When Do You Think We Will Have the Next Economic Recession?

[lizap]

I thought as interest rates rise, bonds lose value? This is because bond funds are priced based on the value of the bonds owned by the fund if they were sold, not what their maturity value is. If you are buying and selling bonds, a rising rate environment is bad. If it is buy and hold, you really should be buying individual bonds and not investing in a bond fund.

Last year, moved most of our retirement money to workplace stable value funds paying 3-4%.

 

[John Cummings]

The Bay Area has continued to climb but places in more suburban/rural areas, even many places in Lake Tahoe at the ski resorts, are still below 2006 peak prices.

That is not a realistic comparison. House prices in 2006 were out of sight due to mortgage lenders allowing people to buy homes they couldn't afford. Prices are climbing in Southern California but not dramatically like they did 12-13 years ago.

 

[John Cummings]

Nine of the ten economic recessions since 1953, when Dwight D. Eisenhower became President, have come under Republican Presidents as follows:

July 1953 to May 1954–Eisenhower

August 1957 to April 1958–Eisenhower

April 1960 to February 1961–Eisenhower

December 1969 to November 1970–Nixon

November 1973 to March 1975–Nixon/Ford

January 1980 to July 1980–Carter (Democrat)

July 1981-November 1982–Reagan

July 1990-March 1991—HW Bush

March 2001-November 2001–W Bush

December 2007-June 2009–W Bush/Obama–last five months under Democrat


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So what is your point? Politics are NOT allowed in TUG.

 

[DavidnRobin]

So what is your point? Politics are NOT allowed in TUG.

My point was someone asking about when the next recession was coming - so I was giving on data points...


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[tompalm]

My point was someone asking about when the next recession was coming - so I was giving on data points...


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Not realistic to determine when the next recession will happen and using that has little value. Each president has a four or eight year time span. So if you had gone to cash when a president was elected that you didn’t like, you would be missising huge gains. There are much better ways to determine when a recession might happen.

 

[WinniWoman]

Wow. In our area, your home would likely sell for around 200k.

Same here! I was just going to post that! Our home is a million dollar home really by CA standards! Especially on the 10.5 acres of land it sits on. With a stream and bridge. But would be lucky to sell it for $250,000 around these parts! Paid $208,000 for it in 1987. A salt box colonial.2600 square feet. Updated. LOL!

 

[TravelTime]

That is not a realistic comparison. House prices in 2006 were out of sight due to mortgage lenders allowing people to buy homes they couldn't afford. Prices are climbing in Southern California but not dramatically like they did 12-13 years ago.

That was my point. Housing is still recovering in many places. I agree with you completely.

 

[klpca]

That was my point. Housing is still recovering in many places. I agree with you completely.

In San Diego they are just as out of whack as pre-2008, but it is inventory shortage driven this time, not demand due to sub-prime lending. Inland areas, not so much. My mom always says that the housing prices in the inland areas are the last to rise and the first to fall. Probably true.

 

[klpca]

I am pro-business. I do not want higher corporate tax rates. I would like to eliminate California state tax. The new tax bill has screwed us royally because we have a lot of state taxes and property taxes that are not longer deductible.

If you are subject to the AMT (and I suspect you are) then you never received any tax benefit from the state tax deductions anyway since they aren't deductible for AMT. Hopefully this will make you feel a bit better.

 

[VacationForever]

Parts of California’s housing market has still not recovered from the last recession. Luxury condos and coops in NYC are falling too.

Most people do not realize why luxury condo and coop prices have fallen hard since 2008 and will never recover unless the current or future administration changes the law. During the real estate bust, the Obama administration deemed that condos loans were risky and put in place something called warrantable vs. non-warrantable condos. All new condos sold by developers are non-warrantable, which in plain English meant that no FHA loan will be granted. It also kills the resale market as buyers have to come up with 100% cash or get high interest loan through the secondary market.

To meet warrantable criteria, basically to get FHA loans:

• Fannie Mae and Freddie Mac use the term “warrantable” to describe condominium projects and properties against which they’ll allow a mortgage. Typically, a condo is considered warrantable if no single entity owns more than 10% of the units in a project, at least 51% of the units are owner-occupied, fewer than 15% of the units are in arrears with their association dues, the homeowners association (HOA) is not named in any lawsuits, and commercial space accounts for 25 percent or less of the total building square footage.

https://themortgagereports.com/18658/condo-mortgage-non-warrantable-loan-rates-gina-pogol

When we were looking at condos several years ago, our realtor said in the entire Las Vegas area, there were only 2 condo development that were warrantable. If you want to buy a condo to live it, that is fine. If you want to buy it for investment, it is a money losing proposition.

