Latest Inflation Numbers and Discussion

[joesxm3]

I bought my house in 1987. The mortgage rate was 9 1/8%. I buckled down and paid every extra penny, aside from my bimonthly DCA into Janus IRA and taxable funds, into extra principle payments. I figured no way, with my stupid investing talent, could I earn a better return than 9 1/8%. Paid it off in 7.5 years. Happy day when that happened. I think I was somethng like 38 at the time.

But I did not stop plowing the extra money into savings. I think I was able to FIRE despite my lack of investment skill only by my obsessive savings rate.

 

[jollystomper]

Anyone remember mortgages from back then?

My boss came into the lab after completing his mortgage in the early '80s. He plopped down in my chair. He was ashen. "I don't know how I'm gonna pay this mortgage. The price of the house was okay, but my rate means I'll be paying 1/3 my salary in payments - for 30 years!" That's about the time DW and I sold our place (that had increased in value 4X in 10 years) and went back to renting the old Homestead where DW and I started married life - and where I rent right now when on the mainland.

Yep, I remember. We bought our first home (a condo) with a 13% mortgage. Of course, the condo at the time was about $53K (3 levels, 2 bedrooms, 2 balconies, microwave thrown in as a gift from the realtor ). But the market boomed after that, we sold it 3 years later for $92K and used the profit to leverage the purchase of our next 2 houses (including our current one).

 

[Koolau]

He did well - housing kept going up from there

I always tell a lot of the younger folks looking to buy their first home while that's true in year 1, over the next 10 years, your income will likely go up by 50% or more if you get promoted while the mortgage payment will only go up 5-10% due to taxes, rent will have gone up 50% and you'll have tripled your money assuming 20% down, housing prices go up 3% a year and you pay down 10 years worth of principal. And in most cases, the mortgage is a lot less than the rent around here.

Yeah, that happened to most of us. Wages went up and eventually, rates came down - allowing refi's.

Fortunately, I rented from family business (and still do) meaning I get most-favored-relative status. Of course, I'm the one who thumb tacks the wall paper back on and never whines when something non-essential quits working (dishwasher, ceiling fan, etc.) Nor do I expect a new interior every 5 years. It's a symbiotic relationship - which is as it should be within family IMHO.) YMMV

 

[aja8888]

Moved to California in 1981 from Connecticut. With young family and new job, ended up with an 18 1/2% mortgage. Fun times!

A few years later, I refinanced it to 10% and thought I died and went to heaven.

 

[copyright1997reloaded]

Moved to California in 1981 from Connecticut. With young family and new job, ended up with an 18 1/2% mortgage. Fun times!

A few years later, I refinanced it to 10% and thought I died and went to heaven.

Quite the good time to move there.

I turned down a transfer/ movement to a management IT job in the San Jose area in 1987. I was looking at houses that were *so* expensive near Mountain View / Santa Clara.... $150K or so. I can only imagine what the houses I looked at are going for now.

 

[Koolau]

Moved to California in 1981 from Connecticut. With young family and new job, ended up with an 18 1/2% mortgage. Fun times!

A few years later, I refinanced it to 10% and thought I died and went to heaven.

Early '80s we bought our Town House in the Islands. We got to assume the owner's 10% VA loan. We were ecstatic with that rate. Due to high rates in general, RE prices were down at the time. Win/win. The rest is history for us. YMMV

 

[Teacher Terry]

In 1979 we bought our first house at 12% interest. We paid 36k and over 14 years put 14k into it. When we sold it we only received 62k so not exactly a moneymaker). People weren’t dying to live in Kenosha.

 

[captain3d]

For every 1% that mortgage rates go up house prices need to come down 10% to keep the monthly payments even.

We are already up 3% in mortgage rates.

Something to consider

 

[Magus]

For every 1% that mortgage rates go up house prices need to come down 10% to keep the monthly payments even.

We are already up 3% in mortgage rates.

Something to consider

For those paying with a mortgage (25% are all cash) this is true. Consider in the 70s and 80s rates went up 14% and yet prices nationally nearly tripled over 1975-1985 so rates don’t always reflect price movement, especially in an inflationary environment with little foreclosures

 

[captain3d]

And prices already up 40%+ in the last few years.

 

[Magus]

And prices already up 40%+ in the last few years.

Median house is up 37% in the last 3 years. Money supply is up 51% in that time, so while housing has gone up a lot, its not even kept pace with the money supply growth.

https://fred.stlouisfed.org/series/MSPUS

https://fred.stlouisfed.org/series/M2SL

 

[almost there]

Median house is up 37% in the last 3 years. Money supply is up 51% in that time, so while housing has gone up a lot, its not even kept pace with the money supply growth.

https://fred.stlouisfed.org/series/MSPUS

https://fred.stlouisfed.org/series/M2SL

Thats wild. Also, not sure how treating the devaluation of the dollar from printing like regular inflation will pan out.
Might be the same? No idea. In my area home prices were up 20% again this year. But sales are down 14%.

