irvinehomeowner
Well-known member
NO ONE can really comprehend what the Fed will do no matter who is in charge.
NO ONE thought the Fed would lower rates during the last crash... so never say never.
Poll: Irvine Housing Prediction June 2022
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NEW -> Contingent Buyer Assistance Program
NO ONE can really comprehend what the Fed will do no matter who is in charge.
NO ONE thought the Fed would lower rates during the last crash... so never say never.
I've spent the past year+ trying to warn people against buying on TI, but I know the reason they don't listen is because emotion overrules logic for most people when it comes to buying a home.
1. The Fed has been crystal clear their priority is Inflation
And
2. When unemployment is low single digits?
I think the unemployment would need to breach 7% and inflation to settle at 3.5% for at least 6 months for any scenario of rate cutting to materialize, a combination I don’t see happening anytime in 2023.
And it's funny that you said the Fed's priority is inflation without realizing that it will be the same with recession. You really just proved my point. The fed's priority is the ECONOMY. You realize that economy means inflation and recession, right?
We will hit recession in 2023. The Fed won't cut rates right away. They will pause for probably 6-9 months to assess the situation, but they WILL cut rates when recession persists.
Like I said, I don't believe that the Fed will cut rates in 2023, but most likely early 2024, but they WILL cut rates. That is why you're wrong claiming Powell won't do it again.
https://www.stlouisfed.org/in-plain...m has,other words, conducting monetary policy.
Unemployment has to go WAY up and inflation has to come WAY down for any dovish signs from our favorite clueless central bank.
And count me as someone who wants to see rates head back down so I could have the option of selling in the future and locking in my $500K exemption before they take it away.
August 2019 (from 2.5% to 2.25%), then again in September and again in October.
Do you know what the unemployment rate was in 2019?
3.7% in August 2019, 3.5% in September, and 3.6% in October.
Now, tell me, what does "unemployment has to go WAY up" mean? Do you think the Fed will do nothing when the interest is at more than 5% and we're in the middle of a recession?
There are people who are buying not because of FOMO but because they need a place to live.
When we last bought.. prices jumped considerably and we thought we were buying at peak (as we have done in the past)... the difference is we made sure we were buying the right house, the right location and we could afford it for many years. Turns out either of those houses/timing were a great choice... the one we bought at near peak didn't drop so much and recovered quickly but was it had a bad location although money wise it would have been fine had we stayed. The last one has obviously jumped considerably but had it not and even decreased, we would still be okay because we can afford it and it's the home/location we wanted.
As @CalBears96 has stated multiple times... we don't really care about appreciation/depreciation as we are enjoying the home we live in. We were actually surprised at how much it had gone up and had we been tracking this better, we should have cashed out last year... but then where would we go? Yeah... maybe we could have sold and rented but we like owning our own home (and did not like renting so much) so the FOMO over lost equity meant less to us.
Just live your life... we've been through that "got to time it right" phase and in the end... didn't really matter.
And don't get me wrong, I'm not putting everyone in my box... just giving you my point of view because I think the differences we have are due to our perspectives and not everyone thinks like you... or me.
Inflation wasn't a threat then and QE was still policy de jour. The Fed has one focus now which they have clearly stated : preventing inflation expectations from becoming embedded. The big unknown for all of us, IMO, is when do they decide to tell the public the target is no longer 2% but 4 or even..5%. I think that will actually calm the markets, and by then the real estate and private credit markets will have taken enough of a hit they can stop hiking.
Jonathan Ferro summed it up on Bloomberg Surveillance well this morning, quoting Mark Knopler - "no more Money for Nothing"
Amazon, Meta, and Cisco have announced layoffs. Microsoft, Lyft, and Salesforce have also announced smaller scale layoffs. There are also others like Stripe and Robinhood. More companies will have layoffs in 2023.
Point is... yield curve is a meaningless indicator so long as Fed has a balance sheet this large.
NO ONE can really comprehend what the Fed will do no matter who is in charge.
NO ONE thought the Fed would lower rates during the last crash... so never say never.
Liar Loan
Well-known member
Black Knight says OC prices have fallen 7% so far this year. Must be seasonal!
“Are we stuck in this place?” Bragg, 42, said.
Overall, U.S. homeowners with a mortgage have lost a collective $1.5 trillion in equity since equity peaked in May, an 8% reduction, according to September data from mortgage services company Black Knight. The number of underwater mortgages — where someone owes more on their loan than their home is worth — has more than doubled to roughly 450,000 nationwide.