 

[TravelTime]

Most people do not realize why luxury condo and coop prices have fallen hard since 2008 and will never recover unless the current or future administration changes the law. During the real estate bust, the Obama administration deemed that condos loans were risky and put in place something called warrantable vs. non-warrantable condos. All new condos sold by developers are non-warrantable, which in plain English meant that no FHA loan will be granted. It also kills the resale market as buyers have to come up with 100% cash or get loan high interest loan through the secondary market.

To meet warrantable criteria, basically to get FHA loans:

• Fannie Mae and Freddie Mac use the term “warrantable” to describe condominium projects and properties against which they’ll allow a mortgage. Typically, a condo is considered warrantable if no single entity owns more than 10% of the units in a project, at least 51% of the units are owner-occupied, fewer than 15% of the units are in arrears with their association dues, the homeowners association (HOA) is not named in any lawsuits, and commercial space accounts for 25 percent or less of the total building square footage.

https://themortgagereports.com/18658/condo-mortgage-non-warrantable-loan-rates-gina-pogol

When we were looking at condos several years ago, our realtor said in the entire Las Vegas area, there were only 2 condo development that were warrantable. If you want to buy a condo to live it, that is fine. If you want to buy it for investment, it is a money losing proposition.

Thanks for sharing this information. We have been looking into a ski condo and we were surprised the prices are below what they sold for when they were brand new. The agent said something about people not being able to get mortgages. She did not explain but I suspect it has to do with this “warrantable” issue. I guess this would be a terrible investment since it would be hard to resell it.

 

[dioxide45]

Most people do not realize why luxury condo and coop prices have fallen hard since 2008 and will never recover unless the current or future administration changes the law. During the real estate bust, the Obama administration deemed that condos loans were risky and put in place something called warrantable vs. non-warrantable condos. All new condos sold by developers are non-warrantable, which in plain English meant that no FHA loan will be granted. It also kills the resale market as buyers have to come up with 100% cash or get high interest loan through the secondary market.

To meet warrantable criteria, basically to get FHA loans:

• Fannie Mae and Freddie Mac use the term “warrantable” to describe condominium projects and properties against which they’ll allow a mortgage. Typically, a condo is considered warrantable if no single entity owns more than 10% of the units in a project, at least 51% of the units are owner-occupied, fewer than 15% of the units are in arrears with their association dues, the homeowners association (HOA) is not named in any lawsuits, and commercial space accounts for 25 percent or less of the total building square footage.

https://themortgagereports.com/18658/condo-mortgage-non-warrantable-loan-rates-gina-pogol

When we were looking at condos several years ago, our realtor said in the entire Las Vegas area, there were only 2 condo development that were warrantable. If you want to buy a condo to live it, that is fine. If you want to buy it for investment, it is a money losing proposition.

You will also find that if a condo is eligible for FHA financing, the resale prices of those codos are considerably higher than those that are not FHA eligible. The problem with many condos is that when real estate went bust in 2008 many private equity firms stepped in and bought up a lot of units and rent them out. This often makes the projects non-warrantable since they don't meet the requirements you cite. Those that bought their condos before 2008 are stuck since they often still owe much more than they can sell them for, even now after the market has gone back up.

 

[VacationForever]

We went ahead and bought a condo because it has to die for views. Every unit in our building was sold in 2008 (with deposits down) but bank pulled financing to the developer which in turn could not complete the transactions and filed for bankruptcy. The building was left unoccupied and BOA held the asset. An investor bought over the entire building from BOA for $4M in 2011. Our penthouse unit was sold for 1.8M in 2008 and we paid 500K for it 5 years ago. The price has not moved. Our HOA has put in an application to make it warrantable and hopefully when approved, we will see some appreciation. But we want to live here so we don't worry about resale value.

 

[klpca]

You will also find that if a condo is eligible for FHA financing, the resale prices of those codos are considerably higher than those that are not FHA eligible. The problem with many condos is that when real estate went bust in 2008 many private equity firms stepped in and bought up a lot of units and rent them out. This often makes the projects non-warrantable since they don't meet the requirements you cite. Those that bought their condos before 2008 are stuck since they often still owe much more than they can sell them for, even now after the market has gone back up.

Depends on the market. We bought a condo in 2010 for less than the original owner paid in 2004. The price has doubled in 8 years - I don't think that anyone in our market is upside down any more.

 

[Big Matt]

"we are now leaning towards socialism" --- so you think these old elite rich people will not like 'socialist' programs like Medicare and social security and will vote to eliminate those programs
funny how some older people literally count the days until they are eligible for medicare and social security. I suppose if the "future elite" inherit multiple millions in a roth IRA they won't care about medicare, they will just pay cash for knee and hip replacements

I absolutely believe my post is directionally correct. I'll throw some more hand grenades into my view of the future 30 years from now:

1) people will either not buy houses as we know it today or they will buy very small houses. The asset called a house gains 4-5% in value annually over a long period of time. Take out cost of living adjustment and that's not a great investment, especially given the asset size. Homes will be mostly be made in factories and assembled on a site of your choice. This is happening in the modular home market now.