 

[copyright1997reloaded]

Median house is up 37% in the last 3 years. Money supply is up 51% in that time, so while housing has gone up a lot, its not even kept pace with the money supply growth.

https://fred.stlouisfed.org/series/MSPUS

https://fred.stlouisfed.org/series/M2SL

The next M2 update will (I think) be on June 28th. To me, that is an important indicator to see if the Fed and market drop is changing anything. We want to see M2 continuing to roll over (i.e. drop).

 

[Magus]

Thats wild. Also, not sure how treating the devaluation of the dollar from printing like regular inflation will pan out.
Might be the same? No idea.

Depends on the velocity of money. The higher the velocity, the higher the inflation. Lower - likewise. Typically it takes a while for increases in the money supply to make its way into inflation (like we're finally seeing the last 12 months) so its one reason I have a lot of conviction that inflation will continue for some time, and that doesn't count the impact of things like Russia/Ukraine and China shutdowns and US firms making plans to unwind out of China.

 

[copyright1997reloaded]

So I'm on a Facebook page for a NE Ski resort area Homeowners and Rentals page. Someone earlier today posted that they were a fairly new owner and that they hadn't gotten any inquiries for summer rentals. They asked the group whether this was normal or whether things seem to be quiet (i.e. less activity than normal).

While a couple people stated that the summer is always less activity, others are stating that activity is a lot less than the last two years. Some of those posts are from other areas such as Hilton Head.

Just a couple random data points....but who knows.

Anyone know of a forum where tourist area rental owners discuss things?

p.s. I don't spend much time on Facebook (so this was just sort of a freak thing to be there and notice the new thread).

 

[NomDeER]

So I'm on a Facebook page for a NE Ski resort area Homeowners and Rentals page. Someone earlier today posted that they were a fairly new owner and that they hadn't gotten any inquiries for summer rentals. They asked the group whether this was normal or whether things seem to be quiet (i.e. less activity than normal).

While a couple people stated that the summer is always less activity, others are stating that activity is a lot less than the last two years. Some of those posts are from other areas such as Hilton Head.

I don't know about the East Coast, but on the West Coast, the last two years rentals spiked in the ski resort areas during the summer. Especially early in the pandemic people were looking to get away to places where they could engage in outdoor activities and be someplace nice while other places weren't realistically accessible. The Tahoe area was overrun. I know a guy who lives in that area and he's a big hiker and mountain biker and was going off the beaten path to try to avoid the hordes. Now, more people are traveling to other places that weren't realistically possible two years ago, like Europe. I also know people who recently have gone or made plans to go to Disneyland and Hawaii even though they usually went there during the winter. The pent up demand isn't for ski resorts in the summer.

I would guess that the bigger problem for winter rental owners is that people are spending a lot of money on travel now (even if they have to put it on credit cards) but won't be willing or able to spend this winter.

 

[Koolau]

I would guess that the bigger problem for winter rental owners is that people are spending a lot of money on travel now (even if they have to put it on credit cards) but won't be willing or able to spend this winter.

Yeah, I could never spend when I could see a bear AND a recession over the next mountain (or ski run.) I know lots of folks who do/have done that. "We won't be able to do this next season - let's do it now. We'll eat PB&J and Mac/cheese when we get home." It's just not me, but YMMV.

 

[NW-Bound]

Well, I am still in the planning phase for my month-long European road trip late this summer.

If the market crashes and people stay home, it's quite OK with me. Less crowd, less chance of contracting COVID.

 

[copyright1997reloaded]

I don't know about the East Coast, but on the West Coast, the last two years rentals spiked in the ski resort areas during the summer. Especially early in the pandemic people were looking to get away to places where they could engage in outdoor activities and be someplace nice while other places weren't realistically accessible. The Tahoe area was overrun. I know a guy who lives in that area and he's a big hiker and mountain biker and was going off the beaten path to try to avoid the hordes. Now, more people are traveling to other places that weren't realistically possible two years ago, like Europe. I also know people who recently have gone or made plans to go to Disneyland and Hawaii even though they usually went there during the winter. The pent up demand isn't for ski resorts in the summer.

I would guess that the bigger problem for winter rental owners is that people are spending a lot of money on travel now (even if they have to put it on credit cards) but won't be willing or able to spend this winter.

That's why I was surprised by the discussion, especially the person who said rentals for their Hilton Head property were slow.

I can get the mountain ski-area property situation. In the last couple of years w/the Rona, those kind of places represented opportunities to get out of the cities into fresh air, etc. So now that there are alternatives, e.g. fly to wherever, not as much demand for Vermont.

