12/4 Update: The real reason why I am so bullish on residential housing

Note to reader: I do not subscribe to any particular person, and only forward this email, because of my response. My reasons for the powerful rally in residential housing have little to do with market timing here, though many will prognosticate accordingly. Being involved in these matters on an ongoing basis affords me a certain perspective that few possess.

This may be of interest. You and the author have some similar views.

Home Prices, Interest Rates, and Recession

Gary North – November 24, 2021

This was posted on my Website yesterday:

With interest rates predicted to rise will that ensue a recession and cause home prices to come down significantly?

Every month, the Federal Reserve System buys $35 billion worth of mortgage-backed securities. This subsidy to the housing market is extraordinary. The FED announced:

The FOMC also directed the Desk to increase SOMA holdings of Treasury securities by at least $60 billion per month and of agency MBS by at least $30 billion per month during the monthly purchase period beginning in mid-December. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the
economic outlook.

So, the FED is prepared to support this market in a recession.

Second, prior to a recession it is common for a decline in the stock market to begin. This is the most overvalued stock market in history. I think it is going to create panic selling when it finally breaks.

When people sell a stock, they have to do something with the money. They can put it in the bank. But the bank has to put it somewhere. Where will big money put it? They are going to buy T-bonds. They want a return on their principal. They want safety. This is going to drive down T-bond interest rates.

They will also go looking for long-term equivalents of T-bonds — that will include mortgages. That is going to drive down mortgage interest rates.

This does not mean that there will be a big new demand to buy homes. It depends on the overall economy. In a recession, a lot of people who could have qualified for a loan in the boom phase will find that they cannot qualify for a loan in the recession phase. This is important for entry-level home buyers. If they cannot buy a home, they are going to have to rent. This is why the purchase of investment properties of three-bedroom, two-bath homes in middle class neighborhoods has always been a good investment. Read John Schaub’s books about this.

People do not indulge in panic selling of their homes. They will do almost anything to hold onto their homes. They are going to meet their mortgage payments every month. So, downward pressure on the buyers’ side is likely, but there will be little downward pressure on the sellers’ side.

The insanity of what took place between 2005 and 2008 in terms of mortgages is not going to be repeated. This is why I do not think we’re going to see a decline in housing prices comparable to what happened in 2009 and the years that followed.

Therefore, while recessions are good times to buy homes by using Schaub’s method, I do not expect to see widespread declines in the price of middle-class housing.

BBJ

Here was my response (edited for grammar):

Rents rarely drop, and though the rental CPI has been climbing higher than the general CPI, this is because the true price inflation numbers are much higher than what’s released by the government. It is more difficult to hide a specific measure than a general one. In other words, rents are rising along with true price inflation.

I agree here though my reasoning differs. I am mostly concerned with investors during this boom cycle in housing, who have been buying a greater percentage of the single family housing stock than before. My concern is that desperate over levered investors could need to unwind.

However, my personal observations have allowed me to be more confident in the resilience of the housing market. My rent rolls have been increasing tremendously over the past two to three years. In particular, there seems to be a powerful demand for single family detached housing stock and townhomes. The rents in my areas have gone up about 30% of the past two years. This has provided a tremendous benefit to the capitalized values of single family housing, and this is why the large money is so interested in this sector.

The large investors view housing as benefiting from any outcome. With higher mortgage rates, rents will be generally rising faster than historic norms, and if bond yields remain low, the capitalized values will increase.

However, my one theoretical concern about this phenomenon is straightforward. If rents begin to fall, we need to be concerned about the prices of residential housing. But I doubt very much we will ever see rents fall. Recall our research regarding the 2005-2008 bubble. Nationwide rents amounts barely budged during the nadir of the 2008-2009 recession.

Rent rolls are surprisingly resilient and the housing stock is being depleted in a larger than normal clip over the past 12 or so years. The builders are no longer building a single family detached housing that is in great demand. Rather, it seems to be higher-end condos and townhomes as well as houses above the median value.

At one house that I am rehabbing, the monthly rent rate has gone up over $1,200 in the past six years. I have another house that will be ready for rent in several months and the market rent has gone up about $700 in the past three years. Indeed, the prices of these houses have gone up quite a bit, but the capitalization rates have barely budged.

For investors desperate for yield, residential housing still makes sense. I ask my family and fellow investors how people can afford these rents, but I leave that up to the tenants to figure out. I let them take the jabs and deal with all of the hassle of working for somebody. I’m the landlord and I’m here to collect the rent. I’m the boss.

14 thoughts on “12/4 Update: The real reason why I am so bullish on residential housing”

  1. Here is a far out argument why I think housing prices could still hold up despite Jacob’s troubles in the next few years. I believe the Deagel.com assessment of the western world populations dropping by 70% in the next few years definitely holds true. I already see vaccinated people starting to have health troubles. The reason why I think property prices could still hold up during these times are two fold:

    1) The Elite in the Synagogue of Satan will take up all the property left by the dead people either by force or rock bottom prices.

