.

---

I'll stay in this one a little longer. But at some point, we'll all just use the equity to pay something off in cash, and not worry about interest rates.


When I bought my first house, I think my rate was 8.25% or something along those lines. But houses weren't near as expensive as they are now. New buyers get a double whammy of high interest and high prices. It's the younger generation that will hurt for a little while...and I dont envy them in that regard.

---

I think we'll see house prices flatten out over the next 10-15 years as the boomers homes are sold off for various reasons. Like everything else they are the biggest generation so they're own the most houses and as they sell them that has to impact prices. At that point we'll see a good opportunity for the younger generation to get into home ownership. A bit later than my generation X but they won't be locked out forever.

---

Boomers own 50% of the homes but make up only 20% of the population. Over the next decade we'll see 4-5 million homes per year going on the market from boomers as they die or move to retirement centers etc. That's a whole lot of homes. That is 3-4x what was being sold each year during housing bubble pre-2008. Downward pressure is coming.

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How many of those homes are going to be move-in ready?
In our neighborhood, Gen Xers keep the nicer homes they inherited from their boomer parents and rent them out. Or they sell them to investors who tear them down and rebuild a much larger and more expensive home in their place.

Hoyt Ag said:

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Mathguy64 said:

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Hoyt Ag said:

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1.99%

I'm stuck with this house forever.

---

Mine has been paid off for a long time. Moving upwards just means higher property taxes, higher insurance and a mortgage north of 7%.

Yeah, thats a no for me Dawg.

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My company is begging me to relocate but it doesn't make a lot of financial sense for me. I will stay a few more years and make a decision then and most likely keep this as a rental. With a note of $1200 and the home able to rent for $3500, its a no brainer.

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Work flexibility will keep a particular segment of the workforce in the rental market, imo.
Homeownership isn't all it's cracked up to be, and public school zones, aren't going to be as important as they once were. The younger generations don't have as much 'stuff,' and even furniture is becoming more disposable.