2021 - Is inflation finally back in the conversation?

[jimmyjazz 45,958]

Inflation thread heating up.

[StassneyHorn 6,577]

Tbone_ if you want to drive me around Scottsdale showing off apartments with 2 months free and $1000 gift cards, I can point out to you all the gas stations with cheaper prices you pass by so you can take pictures at the pump.

[Cheeseweasel 26,438]

You're both pretty, girls. 

[Guest]

Hey guys, I have a lease ending soon. Anyone know where I can get a good deal on an apartment? 

[Hefeweizen 5,324]

6 minutes ago, FirstTimeCaller said:

Hey guys, I have a lease ending soon. Anyone know where I can get a good deal on an apartment? 

Apparently call tbone and Stanley.

[StassneyHorn 6,577]

1 hour ago, Cheeseweasel said:

You're both pretty, girls. 

Tell that Freshman to sit down

[Trey3216 15,346]

3 hours ago, jimmyjazz said:

Inflation thread heating up.

Kinda like my grocery bill 

[Trey3216 15,346]

1 hour ago, FirstTimeCaller said:

Hey guys, I have a lease ending soon. Anyone know where I can get a good deal on an apartment? 

Call BlackRock, I’m sure they could get you into 1 of 5 million single family props they bought in the last 2 years.  

[Captainant 27,675]

14 minutes ago, Trey3216 said:

Call BlackRock, I’m sure they could get you into 1 of 5 million single family props they bought in the last 2 years.  

Excellent move for Joe Public! Black rock got to hold the houses for the big spike in value and lock in low rates, and then pass them off to individuals now that rates are high and value is stagnating. 

Privatize those profits and socialize the costs woooooooo!

[Trey3216 15,346]

15 minutes ago, Captainant said:

Excellent move for Joe Public! Black rock got to hold the houses for the big spike in value and lock in low rates, and then pass them off to individuals now that rates are high and value is stagnating. 

Privatize those profits and socialize the costs woooooooo!

Your ESG BlackRock funds in your 401k are gonna love taking that fair value writedown.  
 

 

why are you the way you are.gif

Edited March 1, 2023 by Trey3216

[tbone_ 14,124]

Oh shit that was you. I wondered why I had you on ignore.

[gmr548 16,580]

The rent talk is actually relevant to inflation because it’s a huge component of the metric and it’s badly tracked. Just as inflation in 2021 and into early 2022 was probably undersold slightly because of the lag in housing data, that same lag is now propping up rental costs in the CPI when the reality is there stagnant or falling across the board and will be for most of this year because of the enormous burst of supply coming online.

[Mullet Free 40]

10 hours ago, gmr548 said:

The rent talk is actually relevant to inflation because it’s a huge component of the metric and it’s badly tracked. Just as inflation in 2021 and into early 2022 was probably undersold slightly because of the lag in housing data, that same lag is now propping up rental costs in the CPI when the reality is there stagnant or falling across the board and will be for most of this year because of the enormous burst of supply coming online.

How much supply is coming online? In multi-family?

[tbone_ 14,124]

There isn’t an enormous bust of supply coming. Yes there are many apartments under construction in all markets but the pipeline isn’t out of line with historical or demand. But you don’t really read that in the sensationalistic headline news.

Apartment projects in the pipeline that aren’t under construction are all delayed due to interest rates spiking and now they don’t work economically. The 10 year going from 1.5ish to 4 means capital wants a low 6 going in yield and most projects that are trying to get capitalized and started now we’re conceived in a low 5 environment. To get the yield to work costs have to come down about 20%. There is an easing of costs but it is very sticky on the way down and hard to get the subs to take the $$ out of the budget because mostly they are still working. But if the disconnect on costs Vs return hurdles stays in place, the work will slow in a big way which will help support rents not falling. Even if that doesn’t happen starts are almost all pushed back due to challenges with capital which will lessen the impact of new supply.

On the sf side, we’ve been under building demand for over a decade. Not even close to that changing these days.

This is the first downturn I’ve personally been involved in dating back to the 80s that didn’t involve an over building of housing. Will be interesting to see how it shakes out for sure.