    2) When the white folk die off in Europe and North America then people from other parts of the world could move into North America and Europe and take up the land. This may be part of the plan. It is already happening with immigration to Europe from Africa and the middle east. In North America it is the Chinese and Latin Americans as well as middle easterners.

    It is obvious that the big boys do not plan on the value of real estate dropping despite a possible die off. They are buying up real estate strictly for control.

    1. I agree with your points here. I suspect that many of the natives in the United States and in the West will begin to die off in earnest, or become incapacitated moving out to mid decade. As this process moves along we will see a concerted effort to continue seeing the mass immigration into the West as the third worlders and non-Christians replace the Jacob remnants.

      These large institutional landlords are being instructed to do what they’re doing. They are the ones primarily responsible for driving up prices and rents the way we are seeing.

      I get that the contemplation of all of these circumstances is nightmarish, but we would be foolish to not invest accordingly. I cannot believe how quickly rents are moving higher. I run the numbers on the prices of housung and they’re still not nearly as expensive as they were in the mid-aughts. Of course, I refer strictly to the United States in this regard, but if you run the numbers in the other Western Nations many will see a similar result. I understand that areas like Toronto are up about 30% in price since the summer of 2020, yet rents have not risen as high.

      The prophet Hosea’s declaration is vital here regarding the last day prophecies. Because Jacob’s remnants didn’t know who they were they fell easily at the end. The church pastors were brainwashed and mind controlled into believing a lie and were neutered through political correctness and fears of anti-semitism. They exerted all their feeble and useless energies discussing Jew versus gentile.

      The propagandized church historianS searched high and low looking for the northern remnants and concluded that somehow they were racially different than the white Jews. I heard some of these historians claim that the Aborigines were the Israelites. I heard one declare that it was the Mayans and Aztecs. Yet I heard another one claim it was the Ethiopians. I heard one claim that the Asians were descended from Jacob, and he had verifiable proof. Of course, they look nothing like the Jews of today, but don’t tell that to these so-called experts. Don’t tell them about this blatant non-sequitur.

      The Mormon Church even claims that the lost Israelites were the native Americans Indians of North America.

      That was exactly what our adversary wanted. It’s all over now and we have to see the tribulation unfold. If Jacob’s remnants really knew who they were, none of this would be going on. I blame the fire and brimstone preachers on YouTube. I blame each and every one of them…

      But hey, we might as well be making some money on our own terms.

      1. I laugh at the archaeologists who can somehow twist history and claim that the northern Israelite remnants, who at the time they were taken into captivity were one of the largest populations in the world, somehow could be found in the Amazon jungle.

      2. Wow, I didn’t know that the Mormons believed that. From a recruitment point of view, that’s a good angle to take, but from a realistic point of view, it makes little sense. North American Indians are nearly as primitive as Africans (they’d be living in teepees still if it were not for Northern European immigration). The Mayans were no better.

  2. In one quick action, btc cracked the 100 and 200 day SMA. The big bear flag on the daily was telegraphing us.

  3. Elites are meeting in Antarctica in December…so not in New York, or Davos, but Antarctica of all places.
    They twitter about it and tell us they are excited.
    David Schwartz, (former?) Ripple, quote: “Just arrived in Antarctica. Thiss will change everything. Everything.”
    Lagarde is there too and a few others.
    Is this the new Jekyll Island meeting of 2021?

    1. Really? Wow. I can’t keep up on this stuff anymore.

      It is all leading up to the time of Jacob’s trouble and Pope Francis’s sellout of the Catholic church. Bioweapons, WWIII, destruction of Manasseh’s remnant, pale horse, etc.

      The elites are really pushing to destroy white Christian Western civilization. That, of course, was founded by the northern Israelite remnants.

      It will be done by the end of the decade. All over. it will be coming faster now.

  4. Hey Chris. I asked you about buying or renting a while back. We decided to buy in the Chicago suburbs. We plan on moving in June and are working with a realtor right now. We did plan on moving in March, but we decided to wait for my husband’s one-year raise at his new job. I was casually looking at homes over the last couple of months, and it was stressful to see them fly off the market so fast. I think I might have a heart attack when the time comes.

    Did you see how Better.com laid off 9% of their workers on a Zoom call? I am not even sure how (or if) this is related to the market overall because I am ignorant. I just watched the video.

    https://www.youtube.com/watch?v=ao3zs41aB_M

    1. Indeed, housing is stressful. People are competing with deep money with search algorithms. They seem willing to pay up, too. That is tough competition.

      I did not see this YouTube video. Thanks for forwarding. Sociopathy and Psychopathy rise to the top in all larger organizations, whether it’s government, corporations, churches, etc. That’s how it works under this NWO regime.

      1. They are getting out of the ibuyer buying program they announced with big fanfare. Zillow realizes that it is much harder flipping properties based on computer algorithms, but they are selling their thousands of houses in home inventory to the large institution landlords.

        All of these firms are controlled by the same all seeing eye anyway.

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