What Will Trigger Economic Collapse / Recession?

I'm not sure how housing can get more expensive even though people aren't making more money, but it is happening. Affordable housing is a big issue in a lot of places I've been in the Pacific Northwest.

I was recently visiting McCall, Idaho and they are short on cheap labor there because there isn't enough affordable housing for people to rent apartments and work those kinds of jobs. Yet the city doesn't want cheap housing because of the lower property values.

a reply to: darkbake

That is what 35+ years of stagnant wages will get you. Remember unions are bad.

a reply to: darkbake

there has to be a deflationary period or huge wage growth

Two things I didn't mention:

Student loans. I do think this bubble has to pop. Student loans have like a 30% default rate.

Medical / Health Insurance. This is a huge anchor around people's neck. The only thing that I think keeps it from having a big impact is that most people will just stop paying for insurance if they have to make a choice between insurance and the mortgage or car payment.

a reply to: Edumakated

It is also a huge weight around employers necks too. How can a business compete with the extra cost of medical insurance when every other industrialized nation doesn't have a for profit med system (and for profit pharma).

Medical / Health Insurance. This is a huge anchor around people's neck.

a reply to: toysforadults

The proposed Tariffs should produce inflation *if* demand for those products remains strong.
Domestic products find it easier to compete with imports so that increases demand for domestically produced goods which feeds into the wage inflation spiral.
The tariff income would help cover the high government debt and inflation driven interest rates would help the banks.
Not going to be very popular with the fixed income crowd though, historically inflation adjustments lag real inflation.

They must have thought this through so that its less likely to cause another deflationary period.

Real estate seems a little soft due to higher rates but maybe that is there to prevent the housing market from overheating? You don't have as many people getting overextended with second mortgages when the interest rates are over 4% and there won't be as much of a shock if ARM's rise a little.

a reply to: Edumakated

it's cheaper for me to pay off medical bills on my own than it is to have medical insurance

a reply to: Edumakated

The deep state globalists don't need a reason.

a reply to: Edumakated

The deep state globalists don't need a reason.

originally posted by: toysforadults
a reply to: theantediluvian

how can housing grow when people aren't making more money?

it doesn't make any sense[/quote

Because the banks and other lenders are pulling off the same # they did back when we had the last bubble pop.
Just sneakier.

originally posted by: darkbake
I'm not sure how housing can get more expensive even though people aren't making more money, but it is happening. Affordable housing is a big issue in a lot of places I've been in the Pacific Northwest.

I was recently visiting McCall, Idaho and they are short on cheap labor there because there isn't enough affordable housing for people to rent apartments and work those kinds of jobs. Yet the city doesn't want cheap housing because of the lower property values.

Pretty simple logic really. Where I am, houses have gone up by about 50% in the last 2 years, from 80k to 120k. Typical rent in this area is about $750/month. $750/month over 30 years is $270,000 while the house is only $120k. In reality it's less since rent will go up while your payment will remain the same or go down.

Buying a house, even with our current inflated prices is still a lot cheaper than renting which means the housing market has plenty of room for growth.

originally posted by: toysforadults
a reply to: Edumakated

it's cheaper for me to pay off medical bills on my own than it is to have medical insurance

No it's not. This past January I had to get some dental work done. Insurance, if I had had it was about $40/month and covered 80%. Out of pocket it cost me $3000. That's $1080 vs $3000. In the next few months I need some more dental work, again I don't have dental insurance (I've been putting off the work hoping my job finally promotes me so I do get insurance). It's going to cost a lot again.

In my opinion the economy is softening in my area ( East Tennessee & Southern Kentucky). The growth of my company at 8% is slowing even with the additional 40% increase in the advertising budget. The local manufacturering company’s that I watch as a barometer of the economy are slowing down as well. One company has 3 production lines idle for the first time in months. They manufacture products for the natural gas industry.

We have been running wide open since just after the election so perhaps it’s time for a pause. As always, I will remain conservative in business. Plan for the worst and hope for the best. When things really get slow, I still have payroll to meet. We feed a lot of families.

originally posted by: Aazadan

originally posted by: darkbake
I'm not sure how housing can get more expensive even though people aren't making more money, but it is happening. Affordable housing is a big issue in a lot of places I've been in the Pacific Northwest.

I was recently visiting McCall, Idaho and they are short on cheap labor there because there isn't enough affordable housing for people to rent apartments and work those kinds of jobs. Yet the city doesn't want cheap housing because of the lower property values.