[Mullet Free 40]

6 minutes ago, tbone_ said:

There isn’t an enormous bust of supply coming. Yes there are many apartments under construction in all markets but the pipeline isn’t out of line with historical or demand. But you don’t really read that in the sensationalistic headline news.

Apartment projects in the pipeline that aren’t under construction are all delayed due to interest rates spiking and now they don’t work economically. The 10 year going from 1.5ish to 4 means capital wants a low 6 going in yield and most projects that are trying to get capitalized and started now we’re conceived in a low 5 environment. To get the yield to work costs have to come down about 20%. There is an easing of costs but it is very sticky on the way down and hard to get the subs to take the $$ out of the budget because mostly they are still working. But if the disconnect on costs Vs return hurdles stays in place, the work will slow in a big way which will help support rents not falling. Even if that doesn’t happen starts are almost all pushed back due to challenges with capital which will lessen the impact of new supply.

On the sf side, we’ve been under building demand for over a decade. Not even close to that changing these days.

This is the first downturn I’ve personally been involved in dating back to the 80s that didn’t involve an over building of housing. Will be interesting to see how it shakes out for sure.

Shit if the yield on a 2 year treasury is 4.9%, what's the draw to investment properties of almost any kind? If you think rates are going to stay elevated, then capital appreciation will be somewhat limited, unless I'm missing something. Maybe not for the young hustler or smaller entities, but Blackrock et al will be less driven to run rental operations. That's a lot less money sloshing out there in market.

4.9%, headache-free.

[tbone_ 14,124]

Spot on.

The only thing I’d add is that most institutional mf buyers are looking to have money out 7-10 years so they typically look at the 10 year.

But yea you’re right. If you can get 4% free money, why take any risk. Hence cap rates now at 5 + which is driving a 6+ going in on new builds. (100-125 bp spread is typically required)

Which is why I believe the overbuilding risk isn’t what convention wisdom thinks it is.

Source: my on-going daily conversations with equity on the 400+MM in projects we are currently trying to capitalize, plus 3 days of non stop conversations with capital at NMHC a few weeks ago.

[gmr548 16,580]

There isn’t an enormous bust of supply coming. Yes there are many apartments under construction in all markets but the pipeline isn’t out of line with historical or demand. But you don’t really read that in the sensationalistic headline news.

Apartment projects in the pipeline that aren’t under construction are all delayed due to interest rates spiking and now they don’t work economically. The 10 year going from 1.5ish to 4 means capital wants a low 6 going in yield and most projects that are trying to get capitalized and started now we’re conceived in a low 5 environment. To get the yield to work costs have to come down about 20%. There is an easing of costs but it is very sticky on the way down and hard to get the subs to take the $$ out of the budget because mostly they are still working. But if the disconnect on costs Vs return hurdles stays in place, the work will slow in a big way which will help support rents not falling. Even if that doesn’t happen starts are almost all pushed back due to challenges with capital which will lessen the impact of new supply.

On the sf side, we’ve been under building demand for over a decade. Not even close to that changing these days.

This is the first downturn I’ve personally been involved in dating back to the 80s that didn’t involve an over building of housing. Will be interesting to see how it shakes out for sure.

I’m in multifamily as well. You can nitpick the word “enormous” if it you want but it’s a very big supply dump in recent historical context. Kind of like undoing a kink in a garden hose, with the added wrinkle that the hose is going to be turned way down for the next year or two after that.

I don’t think it’s a long term overbuilding risk, I’m with you there. Just pointing out the impact on the topic of the thread - current inflation.

[bernorange 8,362]

Quote

A barometer of business conditions at service-style companies such as hotels and hospitals held steady at a robust 55.1% in February, showing the U.S. economy is still in expansion mode.

“Sales activity is generally strong despite economic headwinds,” a senior restaurant executive told the Institute for Supply Management, publisher of the report.

Numbers above 50% are a positive sign. The closely followed ISM reports are the first major indicators of each month to offer clues on how well the economy is performing.

Economists polled by The Wall Street Journal had expected the index to drop to 54% from 55.2% in January.
...

https://www.marketwatch.com/story/most-u-s-businesses-expand-in-february-ism-finds-in-sign-of-economys-resilience-965c3f7e?rss=1&siteid=rss

Not what the Fed wanted to see...