According to Black Knight data, U.S. home prices have so far dropped 3.2% from the peak, while prices have fallen 7% across Los Angeles and Orange counties and 6.3% in the Inland Empire.
www.latimes.com
As home prices decline, Southern Californians who bought at the peak are nervous
Justin Bragg and his wife stretched to buy a home in Boyle Heights late last year. Now, after hearing of multiple shootings at parks near their home, they wonder if they made a bad choice. Bragg, a high school teacher, feels unsafe just bringing their 3-year-old daughter to their neighborhood playground. But he worries they won’t be able to sell or find a renter who’ll cover their mortgage.“Are we stuck in this place?” Bragg, 42, said.
Overall, U.S. homeowners with a mortgage have lost a collective $1.5 trillion in equity since equity peaked in May, an 8% reduction, according to September data from mortgage services company Black Knight. The number of underwater mortgages — where someone owes more on their loan than their home is worth — has more than doubled to roughly 450,000 nationwide.
According to Black Knight data, U.S. home prices have so far dropped 3.2% from the peak, while prices have fallen 7% across Los Angeles and Orange counties and 6.3% in the Inland Empire.
As home prices decline, Southern Californians who bought at the peak are nervous
Southern California home prices are falling, eroding equity homeowners could spend on renovations or emergencies. People who bought at the peak are particularly nervous.
www.latimes.com
irvinehomeowner
Well-known member
So isn't that on Bragg? If prices weren't going down, would he feel different about the shootings?
What was my other caveat in addition to affordability? Oh yeah... making sure you can stay there for a while... so he made a bad choice if he didn't research that neighborhood properly (and I've done that... picked a place because it had a huge lot and was on a cul-de-sac but it was too close to a busy street).
Whether prices are dropping or rising... you have to make sure it's a place you want to live for a while... not just a year.
What was my other caveat in addition to affordability? Oh yeah... making sure you can stay there for a while... so he made a bad choice if he didn't research that neighborhood properly (and I've done that... picked a place because it had a huge lot and was on a cul-de-sac but it was too close to a busy street).
Whether prices are dropping or rising... you have to make sure it's a place you want to live for a while... not just a year.
Liar Loan
Well-known member
Yes, it's the buyer's responsibility to think through all the risks, but human nature is what it is, and when prices are rising by 20%+ per year it's very hard for people to have the discipline not to buy. Greed is a powerful human emotion, as is fear of missing out (FOMO).
I've spent the past year+ trying to warn people against buying on TI, but I know the reason they don't listen is because emotion overrules logic for most people when it comes to buying a home.
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CalBears96
Well-known member
You're wrong, because you don't seem to comprehend that the Fed's priority is the economy. The Fed WILL lower rates after we go into recession in 2023. The question is, will the Fed start lower rates late 2023 or early 2024? Not if, but when.
How can you say that when:
1. The Fed has been crystal clear their priority is Inflation
And
2. When unemployment is low single digits?
I think the unemployment would need to breach 7% and inflation to settle at 3.5% for at least 6 months for any scenario of rate cutting to materialize, a combination I don’t see happening anytime in 2023.
CalBears96
Well-known member
Have you seen the market reaction last week? The market is now worried about recession because the Fed had been too hawkish with the rates. You realize that inflation hit quick, right? So will recession due to the Fed's reaction to the inflation. We went from 0% to 4% in a hurry.
And it's funny that you said the Fed's priority is inflation without realizing that it will be the same with recession. You really just proved my point. The fed's priority is the ECONOMY. You realize that economy means inflation and recession, right?
We will hit recession in 2023. The Fed won't cut rates right away. They will pause for probably 6-9 months to assess the situation, but they WILL cut rates when recession persists.
Like I said, I don't believe that the Fed will cut rates in 2023, but most likely early 2024, but they WILL cut rates. That is why you're wrong claiming Powell won't do it again.
They have a dual mandate - max employment and price stability - not something as broad as "the economy".
https://www.stlouisfed.org/in-plain...m has,other words, conducting monetary policy.
Unemployment has to go WAY up and inflation has to come WAY down for any dovish signs from our favorite clueless central bank.
And count me as someone who wants to see rates head back down so I could have the option of selling in the future and locking in my $500K exemption before they take it away.
irvinehomeowner
Well-known member
I dunno... I just heard that the Fed is not going to raise rates as aggressively as they "planned"... so nothing is set in stone.
CalBears96
Well-known member
Do you know when the Fed started cutting rates?
August 2019 (from 2.5% to 2.25%), then again in September and again in October.
Do you know what the unemployment rate was in 2019?
3.7% in August 2019, 3.5% in September, and 3.6% in October.
Now, tell me, what does "unemployment has to go WAY up" mean? Do you think the Fed will do nothing when the interest is at more than 5% and we're in the middle of a recession?
irvinehomeowner
Well-known member
I think this is where you falter as you like to put everyone into certain boxes.
There are people who are buying not because of FOMO but because they need a place to live.
