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- The Borrow Smart Chronicles - Rate Cuts, Housing Prices and Liquidity oh my!
The Borrow Smart Chronicles - Rate Cuts, Housing Prices and Liquidity oh my!
Episode 41
Todd Ballenger
August 23, 2024
Episode 41
“Shakespeare often employs what the Greeks called anagnorisis, the sudden, piercing recognition of the truth of a situation.”
Source: Lyn Alden Y Charts
Per Lyn, ‘over 30 years, there are kind of mixed signals for what happens next, with a low sample size. After a rate cut - Historically stocks did poorly in the near term, while 2/3 times houses did fine in the near term. We discussed in last weeks newsletter in detail the nature of rate cut impact on everything! And how the LAG is a big part of all market movements.
The other is Liquidity. In our course we have Safety, Liquidity and Return as the three-legged stool that drives our education around how real estate creates wealth. There are also Macro and Micro levels. Interest rates drive payments down to make housing more affordable at the Macro level, but how much your house appreciates is a function of Micro levels - the Location, Location, Location. The BIG TREND of rates going lower is positive for housing and the economy overall as everything becomes cheaper for a company or a person who is borrowing. Macro Liquidity is another big trend and as you can see we are about to move into an upcycle in Liquidity globally, that means more money in movement - the velocity of money is very important stagnation/stagflation is no bueno.
You have money in your pocket and you don’t spend it. Nothing happens. You buy lemonade from a girl on your street, she then goes to Ulta and buys some new lotion, and the person there gets paid (doesn’t lose their job) and they buy groceries, etc. It’s the same money but velocity is important, just as having access use and control of your money (liquidity) is a function of your job (corporate liquidity to pay you) and the government providing money (MACRO liquidity).
a BORROW SMART CONCEPT
Speaking of Sentiment
Great chart from Altos visualizing sentiment of rates… the power of sentiment is key… cocktail party talk about refinancing is a big indicator, or the Uber driver asking you about it… means it’s now in the mainstream. Watch the news, papers, we likely won’t have to get to the big bubble on the left before that sentiment shifts. That GAP might be enough so be ready. Build your list of clients with their ‘cash flow strike price’ and make a market with new ideas that will stimulate other opportunities as the market turns.
so you’re saying there’s a chance?
the sentiment for real estate as a wealth building tool is very high with Millennials, but that is also one reason they are so frustrated at being ‘shut out’ of buying a home
LIABILITIES and DEBT
What’s Happening.
affordability is starting to improve
mainly driven by lower rates, as values are staying put for now
and survey says -’lower rates’ ahead
purchase sentiment is still bad
but refinance sentiment and volume are picking up
overall trend is still at lowest levels recorded…
longer term very bullish on housing
but the lower end is still struggling to save to buy a house, working multiple jobs
and draining savings due to inflation of other expenses
and using more debt to fund the gap
as the US Government leads by example
“Regret for wasted time is more wasted time.”
REAL ESTATE
What’s Happening?
we continue to move between 5 and 6 for last 4 weeks…
From Mike Greene, absent housing inflation if really slowing down
inventory still going up
eventually more inventory should lead to softer house prices if rates don’t drop too fast and jobs stay strong
all time high for failed contracts so don’t feel bad if your pipeline is in flux
existing home sales still struggling too
for all different formats of living
super geeks like me look at lumber prices as a feel of what to expect for housing - what do you see related to having a job in housing?
another look - lumber leads housing… H/T Tom McClellan
reasons people are moving, always interesting….
just thought this was damn fascinating!
“It's not your salary that makes you rich, it's your spending habits."
ASSETS and INCOME
What’s Happening?
stonks really going up this past week - volatility just as expected
you can see inflation by looking at your money SPY/GOLD so in gold dollars your money is worth half of what it was in 2000
and income isn’t going up generally speaking
this is really important, ‘see: Liquidity’ and productivity - if you don’t get this, watch a zombie movie and ask what housing prices do if there are no humans around to buy
this groups wants in
and they are doing a pretty good job of investing to be ready for it…
their parents and grand parents will dump money on them at some point…
markets are moving to a summer happy then fall sad period
but dips are being bought fast
me, I’m nervous and paranoid about where we are overall…
interesting that Tulipomania backwards is Ainamopilut - I’m not sure what that means but it starts with AI!
"Wealth consists not in having great possessions, but in having few wants."
ON BEING HUMAN
What’s Worth Sharing?
in evolution - where are you now and where are you going?
Zen and the Art of Motorcycle Maintenance by Robert Pirsig - a short excerpt on enjoying the journey…
"Mountains should be climbed with as little effort as possible and without desire. The reality of your own nature should determine the speed. If you become restless, speed up. If you become winded, slow down. You climb the mountain in an equilibrium between restlessness and exhaustion. Then, when you're no longer thinking ahead, each footstep isn't just a means to an end but a unique event in itself. This leaf has jagged edges. This rock looks loose. From this place the snow is less visible, even though closer. These are things you should notice anyway. To live only for some future goal is shallow. It's the sides of the mountain which sustain life, not the top."
DOPAMEMES
And Other Happy Moments…
Artificial Intelligence
And the Future of Work…
“AI is the process by which a computer hermaphroditically mates with its own data base, creating successively new data bases with more intelligence…” April 26, 1987 (H/T) Brent Donnelly
One of the coolest tools out there behind Midjourney and Suno:
https://www.topazlabs.com/
Can AI fix this:
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