Author Topic: Global Recession?  (Read 12512 times)

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Offline USCTrojanCPA

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Re: Global Recession?
« Reply #75 on: May 25, 2022, 08:30:10 PM »
today's $1.6M detached Irvine condos will be $1M in a year

Since you asked for my prediction, I'll say today's $1.6M detached Irvine condo will be $1.3M-$1.4M in a year. I think we're reaching the peak soon, then flatten out and will probably drop 20%. It could take a year or two for the 20% to happen.

We'll need to see inventory levels go materially above 3 months on inventory to see those kind of price declines and we are still right around 1 month of inventory as we speak in Irvine.  I think we'll see more like what we saw in late 2018 with single digit price declines.  That being said, 10/30 bond yield have rolled and are down by 30+ bps from the peak. 
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Offline someguy

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Re: Global Recession?
« Reply #76 on: May 25, 2022, 10:25:16 PM »
If the Fed funds rate reaches 6%, how high would mortgage rates end up going?  Job losses + the highest mortgage rates in a generation will not end well for the housing market.

Deutsche Bank Sees 5%-6% Fed Target Rate and Deep U.S. Recession

The Federal Reserve is likely to need to engage in the most aggressive monetary tightening since the 1980s to tamp down an inflation rate at a four-decade high, which will lead to a deep U.S. recession next year, Deutsche Bank AG economists warned.

“We assume conservatively that a Fed funds rate moving well into the 5% to 6% range will be sufficient to do the job this time,” the authors including David Folkerts-Landau, group chief economist and head of research, wrote in a report Tuesday. “This is partly because the monetary-tightening process will be bolstered by Fed balance-sheet reduction, which our U.S. economics team estimates will be equivalent to a couple additional 25 basis-point rate hikes.”

This monetary tightening and the financial upheaval that accompanies it “will push the economy into a significant recession by late next year,” Folkerts-Landau said, adding Deutsche sees the unemployment ultimately rising “several percentage points.”


https://www.bloomberg.com/news/articles/2022-04-26/deutsche-bank-sees-5-6-fed-target-rate-and-deep-u-s-recession

They'd be below 6% and the 10/30 bond rates would be lower than the Fed Funds Rate because the yield curve would be inverted because we'd be in a recession at that point.

The Fed plans to begin Quantitative Tightening on 6/1/22 (though they've been saying QT since Oct 2021) allowing up to $95B of treasuries and MBSs to roll off the balance sheet monthly.  Of the approximately $9T on their balance sheet roughly $3.5T is MBS.  That should have an impact on the longer end of the yield curve.

They stopped growing their balance sheet in recent months (https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm)

The Fed has made it clear they want asset prices lower, inflation under control, and are wiling to tolerate an increase in unemployment from today's levels. The only tool they have is to manipulate demand via yield curve control.  The Fed will get their way imho, unless there's an external shock (i.e. expanded war, financial crisis).  They're essentially going to manufacture a recession.  It's just a matter of how "soft-ish" of a recession we get and when + how quickly they reverse course.
« Last Edit: May 25, 2022, 10:35:45 PM by someguy »

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Offline OCtoSV

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Re: Global Recession?
« Reply #77 on: May 26, 2022, 09:07:19 AM »
I feel for real estate this will be similar to the late 80s/early 90s crash in SoCal given the dy/dx of the unemployment rate and mortgage rates. Remote workers are already starting to whine on LinkedIn about pressure to come to the office. How do you get to Cupertino weekly if you're living in OC? That gets expensive quick.

June 1 2023 is the date for my $1M/7% prediction. Happy to buy a round at Houstons for anyone that wants to show up if I lose - always looking for an excuse to come home.

Offline morekaos

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Re: Global Recession?
« Reply #78 on: May 26, 2022, 09:18:52 AM »
I'm on your side OC...we hit 5.5% just a little while back and 7% is just a hop skip and a jump from there. With the Fed rhetoric like this...its not out of the question.

