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DD: Why the housing market ISN’T going to crash, Inflation IS transitory, and you are all retards for thinking otherwise

First off I’m getting pretty tired of seeing a “**It’S 2008 AgAiN! HoUsInG Go BoOm!!!1!**” every couple days. Let’s review why it’s not going to happen:

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* The crash in 2008 was caused by lots of things but the biggest issue was mortgage companies were handing out mortgages like beads at Mardi Gras. People who had no possible way of actually paying back the mortgage were given one anyway. So now lots of people who normally would only afford say a 130k house were getting pre-approved for 180k which lead to:
* Bidding wars on houses driving the prices up higher then the actual fair market value. Which these same people who shouldn’t have been approved for the higher amounts were buying and then:
* Huge numbers of people defaulting on loans that they should have never been given in the first place which lead to all the banks begging for the feds to bail them out and the feds said:
* Fuck yo loans, you should have known better which lead to the [single biggest drop in the Dow of 777 points](https://money.cnn.com/2008/09/29/markets/markets_newyork/)

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Is this going to happen again? No. Why? [Because it was a fucking mess in 2008](https://www.wealthsimple.com/en-us/learn/2008-market-crash#what_date_in_2008_did_the_stock_market_crash) and a bunch of new regulations were put in place to make sure it doesn’t. But why are prices so high? Because Americans overall are doing better through the pandemic then worse and have more to spend. In 2008 US households **lost $8 trillion in wealth**. In 2020 US households **gained $13.5 trillion in wealth**. [The majority of Americans are doing pretty fucking fantastic](https://www.wsj.com/articles/during-covid-19-most-americans-got-richerespecially-the-rich-11624791602).

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But Inflation!!! Inflation will stop everything!! No, it won’t. You know why they are saying inflation is transitory this year? Because it is. Will inflation this year be higher then a “normal” year? Possibly. Is higher inflation here to stay? Highly unlikely. Remember 30 seconds ago, the whole US household wealth thing? Turns out when we have lots of extra cash we spend it. Also turns out when there is suddenly higher demands for almost everything that prices tend to go up. Lets look at why that is:

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* [Unemployment](https://tradingeconomics.com/united-states/unemployment-rate) went from a peak of around 15% in March 2020 to 5.9% currently. A “Healthy” unemployment rate is 4% – 5%.
* Up until this week most states were still offering Unemployment bonuses. As of this week [half will keep the program in place](https://www.cnet.com/personal-finance/unemployment-shutoffs-states-offer-workers-cash-incentives-to-find-jobs/) until September. Many people made more money not having a job then they did before.
* Some of those states that have stopped the bonus are offering “Go back to work bonuses”.
* About 127 million US households got stimulus checks including many who simply didn’t need them. In total approximately **$391 BILLION** was handed out.
* Many households with children started to get a advance on their child tax credit this month, which was also increased.
* Many employers, especially ones that were paying minimum wage, have increased their rates to get people back so even at the low end people are now making more then they were pre-pandemic.

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Again more money into the economy = more buying = more demand = prices go up. This isn’t rocket science, it’s simple economics. People who were waiting to [buy a car](https://www.businessinsider.com/why-are-used-cars-so-expensive-now-shortages-pandemic-rentals-2021-7) now had the money to do so. Cars became scarce. Prices went up. But what about now? After peaking last month wholesale car prices are starting to come down and in the coming 6 months used cars should return to “normal” levels. People started buying houses, both existing and new, and what happened? Building materials shot up. Lumber was at a [10 year high in May](https://www.nasdaq.com/market-activity/commodities/lbs) and right now is back right around it’s average.

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We are in a bull market simply because we have the cash to be in one. People are buying more. People are investing more. More people have entered the stock market [in the last year then in the 12 years before this combined](https://www.cnbc.com/2021/04/09/investors-have-put-more-money-into-stocks-in-the-last-5-months-than-the-previous-12-years-combined.html). The lowest paid people in our country are making more. 25 US states increased their minimum wage [this year](https://www.usnews.com/news/articles/best-states/minimum-wage-by-state). Inflation will subside and Americans will continue to make more money. Our biggest problem isn’t going to be inflation but actually filling all the jobs that need to be done. Once more unemployment benefits expire and more enter the workforce we are going to find that we grew during the pandemic and will have problems filling jobs as unemployment drops to below healthy levels (sub 4%).

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TL;DR: Buy everything. Stop fear mongering. Also Bers R Fukd.

What do you think?

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33 Comments

  1. WSB is messed up today. 2 front page posts, 1 saying the housing market is gonna crash the next saying no, no its all fine and dandy.