[Gatorubet 30,239]

On 2/18/2023 at 8:25 AM, Captainant said:

Just be sure to buy up as many single family properties as you can to ensure that gen Z will have no option but to rent

in other GenZ housing news, used cars are cheaper. Buy one now before all the Walmart shady parking spots are gone.

[HamsterHookah 112]

1 hour ago, Gatorubet said:

in other GenZ housing news, used cars are cheaper. Buy one now before all the Walmart shady parking spots are gone.

Late and default car payment data is at a high, I’ve read recently, and projected to just get higher as tightening continues, good jobs are continuing to be cut, and credit gets maxed. I think if you wait car prices will continue to fall.

Edited March 3, 2023 by HamsterHookah

[Gatorubet 30,239]

19 minutes ago, HamsterHookah said:

Late and default car payment data is at a high, I’ve read recently, and projected to just get higher as tightening continues, good jobs are continuing to be cut, and credit gets maxed. I think if you wait car prices will continue to fall.

As an aside, I noticed that my youngest son’s friends in their new jobs out of college seem to blow through money like crap through a goose.  It seems that none of them cook, but spend an enormous amount of money every month on Uber eats and DoorDash.  And I get that this is just a tiny sliver of the overall problem, but I wish we did a better job educating young people about money management. While always a good thing to know, not wasting your money in a bad economy is even more important.

[Cheeseweasel 26,438]

1 hour ago, Gatorubet said:

It seems that none of them cook, but spend an enormous amount of money every month on Uber eats and DoorDash.

My 22 year old is a trained chef and uses Door Dash way too much. This fucker can take a can of beans and a few spices and make your tongue slap the back of your head, but damn if he doesn't piss away money ordering crap food on Door Dash. 

I blame his mom. 

[tbone_ 14,124]

I’ve never once ordered door dash. Always seemed hella expensive and a likely recipe for cold food. What do I know though.

I do use the Pizza Hut app though.

[Cheeseweasel 26,438]

24 minutes ago, tbone_ said:

I’ve never once ordered door dash. Always seemed hella expensive and a likely recipe for cold food

You're not wrong.

[Brisketexan 105,145]

My son did Doordash delivery this summer when he was waiting to go to school. Fantastic education for him about how stupid people were with their money.
He’d come in shaking his head about how he just delivered a $40 slice of cheesecake from the Cheesecake Factory. “They could have driven there and grabbed it themselves for $10 [he would regularly deliver to places that were 5 minutes away]. Or they could have ordered more food and spread out the delivery charge to cover multiple items. It’s so stupid.”

[Storm the Field 5,294]

It's not necessarily an age thing. Think a lot has to do with lifestyle and living arrangement. 20-somethings are a lot more likely to be single and live in apartments or share a place with roommates. So long as rent gets paid, the rest of the budget is pretty much all social life/drinking and eating.

Buddy of mine is early 40's and gets literally every single meal delivered. Usually places a big order for dinner that doubles as lunch the next day. Lives by himself in a tower downtown right by his office and rarely ever drives his car (takes Uber when venturing out). Don't think he's ever touched his oven. I guess money that would otherwise be spent on groceries and gas just goes to Uber and Uber Eats instead.

Edited March 3, 2023 by Storm the Field

[B00M 6,416]

3 hours ago, Brisketexan said:

My son did Doordash delivery this summer when he was waiting to go to school. Fantastic education for him about how stupid people were with their money.
He’d come in shaking his head about how he just delivered a $40 slice of cheesecake from the Cheesecake Factory. “They could have driven there and grabbed it themselves for $10 [he would regularly deliver to places that were 5 minutes away]. Or they could have ordered more food and spread out the delivery charge to cover multiple items. It’s so stupid.”