Powell says the Fed will not hesitate to keep raising rates until inflation comes down

Fed Chair Jerome Powell said he will back interest rate increases until prices start falling back toward a healthy level.
“If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,” the central bank leader told the Wall Street Journal

https://www.cnbc.com/2022/05/17/powell-says-the-fed-will-not-hesitate-to-keep-raising-rates-until-inflation-comes-down.html

Offline Compressed-Village

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Re: Global Recession?
« Reply #79 on: May 26, 2022, 10:15:59 AM »
I feel for real estate this will be similar to the late 80s/early 90s crash in SoCal given the dy/dx of the unemployment rate and mortgage rates. Remote workers are already starting to whine on LinkedIn about pressure to come to the office. How do you get to Cupertino weekly if you're living in OC? That gets expensive quick.

June 1 2023 is the date for my $1M/7% prediction. Happy to buy a round at Houstons for anyone that wants to show up if I lose - always looking for an excuse to come home.

Quote from: OCtoSV on May 24, 2022, 01:01:22 PM
today's $1.6M detached Irvine condos will be $1M in a year

So I want to make sure that I have this correct. In Irvine Condo with 1.6 will drop to 1 million at about 1 year from now with 7% mortgage rate correct?




Offline zubs

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Re: Global Recession?
« Reply #80 on: May 26, 2022, 10:16:56 AM »
It's been more than a decade, but are we finally becoming a bear blog again?  sure feels like it.
I was promised a recession back in 2018.


Who's going to play contrarian as we morph back into a bear?

Offline Liar Loan

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Re: Global Recession?
« Reply #81 on: May 26, 2022, 10:44:32 AM »
I feel for real estate this will be similar to the late 80s/early 90s crash in SoCal given the dy/dx of the unemployment rate and mortgage rates. Remote workers are already starting to whine on LinkedIn about pressure to come to the office. How do you get to Cupertino weekly if you're living in OC? That gets expensive quick.

June 1 2023 is the date for my $1M/7% prediction. Happy to buy a round at Houstons for anyone that wants to show up if I lose - always looking for an excuse to come home.

I don't think a housing bust will play out that quickly.  Real estate moves much more slowly than stocks and typically doesn't bottom out until 2-3 years after the recession that caused the bust has ended. 

By that time there will be some demographic headwinds working against housing with Boomers starting to sell en masse, and the wave of Millenials hitting home-buying age having already peaked.

Offline USCTrojanCPA

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Re: Global Recession?
« Reply #82 on: May 26, 2022, 12:07:59 PM »
I feel for real estate this will be similar to the late 80s/early 90s crash in SoCal given the dy/dx of the unemployment rate and mortgage rates. Remote workers are already starting to whine on LinkedIn about pressure to come to the office. How do you get to Cupertino weekly if you're living in OC? That gets expensive quick.

June 1 2023 is the date for my $1M/7% prediction. Happy to buy a round at Houstons for anyone that wants to show up if I lose - always looking for an excuse to come home.

I don't think a housing bust will play out that quickly.  Real estate moves much more slowly than stocks and typically doesn't bottom out until 2-3 years after the recession that caused the bust has ended. 

By that time there will be some demographic headwinds working against housing with Boomers starting to sell en masse, and the wave of Millenials hitting home-buying age having already peaked.

Do you recall what housing did in the post dot.com bubble recession?  Hint, prices didn't go down much at all.  You'll need significant job losses to result in material housing price reductions because the cost side to build a home are sticky.
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Offline OCtoSV

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Re: Global Recession?
« Reply #83 on: May 26, 2022, 12:32:54 PM »
To be clear, my price call is for the $1.6M condo to get crammed down to $1M as rates hit 7%. The $1.6M older Irvine resale SFR will get hit less. The $1.6M condo is a product for areas like Bronxville NY, close in to Manhattan job centers where the SFRs are much more expensive, almost all of them resale. The Irvine $1.6M condo is a luxury consumer product that will get whacked as OC employment gets hit in the coming recession.

