| | | Thank you for the thoughtful reply!
So the followup question is: how do you view the current housing scenario vs. 1978?
Based on what you wrote, I'm guessing that the 1978 you would find the current situation far less buyer-friendly. Mortgage rates have backed off a bit, but they're still the highest they've been in over two decades. Meanwhile, prices are up three-fold against a backdrop of stagnant wages.
So, I'm struggling to see how residential prices can triple again with rising interest rates and an overhang of bad commercial loans from the 2021 vintage. Individuals can just stay put, locked in their 30-year mortgages at 3%. Commercial properties don't have that luxury; they have to refi every 3-7 years.
Is it possible that commodities - energy, food, gold - go up and interest rates rise, but real estate stays flat, rents stay flat, stocks stay flat, wages rise just enough to barely keep up with food and energy. In that world, everybody loses except commodities (and short sellers). Stocks, bonds, real estate - all investments that ran up in the everything bubble - now spend 10-20 years losing to inflation as the bills come due from all the money that's been printed since 2000. All that paper wealth goes looking for something that isn't interest rate sensitive - and it comes to the conclusion that commodities are the only category that passes that test.
Everybody with those green slips of paper rushes to exchange them for something real that isn't going down.
I'm curious how the high dividend stocks will fare in that environment. Looks like some of them are geared toward natural resources and would probably fare OK. Some of the stronger REITs might actually make money by picking up properties from weaker players forced to liquidate. But there will probably be a lot of margin pressure from wage inflation and the higher tax rates that are coming. They should hold up better than growth stocks, though.
It'd be a tough investing environment, for sure... |
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