Bitch, if im fuuuuucked up because Texas football is mediocre again, that $40 slice of cheesecake was wise as fuck. Don’t assume 

[gmr548 16,580]

4 hours ago, Brisketexan said:

My son did Doordash delivery this summer when he was waiting to go to school. Fantastic education for him about how stupid people were with their money.
He’d come in shaking his head about how he just delivered a $40 slice of cheesecake from the Cheesecake Factory. “They could have driven there and grabbed it themselves for $10 [he would regularly deliver to places that were 5 minutes away]. Or they could have ordered more food and spread out the delivery charge to cover multiple items. It’s so stupid.”

https://ifunny.co/video/brain-should-i-doordash-2-crunchwrap-supremes-for-47-50-B6CRL0W9A?s=cl

[ChickenSandwich 9,836]

1 hour ago, B00M said:

Bitch, if im fuuuuucked up because Texas football is mediocre again, that $40 slice of cheesecake was wise as fuck. Don’t assume 

Hell of a lot cheaper than a DWI or passing out in the drive through. 

[StassneyHorn 6,577]

This is why I try and live a walkable distance to grocery stores. Never use doordash or Uber eats.

The day I learn to make my own pho, which will be soon, my gains will be up and to the right.

[Captainant 27,675]

Smells like boomer in here, complaining about millennials buying avocado toast and how its preventing them from buying a house. Yeah, door dash is definitely the root of the problem lol

[Trey3216 15,346]

6 minutes ago, Captainant said:

Smells like boomer in here, complaining about millennials buying avocado toast and how its preventing them from buying a house. Yeah, door dash is definitely the root of the problem lol

Good financial sense to spend an extra $800 on food and shit rather than save it and invest in your financial future.   How Boomer an idea.  

[Captainant 27,675]

4 minutes ago, Trey3216 said:

Good financial sense to spend an extra $800 on food and shit rather than save it and invest in your financial future.   How Boomer an idea.  

Yes, that's absolutely what every young person is doing and we don't need to think a millisecond any longer for why home ownership and wealth is declining for individuals despite record high profits and stock growth

[Trey3216 15,346]

2 minutes ago, Captainant said:

Yes, that's absolutely what every young person is doing and we don't need to think a millisecond any longer for why home ownership and wealth is declining for individuals despite record high profits and stock growth

That’s what an absolute assload of them do.  Do you ever observe young people? 

[Neonmoon 38,129]

It has nothing to do with wage stagnation over the last 50 years. Today we blame door dash. Before it was Starbucks. Before that, it was concerts. 

[tbone_ 14,124]

Young people have been dumb as shit since the beginning of time. Most old people are dumb as shit too. It’s not a generational thing.

[Hornbeliever 712]

I remember the 90s when I was young and all we did on 6th street was discuss yield to maturity rates on all our bonds.  

[Snake Diggity 4,625]

4 hours ago, Trey3216 said:

Good financial sense to spend an extra $800 on food and shit rather than save it and invest in your financial future.   How Boomer an idea.  

Let’s run with this hypothetical.  Let’s say Millenial Kid does a 180 and starts saving all his Uber Eats money, eating ramen and peanut butter instead, and actually socks away $800 each month ($9600/yr).  How long do you think it would take him to save the $30,000-$60,000 he would need to make a down payment on his first home in Austin?  The math is pretty simple and it doesn’t even need to account for the added long term cash flow implications of home ownership.  Uber Eats is not the fucking problem.

Edited March 4, 2023 by Snake Diggity

[Trey3216 15,346]

1 minute ago, Snake Diggity said:

Let’s run with this hypothetical.  Let’s say Millenial Kid does a 180 and starts saving all his Uber Eats money, eating ramen and peanut butter instead, and actually socks away $800 each month ($9600/yr).  How long do you think it would take him to save the $30,000-$60,000 he would need to make a down payment on his first home in Austin?  The math is pretty simple and it doesn’t even need to account for the added long term cash flow implications of home ownership.  Uber Eats is not the fucking problem.

Or the fact that those are patterns for other poor spending habits, and that there are other options out there for financing that may require less down payment, or buying your way up as you go like most homeowners do.   There are lots of problems, and piss poor savings habits is the largest one.  

[StassneyHorn 6,577]

6 hours ago, Captainant said:

Smells like boomer in here, complaining about millennials buying avocado toast and how its preventing them from buying a house. Yeah, door dash is definitely the root of the problem lol

It is tho

[StassneyHorn 6,577]

There are gonna be people with student loans who didn’t touch payments for 3 years complaining when those come due again and not realize they had 3 years to make principal only payments. It’s not one individual delivery app, it’s a collection of shitty decisions because they couldn’t alter their consumption.

