Friday, April 03, 2015

Bubble highs.

That bad jobs number you heard is the sound of liquidity drying up. Which will be super interesting because real estate in the Bay Area is fully back at bubble highs.

My renters gave notice they are moving because they bought a house. So I had to go in and talk to my property manager. I try not to talk to real estate agents too often because their reality is not my reality. Well, maybe it's more accurate to say I don't want their reality to distort my reality. I'm on a good run. I get my information from experience. But in the last couple of months it looked like my house was finally flat. So I had to ask her directly, and she confirmed we are at the 2007 highs again all over town. Inventory was half of what a normal year is, and houses are closing in as little as 7 days. Seven days! Just like the heady days before the recession.

I also wanted to find out more about my renters situation because they had two foreclosures under their belt. Oh yes, I did rent to a couple that had two foreclosures. She was a nurse, and he worked for the government. Between them, they were actually quite wealthy. You can not imagine how much a nurse makes. I was completely shocked. They could have afforded to live in a million dollar house which my rental is not. It's a starter house. But they had a lot of money in the bank. So I took the chance. Not like it's that easy to escape people who have a foreclosure on their record these days. Two of them is a bit chancey, but they turned out fine. It wasn't a surprise at all they bought a house. But I did want to know how long it took for the banks to get over that. I guess they were tossed out in the first wave in 2009.

In the past few months I've started to turn my focus more on housing shortages. This recession is the longest stretch since at least 1960 that housing units have been under 500,000 units being built. Here. The average recessionary building dip previously has been about two years. This recession is roughly five years. Which can easily be resolvable if you can find land to build on, and can find the financing. The second part being super important right now because it's finally apparent to all we are entering another recession. That took quite a bit longer than I thought - but then we have the full weight of the government trying to make it not be so. And don't think for a minute banks aren't looking at those neg interest rates in Europe and not shitting their pants a little.

The funny thing about banks I learned from the recession is they don't like to lend so much when they are under deflationary pressure. It will be interesting to see how this sorts itself out. The one thing I do know is that in the next few years renters are going to be in an awful position.

Despite the recession I think housing will remain solid now. There are just more people on the earth than there were seven years ago. And it's easy to jingle mail your keys to the bank when you see no relief in sight. I knew a lot of people who could afford their house who chose to do that. When you are being told day after day your house will never be what you paid for it in your lifetime, even I thought about giving up a million times. I just couldn't believe what I'd known about housing my whole life was now not true. I grew up welfare poor. Moving every year. There is just a basic human need eventually to have a house. I don't care what anyone says. Even the cavemen who had caves did better.

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