Offline Liar Loan

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Re: Global Recession?
« Reply #84 on: May 26, 2022, 12:58:37 PM »
I feel for real estate this will be similar to the late 80s/early 90s crash in SoCal given the dy/dx of the unemployment rate and mortgage rates. Remote workers are already starting to whine on LinkedIn about pressure to come to the office. How do you get to Cupertino weekly if you're living in OC? That gets expensive quick.

June 1 2023 is the date for my $1M/7% prediction. Happy to buy a round at Houstons for anyone that wants to show up if I lose - always looking for an excuse to come home.

I don't think a housing bust will play out that quickly.  Real estate moves much more slowly than stocks and typically doesn't bottom out until 2-3 years after the recession that caused the bust has ended. 

By that time there will be some demographic headwinds working against housing with Boomers starting to sell en masse, and the wave of Millenials hitting home-buying age having already peaked.

Do you recall what housing did in the post dot.com bubble recession?  Hint, prices didn't go down much at all.  You'll need significant job losses to result in material housing price reductions because the cost side to build a home are sticky.

Yes, but I don't see any reason to believe this downturn will mimic that one.  The Fed dropped rates from 6.5% in 2000 to 0.97% in 2003, which saved housing and ultimately led to the '07 bubble.  This time the Fed is moving in the opposite direction going from 0.0% (not including the effect of QE) to the highest rate since at least the Great Recession, and their hands are tied because inflation has gotten out of control.

Offline USCTrojanCPA

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Re: Global Recession?
« Reply #85 on: May 26, 2022, 01:32:41 PM »
I feel for real estate this will be similar to the late 80s/early 90s crash in SoCal given the dy/dx of the unemployment rate and mortgage rates. Remote workers are already starting to whine on LinkedIn about pressure to come to the office. How do you get to Cupertino weekly if you're living in OC? That gets expensive quick.

June 1 2023 is the date for my $1M/7% prediction. Happy to buy a round at Houstons for anyone that wants to show up if I lose - always looking for an excuse to come home.

I don't think a housing bust will play out that quickly.  Real estate moves much more slowly than stocks and typically doesn't bottom out until 2-3 years after the recession that caused the bust has ended. 

By that time there will be some demographic headwinds working against housing with Boomers starting to sell en masse, and the wave of Millenials hitting home-buying age having already peaked.

Do you recall what housing did in the post dot.com bubble recession?  Hint, prices didn't go down much at all.  You'll need significant job losses to result in material housing price reductions because the cost side to build a home are sticky.

Yes, but I don't see any reason to believe this downturn will mimic that one.  The Fed dropped rates from 6.5% in 2000 to 0.97% in 2003, which saved housing and ultimately led to the '07 bubble.  This time the Fed is moving in the opposite direction going from 0.0% (not including the effect of QE) to the highest rate since at least the Great Recession, and their hands are tied because inflation has gotten out of control.

Fair point but employment and the job market will be key going forward.  Rates are actually coming down as bond investors are already pricing in an economic slowdown which will obviously result in lower inflation.
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Offline Liar Loan

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Re: Global Recession?
« Reply #86 on: May 26, 2022, 02:17:15 PM »
I feel for real estate this will be similar to the late 80s/early 90s crash in SoCal given the dy/dx of the unemployment rate and mortgage rates. Remote workers are already starting to whine on LinkedIn about pressure to come to the office. How do you get to Cupertino weekly if you're living in OC? That gets expensive quick.

June 1 2023 is the date for my $1M/7% prediction. Happy to buy a round at Houstons for anyone that wants to show up if I lose - always looking for an excuse to come home.

I don't think a housing bust will play out that quickly.  Real estate moves much more slowly than stocks and typically doesn't bottom out until 2-3 years after the recession that caused the bust has ended. 