When we last bought.. prices jumped considerably and we thought we were buying at peak (as we have done in the past)... the difference is we made sure we were buying the right house, the right location and we could afford it for many years. Turns out either of those houses/timing were a great choice... the one we bought at near peak didn't drop so much and recovered quickly but was it had a bad location although money wise it would have been fine had we stayed. The last one has obviously jumped considerably but had it not and even decreased, we would still be okay because we can afford it and it's the home/location we wanted.
As @CalBears96 has stated multiple times... we don't really care about appreciation/depreciation as we are enjoying the home we live in. We were actually surprised at how much it had gone up and had we been tracking this better, we should have cashed out last year... but then where would we go? Yeah... maybe we could have sold and rented but we like owning our own home (and did not like renting so much) so the FOMO over lost equity meant less to us.
Just live your life... we've been through that "got to time it right" phase and in the end... didn't really matter.
And don't get me wrong, I'm not putting everyone in my box... just giving you my point of view because I think the differences we have are due to our perspectives and not everyone thinks like you... or me.
There is no recession now with current levels of unemployment and surplus job openings - it's only a recession for undiversfied tech stock portfolios and real estate prices. And crypto.
Inflation wasn't a threat then and QE was still policy de jour. The Fed has one focus now which they have clearly stated : preventing inflation expectations from becoming embedded. The big unknown for all of us, IMO, is when do they decide to tell the public the target is no longer 2% but 4 or even..5%. I think that will actually calm the markets, and by then the real estate and private credit markets will have taken enough of a hit they can stop hiking.
Jonathan Ferro summed it up on Bloomberg Surveillance well this morning, quoting Mark Knopler - "no more Money for Nothing"
Mawesome Sauce
Member
The dirty little secret is no serious central banker cares about employment. That’s just a mandate politicians put out there because politicians care about it. Everybody knows that if you take care of inflation, employment will take care of itself (so long as politicians don’t mess it up). Remember Volcker destroyed the economy in order to stop inflation… we had the best economy for decades after.
If Powell doesn’t choke and sticks to plan, he won’t care about a recession. He won’t care about what the politicians, mostly Democrats at this point, but we will see next year, say. Nothing short of a government funding crisis will make him cut rates. Question is if he will care about foreign governments or only US/state ones.
If Powell doesn’t choke and sticks to plan, he won’t care about a recession. He won’t care about what the politicians, mostly Democrats at this point, but we will see next year, say. Nothing short of a government funding crisis will make him cut rates. Question is if he will care about foreign governments or only US/state ones.
CalBears96
Well-known member
Who said anything about recession right now? I said 2023, probably mid 2023. We are already seeing signs of it.
Amazon, Meta, and Cisco have announced layoffs. Microsoft, Lyft, and Salesforce have also announced smaller scale layoffs. There are also others like Stripe and Robinhood. More companies will have layoffs in 2023.
CalBears96
Well-known member
You realized that Trump put pressure on Powell to cut rates back in 2019, right? I mean, I guess you're somewhat right that Powell pushed back a bit since Trump wanted him to cut more, like all the way down to 0% or even into negative territory. Ultimately, though, the Fed did cut it all the way down to 0% in 2020, so...
Mawesome Sauce
Member
Yes. And Powell now is worried he will be the next Burns, the opposite of his hero Volcker. He has motivation now to be remembered as the most hawkish chair since Volcker or die trying. I feel he wants to be fired for being too hawkish to salvage his legacy.
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usctrojancpa
Well-known member
Inflation will come down in 2023 because rent equivalent prices will begin moderating and oil prices are also beginning to roll over as we speak. I think inflation will come down to 3-4% next year and the big wildcard will be food prices. The higher the Fed goes on rates the worse the recession will be and the more they'll invert the yield curve and end up cutting rates more in 2024-2025.
Mawesome Sauce
Member
Would the yield curve be inverted if the fed unloaded its balance sheet? I doubt it. The10 year should never be below 3% even during the worst of recessions. We should be over 5% right now and over 4% even if recession hits next year. But we won't be, because the indicator has been tampered with. The fed could just as easily normalize the yield curve into a recession, which would make life miserable for the housing market. They won't do that cause the politicians will stop them... even though they should do it.
Point is... yield curve is a meaningless indicator so long as Fed has a balance sheet this large.
Bingo - long term QE distorted market pricing signals, perhaps the greatest damage done by the Fed, especially with the 10 yr
To ponder how truly distorted markets were, The Fed was such an eager buyer of A paper MBS that Rocket refid me into a 1.99/15 yr (12 day closing - auto appraised!!) and they gave a 5 figure lender credit that returned $300 back at the closing table. In what world is that something anyone wants in their portfolio except me?