[Guest]

14 hours ago, Snake Diggity said:

Let’s run with this hypothetical.  Let’s say Millenial Kid does a 180 and starts saving all his Uber Eats money, eating ramen and peanut butter instead, and actually socks away $800 each month ($9600/yr).  How long do you think it would take him to save the $30,000-$60,000 he would need to make a down payment on his first home in Austin?  The math is pretty simple and it doesn’t even need to account for the added long term cash flow implications of home ownership.  Uber Eats is not the fucking problem.

3.5 years is just fucking impossible.

The part that makes me laugh/ cry is the young'ins  feeling like they have to live in a certain level of affluence starting out.  That damned sure ain't how most of us olds did it.  I own a car today  worth more than our first mortgage.

Edited March 5, 2023 by slorch

[B00M 6,416]

17 hours ago, Neonmoon said:

It has nothing to do with wage stagnation over the last 50 years. Today we blame door dash. Before it was Starbucks. Before that, it was concerts. 

The fed manipulating markets with artificially low interest rates and outrageous QE created an everything bubble that priced young people out of real estate while saddling them with tens of thousands of student debt and we’re in here judging the poors for letting other poors deliver shit to them

 

[Fudge Nuggets 19,190]

On 3/3/2023 at 1:37 PM, Gatorubet said:

As an aside, I noticed that my youngest son’s friends in their new jobs out of college seem to blow through money like crap through a goose.  It seems that none of them cook, but spend an enormous amount of money every month on Uber eats and DoorDash.  And I get that this is just a tiny sliver of the overall problem, but I wish we did a better job educating young people about money management. While always a good thing to know, not wasting your money in a bad economy is even more important.

News flash, new grads have always wasted their money on stupid shit.

[Neonmoon 38,129]

1 hour ago, B00M said:

The fed manipulating markets with artificially low interest rates and outrageous QE created an everything bubble that priced young people out of real estate while saddling them with tens of thousands of student debt and we’re in here judging the poors for letting other poors deliver shit to them

 

That’s right. Blame the government for private business not paying their employees enough. If only we let banks, car companies, farmers, and restaurants feel the effects of the free market instead of propping them up with billions of bailout money. If you think the government creates problems, it doesn’t hold a candle to the shitty decisions of the private sector 

[Gatorubet 30,239]

1 hour ago, Fudge Nuggets said:

News flash, new grads have always wasted their money on stupid shit.

Older new grads and younger new grads?   So, both sides?

[Fudge Nuggets 19,190]

2 hours ago, Gatorubet said:

Older new grads and younger new grads?   So, both sides?

I guess the 1% or whatever “older grads” may not, but in general new grads waste a shit load of their money. 

[B00M 6,416]

7 hours ago, Neonmoon said:

That’s right. Blame the government for private business not paying their employees enough. If only we let banks, car companies, farmers, and restaurants feel the effects of the free market instead of propping them up with billions of bailout money. If you think the government creates problems, it doesn’t hold a candle to the shitty decisions of the private sector 

I think it might have been Reagan that loosened anti trust laws encouraging consolidation and monopolies… all the problems you’re describing boil down to monopolies and corporations being too politically powerful 

[TwiceHorn 31,482]

11 minutes ago, B00M said:

I think it might have been Reagan that loosened anti trust laws encouraging consolidation and monopolies… all the problems you’re describing boil down to monopolies and corporations being too politically powerful 

Antitrust law didn't have very solid economic foundations to begin with.  Economic theories started seeping deeper into it after WWII, which caused a cutback in antitrust enforcement.

But, Chicago-school economists, think Milton Friedman, began systematic study and critique of the antitrust laws in the 60s and 70s, which led to their becoming pretty toothless around the Reagan administration.  Reagan didn't have anything in particular to do with it.

[fattyflattie 4,639]

On 3/4/2023 at 1:16 PM, Captainant said:

despite record high profits and stock growth

Sounds like they should invest.