Pretty simple logic really. Where I am, houses have gone up by about 50% in the last 2 years, from 80k to 120k. Typical rent in this area is about $750/month. $750/month over 30 years is $270,000 while the house is only $120k. In reality it's less since rent will go up while your payment will remain the same or go down.

Buying a house, even with our current inflated prices is still a lot cheaper than renting which means the housing market has plenty of room for growth.

It’s not a lot cheaper unless you have cash. Interest on the mortgage is often more than the principal.

I think economic bubbles typically happen when the intangible value of something is over inflated - i.e. the value of the bricks and mortar in a house never equals the sale value of a house hence the intangible value is ever over-inflated.

We all know this principle is true for housing/property.

The next big bubble that I think will burst in the UK is the student debt bubble.

Typical student debt per student is £45k which has been 'paid' by the student for an intangible product (the degree). The majority of degree's values is never £45k.

The vast majority of degrees are never paid off so they get written off after 25 years.

Once that starts happening the lending institutions won't be affected - why? Because large swathes of this loan debt has been sold off by the financial lenders to other institutions like pension funds.

The student debt scheme is almost like a massive Ponzi scheme - more and more students are needed to maintain the pile of debt.

Once the debt gets written off - pop goes the bubble. Pop goes the pension funds / annuity funds / ISA funds.

I hope my economic understanding is wrong...

a reply to: Nickn3

Property tax, oops furnace is bad, oops AC is bad, oops refrig is bad, oops roof is bad, oops pipe burst in the fiippin basement.

Rent it or own it-it is expensive to live.

a reply to: Loque76

Imagine you had to take an actual physical resource such as wheat or gold

Now.. Go to that house you own or want to buy and take actual gold and or wheat worth equivilant value and ask yourself. Is it really worth 750k worth of gold to buy some sticks and bricks on a piece of land?

No. If our money wasnt so abstract and had an actual value to it you wouldn't spend that much money on it

But since its such an abstraction the market is totally out of balance

originally posted by: Aazadan

Buying a house, even with our current inflated prices is still a lot cheaper than renting which means the housing market has plenty of room for growth.

Right, but rent is also too high in a lot of places.

originally posted by: Aazadan

originally posted by: darkbake
I'm not sure how housing can get more expensive even though people aren't making more money, but it is happening. Affordable housing is a big issue in a lot of places I've been in the Pacific Northwest.

I was recently visiting McCall, Idaho and they are short on cheap labor there because there isn't enough affordable housing for people to rent apartments and work those kinds of jobs. Yet the city doesn't want cheap housing because of the lower property values.

Pretty simple logic really. Where I am, houses have gone up by about 50% in the last 2 years, from 80k to 120k. Typical rent in this area is about $750/month. $750/month over 30 years is $270,000 while the house is only $120k. In reality it's less since rent will go up while your payment will remain the same or go down.

Buying a house, even with our current inflated prices is still a lot cheaper than renting which means the housing market has plenty of room for growth.

Depends on the market. It also depends on your stage in life if buying over renting makes sense.

Buying makes the most sense if you are settled meaning you are stable in career and life have at least a five year time horizon or more.

In higher cost areas, many people rent because they can't come up with the down payment's required. Even 5% down in Chicago on a typical condo is $20k, not including the other $10k you'll need in closing costs. Then you have to factor in the transaction costs (realtors, transfer taxes, closing costs, etc) to sell.

It is just far easier to rent for a lot of people. Here in Chicago, most high paid millenials are renting because they can rent a place nicer than most condos (we've had a glut of high cost luxury units) and not have the baggage if they need to move.

a reply to: atsgrounded

But the only thing worth doing today (best time was about 20 years ago) is to buy a cheap house that you could fix up to live in for comforts sake, not future investment income. Then before your eyes the power of inflation makes that mortgage cheaper and cheaper every year. While insurance and taxes will continue to increase, the actual carrying pain of that debt becomes less and less every year. People think they are getting appreciation income when their value increases and increases. I tend to think that increase is what inflation is running that year or decade. The house is the same value, just your currency is worth less year in and year out.

As another poster pointed out, the majority of money you pay to the bank for that mortgage is interest payments. Most of the time you pay all of the interest up front in the first payments. Then when you have payed off the blood debt to the bank, you can actually start paying on the principle of the property itself. Brilliant on the part of the banks. That is why if you make one extra house payment every so often towards the principle(at least once a year), you can shave off 10 years from a 30 year term.