Calculated Risk

Consider this sentence:

"That inability is mushrooming, driven by increasing rents across much of the country and wages that aren’t going anywhere."

One has to wonder: where is the money coming from that drives up these rents, if wages are stagnant? The issue is supply and demand.

Why has supply decreased? Part of the answer is the housing bust, which followed the housing boom (irrational exuberance was counter balanced by irrational pessimism):

http://www.calculatedriskblog.com/2013/09/ny-times-on-shortage-of-buildable-lots.html

As it says there:

"The latest land rush is in full swing, as developers realize that they have failed to feed the zoning, permitting and mapping pipeline, which can take months or years to turn raw fields into buildable lots."

The other side of the supply and demand issue is the increase of foreign demand. Some of the money comes in the form of foreign money that speculates in the American real estate:

http://www.nytimes.com/2011/07/07/nyregion/more-apartments-are-empty-yet-rented-or-owned-census-finds.html?pagewanted=all

As it says there:

"But some Manhattan neighborhoods are assuming that vacant feeling the year round, because the people who own or rent apartments there actually live somewhere else most of the time. "

A combination of housing bust and foreign speculation in USA real estate leads to a situation where rents go up even when wages are stagnant or falling.

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A possible explanation of the international forces at…

German here living in CA.

My take is as follows (YMMV):

- We'll live and work in CA until scrappy financial independence is possible in Germany (ballpark ~3-3.5M net worth).

- Once we could comfortably retire in Germany, we'll decide whether to move back there or keep working just to stay in CA (due to cost of living FIRE in CA seems out of reach)

- In some sense starting out in CA maintains more optionality (it'll be easier to move from CA to Germany than vice versa)

Advantages of CA:

- The weather

- Monthly savings (pay - expenses; much higher than Germany if you avoid lifestyle creep)

- Career opportunities (lots of interesting work)

- Outdoors (subjective)

- Food

- If your kids grow up in LA or SF, I'd say there's a pretty good chance they'll stick around close by when they grow up

- Vibe ~ more optimism about the future and the role technology can play

- The earlier you move and buy a house, the earlier you can lock in your real estate taxes (Proposition 14 [2] renders CA hostile to those that 'come later'). Admittedly, it's already pretty late in the game.

Disadvantages of CA:

- Housing prices are 1M+ (although the market seems to be changing now that interest rates are going up [1])

- Homelessness

- Getting into good public schools needs a lot of planning (including buying in pricey neighborhoods)

- Related: kids in elite schools / social circles seem to be under a lot of pressure to perform from day 1 (IMHO a consequence of the winner takes all…

I've been following the housing bust.

In 2009, I remember reading a resignation later by a guy who made his "F* you money" betting for a housing collapse. He blasted the big banks, ivy leaguers, and old boys network.

I bought complex derivatives (SRS, SKF) but lost betting against the market.

I read http://calculatedriskblog.com for a while and educated myself about the macro factors in the markets.

Through "calculated risk", I learned of Jim the Realtor http://www.bubbleinfo.com/ who videos (vacant) casualties of the housing collapse. Seeing it made it real for me.

Over time, I've realized that the further from reality that decisions are being made, the more likely we are to make destructive decisions.

When soldiers kill people with drone aircraft in video game-like conditions, it removes the reality from something that would be extremely traumatizing when done with bare hands.

In our wonderfully complex world, we sow complexity, and reap disaster. Im not sure what the answer is, but there is something terribly wrong when destruction is more profitable than creation.

Gotta call BS on her...she was one of the first BANK analysts [1] to say on CNBC that banks were effed... when it was pretty obvious to anyone not in a bank or not on cheerleading CNBC.

Then she said munis were effed... went on 60 Minutes and scared a lot of people into losing a lot of money since there have been few defaults, bonds have performed well, and taxes have gone up.

A genius is someone who makes the right call in the right media at the right time.

http://www.bloomberg.com/news/2013-06-03/meredith-whitney-offers-barrage-of-numbers-errors-books.html

http://blogs.reuters.com/muniland/2013/06/04/meredith-whitneys-great-migration/

[1] and not even the first - Ivy Zelman made a great case and got herself fired from Credit Suisse in 2007

http://www.calculatedriskblog.com/2007/06/ivy-zelman-departs-credit-suisse.html

> Don't look to VCs for economic perspective. They don't have it. All they know how to do is raise funds and collect a carry. Don't look to political hacks like "A housing bubble would be good for the economy" Paul Krugman, or any politicians.... look to actual economists.

Agreed. I really like what's happening over at Calculated Risk (http://www.calculatedriskblog.com/). Bill seems to do a good job at taking macroeconomic information and distilling it into something understandable.

The Fed has not shown any real interest in wanting to hurt this delicate (and booming) economy with an end to QE or by raising rates. But most analysts seem to point to Oct 2015 to mid 2016 as the point when rates will rise. But we also said that about early 2015 last year, so who knows what will happen, until it actually happens!

While it definitely contributed to it, the trend towards SUV/crossovers was already underway[1][2] far before with CAFE standards[3]. It's also just higher margins for the auto companies (mostly similarly priced components, but upcharge for size), so they've been pushing it everywhere. While not drastic as US, the same trend can be seen outside US even without the same laws[4].

[1] https://www.calculatedriskblog.com/2018/05/the-changing-mix-of-light-vehicle-sales.html
[2] https://advocacy.consumerreports.org/research/the-rise-of-the-crossover-the-segment-thats-really-driving-the-auto-industrys-sales/
[3] https://en.wikipedia.org/wiki/Corporate_average_fuel_economy
[4] https://www.forbes.com/sites/judeclemente/2019/10/23/suvs-a-reality-check-on-oil-use-and-co2-emissions/?sh=118ee3225657