I don't own a ski property (I am close enough to just drive), so no impact to me either way. I've already got my pass for the coming season, so I will be going regardless (well, I guess if gas is $10/gallon it might impact me somewhat).

 

[Magus]

So I'm on a Facebook page for a NE Ski resort area Homeowners and Rentals page. Someone earlier today posted that they were a fairly new owner and that they hadn't gotten any inquiries for summer rentals. They asked the group whether this was normal or whether things seem to be quiet (i.e. less activity than normal).

While a couple people stated that the summer is always less activity, others are stating that activity is a lot less than the last two years. Some of those posts are from other areas such as Hilton Head.

Just a couple random data points....but who knows.

Anyone know of a forum where tourist area rental owners discuss things?

p.s. I don't spend much time on Facebook (so this was just sort of a freak thing to be there and notice the new thread).

If you google Resort RevPAR, hotel industry data is published weekly by CoSTAR, not all of it will be free but enough hotel data is free you can usually find out anything you want. I’ll look myself shortly for you. Much better data than anecdotal.

Follow up here:

Hotel execs are saying summer leisure is “off the charts” good

https://www.travelweekly.com/Travel...l-executives-brimming-with-optimism-NYU-event

“Hilton CEO Chris Nassetta credited both leisure travel, which he characterized as "off the charts," as well as a more recent comeback in business travel as companies play catch-up on missed opportunities for meetings and events.

During a panel discussion at the conference, Marriott International CEO Tony Capuano said that the hospitality industry was currently experiencing "extraordinary" demand volume.”

 

[Magus]

Well, I am still in the planning phase for my month-long European road trip late this summer.

If the market crashes and people stay home, it's quite OK with me. Less crowd, less chance of contracting COVID.

I got Covid in London in early March. Extended my bleisure trip by 5 extra nights. My boss (CFO) got stuck for two extra weeks. Fortunately I had a really mild case and he was only bad for a day.

 

[milford]

So I'm on a Facebook page for a NE Ski resort area Homeowners and Rentals page. Someone earlier today posted that they were a fairly new owner and that they hadn't gotten any inquiries for summer rentals. They asked the group whether this was normal or whether things seem to be quiet (i.e. less activity than normal).

While a couple people stated that the summer is always less activity, others are stating that activity is a lot less than the last two years. Some of those posts are from other areas such as Hilton Head.

Just a couple random data points....but who knows.

Anyone know of a forum where tourist area rental owners discuss things?

p.s. I don't spend much time on Facebook (so this was just sort of a freak thing to be there and notice the new thread).

Another data point. I have a friend that likes to gamble, but isn't a whale by any means, but does get freebies every now and then just told me that a couple of hotels in Vegas are offering him comp weekend nights now. Previously they would only offer him comp nights M-Thurs. Discretionary spending seems to finally be cracking a bit with all the outrageous prices, by fall/winter this year I think we're going to see it dry up and have a reversal of trend of dropping prices.

 

[boont]

Inflation

To me these numbers are so misleading. Inflation is different for almost everyone. It's 8.5 percent. But what is it for you?

For me, the largest part of inflation figures don't affect me. Shelter, new and used cars, furniture, apparel, on and on...I already have all that. My rent didn't go up because I own houses where the mortgage payments fell to 2.7 and 2.8 %. My rentals units got raises as tenants moved out and the market had shot the current rental rates up.

So I'm left with transportation costs, food, etc. Not a major deal for a lot of people like myself.

 

[Koolau]

To me these numbers are so misleading. Inflation is different for almost everyone. It's 8.5 percent. But what is it for you?

For me, the largest part of inflation figures don't affect me. Shelter, new and used cars, furniture, apparel, on and on...I already have all that. My rent didn't go up because I own houses where the mortgage payments fell to 2.7 and 2.8 %. My rentals units got raises as tenants moved out and the market had shot the current rental rates up.

So I'm left with transportation costs, food, etc. Not a major deal for a lot of people like myself.

It's true that your specific "basket of goods and services" affect your personal inflation rate. I think it's also somewhat self-limiting as we tend not to buy things we consider priced out of our range. At least within limits, very few things are so necessary that we would pay almost any price. I think that actually blunts numerical "real" inflation, but I'm no expert so YMMV.

 

[milford]

To me these numbers are so misleading. Inflation is different for almost everyone. It's 8.5 percent. But what is it for you?

For me, the largest part of inflation figures don't affect me. Shelter, new and used cars, furniture, apparel, on and on...I already have all that. My rent didn't go up because I own houses where the mortgage payments fell to 2.7 and 2.8 %. My rentals units got raises as tenants moved out and the market had shot the current rental rates up.

So I'm left with transportation costs, food, etc. Not a major deal for a lot of people like myself.

Wouldn't call it misleading, like you mentioned it affects everyone differently... however a homeowner with rental properties is not the "average" American.