The Ultimate Meme Stock - Your Home

[Running_Man]

https://www.cnbc.com/2021/06/10/hom...richer-during-first-three-months-of-2021.html

Interesting that in the month of March homes went up 11% Nationwide, and in April homes went up 13% nationwide. A homeowner with a 320,000 house with a $288,000 mortgage in one year has received a gain on investment of 154% ($61,000 on $41,000 of equity).

Put this in along with the 65% gain in valuation of stockmarket as a % of GDP (worth another 6 trillion) and you are talking about 8 trillion dollars of gains in a year in an economy of 21 trillion dollars.

Homes are up to 50% of GDP in the economy and stocks are at 200% so as these gains continue to exceed GDP the net wealth of Americans on Average will eventually soar to unimaginable heights.

 

[aja8888]

https://www.cnbc.com/2021/06/10/hom...richer-during-first-three-months-of-2021.html

Interesting that in the month of March homes went up 11% Nationwide, and in April homes went up 13% nationwide. A homeowner with a 320,000 house with a $288,000 mortgage in one year has received a gain on investment of 154% ($61,000 on $41,000 of equity).

Put this in along with the 65% gain in valuation of stockmarket as a % of GDP (worth another 6 trillion) and you are talking about 8 trillion dollars of gains in a year in an economy of 21 trillion dollars.

Homes are up to 50% of GDP in the economy and stocks are at 200% so as these gains continue to exceed GDP the net wealth of Americans on Average will eventually soar to unimaginable heights.

Yeah, life is good...for now.

 

[bobandsherry]

Seems to ignore expenses for interest, taxes, maintenance, HOA fees and insurance to name a few. I get it but for me it's largely illiquid as I can't, or rather won't be selling. If I did there's huge transaction cost. [emoji383][emoji41]

 

[NW-Bound]

Doesn't it make you want to short some homes?

Back in the last housing bubble, one could make a lot of money shorting subprime mortgage companies or banks. This time, there's no similar problem that I know of. You have to bet directly against the home buyers, but I don't know how one does that, other than to sell them some homes. I can't sell them the homes I have.

Besides, my investable assets are a lot more than the value of my homes, and I need to pay more attention there.

 

[jazz4cash]

Seems to ignore expenses for interest, taxes, maintenance, HOA fees and insurance to name a few. I get it but for me it's largely illiquid as I can't, or rather won't be selling. If I did there's huge transaction cost. [emoji383][emoji41]

Exactly. Too illiquid to compare to just about any other asset...and yes, what about those transaction expenses!

 

[Running_Man]

Exactly. Too illiquid to compare to just about any other asset...and yes, what about those transaction expenses!

https://www.cnbc.com/2021/06/04/home-equity-loan-vs-cash-out-refinance.html

Requests for home Equity Lines of Credit are at an all time high, so maybe not so illiquid as you might think, you also could refiance the equity gain on a cash out mortgage and depending on the old rate actually be paying less per month.

Moving money for 4% to earn 20 percent per year will be a profitable transaction, whether you throw that money into a second house or the hottest stocks.

And here is a nice story on how to use the new found leverage to accelerate your gains:
https://www.moneysense.ca/columns/ask-moneysense/should-martha-leverage-a-heloc-to-invest-in-dividend-paying-investments/

In actuality in the present investment climate, this trade makes a lot of sense as this is what the Federal Reserve is backing through their bond policies, have mortgages below the inflation rate and stocks and housing values accelerate much faster over the inflation rate. I would reccomend for most people to seriously consider this, debt is seriously underpriced and therefore can be utilized to create great amounts of wealth. Easiest debt to get is on your house.

Tesla borrowed 2 billion to buy bitcoin
Microstrategy is issuing 400 million in bonds with the exclusive purpose of buying bitcoin, which is part of the security of the bonds. Expected interest rate for a CCC company implementing this strategy - 6% .

Pension funds are buying bonds that are issued to publicly buy houses in order to get the interest from the rentals, which is far higher that the market bears. In some ways these funds are more just a fancy REIT but they are being used to purchase single homes, at prices up to 150% over market rates because the low borrowing rates is allowing. In some towns in texas these funds are bidding on every single house they go for sale in select communitites.

 

[Montecfo]

Soar yes...and then fall back to earth. yes, I expect some of these gains to unwind when supply and demand come back into balance, though that will take some time.

 

[jazz4cash]

I would reccomend for most people to seriously consider this, debt is seriously underpriced...

Most people? Wow! I do agree debt is seriously underpriced.

 

[Running_Man]

Most people? Wow! I do agree debt is seriously underpriced.

Yes most people, the hurdle rate of 3.5 to 4.0 percent is so low that even in a low inflation period the returns should be positive. In a accelarating inflation period as it appears we are in now, the returns could be quite positive.