    Guess its housing market straddles today!

  2. To be fair, I don’t really think more people are entering the stock market because they’re “doing great,” it’s just because it’s become much more mainstream the last few years with shit like Robinhood making it very accessible to just about anyone with a smartphone.

  3. What about forbearance expiration?

    AND

    What about eviction moratorium expiration?

    What will people do when they find themselves in deep shit after these two expire? Will they think of getting out of their houses?

  4. This is the most retarded DD I have ever read.

    You explained why inflation is happening (more money in economy, high demand, low supply), which EVERYONE FUCKING KNOWS, but you haven’t explained, at all, why you think this is going to go stop any time soon.

    Supply will take years to catch up to the demand created by all the money in the system.

  5. It’s more of a “my opinion” write up rather than a DD. On inflation I think you’re missing a critical point. Once wages rise it’s very difficult to drive them back down. When someone is used to earning $18/hr they won’t take a job for $15/hr easily, for example. Employers will be stuck paying higher wages and will increase prices to maintain their profit margin. Customers who on large are getting paid more now anyway will simply pay the higher prices. e.g. persistent inflation.

    In addition rents are increasing which also contributes to sticky inflation as most contracts are for 1-2 years.

    In a way inflation is driving the housing price increase as over paying now but locking in a price in an inflationary environment when combined with cheap mortgages is a strong incentive.

    IMHO at some point rates will go up, mortgages will become more expensive, and housing will experience a strong correction, but not a 2008 style crash.

  6. This is very poorly thought out. You failed to mention interest rates, CMBS, eviction moratorium ending this month, “climate change” (according to our govt – having meetings this week on it), and you seemed to imply that an endless supply of money can continue to flex seal this speculative bubble until the end of time.

  7. So, you are saying it wont crash because “the WS made a lot of regulations and are following all the rules”. The second argument is because i feel like it wont?

    I would rather prepare for a crash which will not come, then wishful think my way into a personal bankruptcy because it is impossible for a crash to happen AGAIN (just like the last time)

  8. 2.7 million mortgages are between 30-89 days delinquent as of today (7.6% of all single family residential mortgages), however, the foreclosure rate is at .04% (12,700 mortgages). This is completely due to the foreclosure moratorium put in place by the federal government. Currently the housing market is roughly 1 million houses short of a “‘healthy market”, which is causing skyrocketing prices…

    What do you think will happen when almost 3 million houses hit the market simultaneously once banks are allowed to start foreclosure proceedings again? This is the reality that will occur at the end of July when the moratorium expires. Foreclosures typically take 90 days, so expect the housing market to tank in Q4 of 2021 (October-November) and at the same time when demand is also usually low.

  9. The posts about “crash is imminent!” convince me that a crash won’t happen any time soon.

    But now the fact that you posted that a crash *won’t* happen makes me worried.

  10. Maybe they stopped giving mortgages to every retard on WSB but they are giving auto loans to each of us… That and student loans are what I’m banking on fucking us.

    Source: Sold cars. Saw cars I sold get repo’d… a lot

  11. It might be worse than 2008 because investors own a large percentage of the properties. Not saying this happens soon but when we enter a longer term bear market rates rise and liquidity dries up it won’t take investors long to dump properties to provide liquidity. If you own 50 properties that are all down 10% you only put down 10% rent is declining and your paying taxes and maintenance on a depreciating asset it’s easier to cut and run that’s what investors are great at. I agree with you inflation is transitory we will see deflation across the board.

  12. i think this is all bs. What about bonds? After 08 the govt did do something to combat against a crash like the housing market to ever happen again: they apportioned more to BONDS as bank’s collateral. During the pandemic, bonds were given on loan for nearly free and these scumbags asset managers oversold them to the point where it is impossible to pay the loans back.

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    Same thing as 08, only difference is, bonds will screw us. We can see this already with huge firms like Blackrock overpaying for mortgages. My personal take (and I do not think this is necessarily true) is the bond market was used to fight against the short frenzy that happened in January and only helped for a moment.

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    But what do I know, I’m a waiter.

  13. You lost me when you said people are buying more, making more but that inflation won’t be a problem. Those are contradictory. Also, if jobs need to be filled then companies will need to pay higher wages to attract talent. Higher wagers = more money for people = more spending by people = higher inflation. This is the kind of amateur DD that gets people fucked in the @$$.

  14. Not to mention a ton of industries lowered their supply manufacturing because they thought demand would plummet and it really didn’t. So now a lot of suppliers are years behind demand.

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