By that time there will be some demographic headwinds working against housing with Boomers starting to sell en masse, and the wave of Millenials hitting home-buying age having already peaked.

Do you recall what housing did in the post dot.com bubble recession?  Hint, prices didn't go down much at all.  You'll need significant job losses to result in material housing price reductions because the cost side to build a home are sticky.

Yes, but I don't see any reason to believe this downturn will mimic that one.  The Fed dropped rates from 6.5% in 2000 to 0.97% in 2003, which saved housing and ultimately led to the '07 bubble.  This time the Fed is moving in the opposite direction going from 0.0% (not including the effect of QE) to the highest rate since at least the Great Recession, and their hands are tied because inflation has gotten out of control.

Fair point but employment and the job market will be key going forward.  Rates are actually coming down as bond investors are already pricing in an economic slowdown which will obviously result in lower inflation.

Another follow up point is that housing wasn't particularly overvalued in 2000.  It had just crawled it's way out of the 90's downturn and regained the prior peak achieved in 1991 (at least in OC).  The current housing market has surpassed the 2007 bubble peak by quite a bit in nearly every metro.

Offline The California Court Company

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Re: Global Recession?
« Reply #87 on: May 26, 2022, 02:48:19 PM »
too bad there is a limit on how many characters we can have in the signature.
Please look at my signature for the prediction made by IndieDev many years ago. QH now trades at least 10X of that prediction.

To be clear, my price call is for the $1.6M condo to get crammed down to $1M as rates hit 7%. The $1.6M older Irvine resale SFR will get hit less. The $1.6M condo is a product for areas like Bronxville NY, close in to Manhattan job centers where the SFRs are much more expensive, almost all of them resale. The Irvine $1.6M condo is a luxury consumer product that will get whacked as OC employment gets hit in the coming recession.
"Should any Person come into contact with such fruit, soil or groundwater, such Person is advised to wash thoroughly with soap and water and seek immediate medical attention"-Augusta Disclosure, Tustin Legacy

"You'll probably be able to buy a 4BR detached home in Quail Hill for $150,000."-IndieDev

Offline OCtoSV

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Re: Global Recession?
« Reply #88 on: May 26, 2022, 04:36:57 PM »
oh please CCC - what was the Fed up to when you made your sig? Not selling $95B/month off their balance sheet, and the JPY wasn't at 130 with higher rates in JP suppressing demand for Treasuries. China factories were running full steam powering US corp profits. Inflation was non-existent.

I really do hope I'm wrong, but I just call 'em like I see 'em through the lens of a small amount of knowledge about the global financial markets and the Fed.

Offline morekaos

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Re: Global Recession?
« Reply #89 on: June 01, 2022, 08:24:37 AM »
China...

Asia-Pacific stocks mixed as private survey shows China’s factory activity contracted in May

China’s Caixin/Markit manufacturing Purchasing Managers’ Index for May came in at 48.1 on Wednesday, an improvement over April’s reading of 46 but still remaining below the 50-level mark that separates expansion from contraction.

https://www.cnbc.com/2022/06/01/asia-markets-china-economy-australia-gdp-data-currencies-oil.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

China faces a nearly $1 trillion funding gap. It will need more debt to fill it.

The Chinese government faces a growing shortfall of cash, analysts say, as they predict an increase of debt to fill the gap.
The analysts did not share specific figures on how much additional debt might be needed. But they pointed to growing pressure on growth that would require more support from debt.
Nomura estimates a funding gap of about 6 trillion yuan ($895.52 billion) — roughly 2.5 trillion yuan in decreased revenue due to tax refunds and weaker economic production, and another 3.5 trillion yuan of lost land sales revenue.

https://www.cnbc.com/2022/05/31/china-faces-a-nearly-1-trillion-funding-gap-it-will-need-more-debt-to-fill-it.html?&qsearchterm=china%20funding%20gap
« Last Edit: June 01, 2022, 08:30:36 AM by morekaos »

 

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