tomfoolery wrote: ↑Sun Jun 06, 2021 6:28 pm
D1984 wrote: ↑Sun Jun 06, 2021 5:47 pm
9.
Also, where are you getting -5% real rates from? Inflation was around 4.2% year-over-year from April 2020 to April 2021 but much of that was due to base effects (since inflation was depressed year-over-year in April and May of 2020 this means that any Y-O-Y reading will be starting from a lot lower base than normal if you start from those months; see
https://www.forbes.com/sites/georgecalh ... 86c0516be2 .
What a wonderful way to measure inflation. It's not really 4.2% because it dipped just beforehand by 1% so it's really only 3%.
Perhaps if CPI hits double digits by end of the year, instead of looking at annual inflation we can look at 10 year average. Because then inflation would still only be about 3% over ten years.
And if this transitory inflation hits double digit levels for more than a few years, perhaps we can measure inflation as an average over the last 100 years.
And if inflation hits Venezeula levels, perhaps we can look at median inflation per year over last century.
Nothing to worry about.
Did you not even read what was in the attached link? My point (and the point of the author of the page I linked) was that you shouldn't merely look at one or two data points that are exactly 12 months from an artificially depressed bottom and then start worrying that the inflationary sky is falling and/or assume it's a given that we soon will be seeing double-digit inflation.....what you are seeing is likely a temporary blip caused by starting--when measuring on a 12 months year-over-year basis--from a lower level than normal. We had similar Y-O-Y spikes/temporary rises/blips (just that I can recall from when I started paying attention to this sort of thing....I'm sure there were plenty before that too) that were for a short time above the Fed's preferred 2% or so comfort zone in 2005, 2006, 2008, 2011, and early 2017 and every one of those turned out to be transitory rather than the start of "here comes the 1970s all over again".
FWIW Y-O-Y inflation from Apr 2019 to Apr 2020 was barely positive (around 0.3%); given that the Fed is aiming for 2 to 2.5% an increase of 4.2% for Y-O-Y Apr '20 to Apr '21 would put us basically at or a tiny bit above trend. If anything, the May '21 Y-O-Y inflation reading might even be a bit higher than the April '21 figure since the May '20 reading was the nadir. After that, though, I would only start being seriously worried if by mid to late autumn we still see both CPI, core CPI, sticky CPI, and PCE all at an above-trend level and continuing to accelerate much beyond the high 2% or low 3% range....at that point the Fed should probably start putting on the monetary brakes.
Look, it sucks that you missed out on the chance to buy a house in a HCOL area a decade or so ago and now said house is even less affordable but whose fault is that? Did someone put a gun to your head and tell you not to buy a home or else they'd blow your brains out? You could've bought a property but for whatever reason, you chose not to. Don't blame "inflation" or the Fed for an investing decision you chose to make or not make.
Finally, if you are really so concerned about being able to afford real estate then--back when you chose not to buy a home--why did you not instead invest in something that would directly benefit from rising real estate prices.....say:
A. Case-Shiller Index futures that most closely matched the locality you wanted to buy in (these futures exist for eleven major US metro areas and have been around and traded on the CME since the late 2000s) which IIRC was California,
or
B. Something like the Residential REIT Index ETF (ticker REZ) or individual SFR focused REITs like AMH or Colony Starwood (the latter of which got bought out by Invitation Homes which is ticker symbol INVH), or even a mostly apartment focused but with a bit in SFRs/duplexes/fourplexes REIT like EQR.
In the case of Option A. You would've in theory see your investment appreciate at roughly the price of housing in the metro area/s you chose (minus the implied financing costs on the futures which would be very little because rates were pretty low over this period) although the level of demand/supply of futures contract buyers i.e. whether the futures contracts were typically in contango or backwardation depending on whether more people wanted to buy or sell a particular city's future could affect this too; in the case of Option B. your investment would actually have appreciated at slightly more than the San Diego metro area prices and roughly equal to the LA metro area real estate prices (at least judging by the Case Shiller indices for those two metro areas) and not quite as much as SF prices but it sure would've beat holding cash.
For that matter, as much as you make you should be considered an "accredited investor" and therefore should've had access to the privately traded real estate investment funds that Blackrock and the other institutional buyers were putting together back in the early to mid 2010s (in other words you could've gotten a piece of the action by investing with the same institutional investors that were snapping up single-family homes left and right back ten years ago).