2) modern health care will shift from a pharmaceutical oriented model to a genetic modification model. Wellness and Eastern medicine will continue to increase in popularity. Diet will change radically away from sugar, and many local and state governments will outlaw sugar based products. Most care will be preventative in nature shifting the cost of healthcare to a focus on wellness starting at an early age.

3. People will buy local and will eat much less than today. Obesity will become a thing of the past just like the ill effects of smoking are already a thing of the past for most people. How people shop will change also (already is). Everything will move away from buying at the store to picking things up at Amazon or similar pick up points.

4. Cars as we know them will go away. Cars will be electric and modular. You will have a very small car that will be able to attach things like small modules for storage, luggage, etc. They will all be electric or an alternative energy source. Many people will use electric scooters. We will not see driverless cars dominate the roads, but there will be far fewer vehicles.

5. About 75% of all workers will be independent contractors and the work week will shift away from a standard 40 hour work week. People will do two to three jobs that add up to 30-60 hours per week. Businesses will be mostly service based and with few brick and mortar locations. Everything will be in the cloud.

Now let's look at what it was like in 1988 just 30 years ago.
1) Smoking was around 30 percent of the population. It is about half that now.
2) Most workers still relied on pensions and made careers at one or two companies. 401k plans were taking off. The Roth IRA wasn't in place until 1997.
3) American cars were terrible.
4) MRI machines were just becoming available in most large hospitals. The human genome project had not started yet.
4) Every shopping center, most restaurants, and city streets had pay phones that cost a quarter. Find one today. People had cameras that were not part of their phone.
5) Sears was a dominant player in retail. Walmart was just getting off the ground nationally.
6) Video rental stores were becoming an important part of most shopping centers. So the bottom line is that
a) 30 years is a long time, and b) societal norms change a lot over a similar time period. I may not be right about my predictions, but I'm not making up the past.

[Added paragraph breaks to make this readable.]

 

[CalGalTraveler]

Most people do not realize why luxury condo and coop prices have fallen hard since 2008 and will never recover unless the current or future administration changes the law. During the real estate bust, the Obama administration deemed that condos loans were risky and put in place something called warrantable vs. non-warrantable condos. All new condos sold by developers are non-warrantable, which in plain English meant that no FHA loan will be granted. It also kills the resale market as buyers have to come up with 100% cash or get high interest loan through the secondary market.

To meet warrantable criteria, basically to get FHA loans:

• Fannie Mae and Freddie Mac use the term “warrantable” to describe condominium projects and properties against which they’ll allow a mortgage. Typically, a condo is considered warrantable if no single entity owns more than 10% of the units in a project, at least 51% of the units are owner-occupied, fewer than 15% of the units are in arrears with their association dues, the homeowners association (HOA) is not named in any lawsuits, and commercial space accounts for 25 percent or less of the total building square footage.

https://themortgagereports.com/18658/condo-mortgage-non-warrantable-loan-rates-gina-pogol

When we were looking at condos several years ago, our realtor said in the entire Las Vegas area, there were only 2 condo development that were warrantable. If you want to buy a condo to live it, that is fine. If you want to buy it for investment, it is a money losing proposition.

Thanks for sharing this @VacationForever. I learn so much from Tuggers as I had no idea this had taken place. It's something to be aware of as we downsize someday, or consider trading our mountain cabin for a rental condo as a 1031 exchange.

re: the other thread on using a TS as a second home, this provides another downside of owning a vacation condo because non-warrantable rentals makes vacation condos sound more like timeshares. However condos are higher risk for loss (via more capital invested) than a typical timeshare, non-warrantable makes it harder to sell, plus you have HOA dues etc that increase regularly. - there goes that condo in Hawaii dream...

 

[Brett]

I absolutely believe my post is directionally correct. I'll throw some more hand grenades into my view of the future 30 years from now: 1) people will either not buy houses as we know it today or they will buy very small houses. The asset called a house gains 4-5% in value annually over a long period of time. Take out cost of living adjustment and that's not a great investment, especially given the asset size. Homes will be mostly be made in factories and assembled on a site of your choice. This is happening in the modular home market now. 2) modern health care will shift from a pharmaceutical oriented model to a genetic modification model. Wellness and Eastern medicine will continue to increase in popularity. Diet will change radically away from sugar, and many local and state governments will outlaw sugar based products. Most care will be preventative in nature shifting the cost of healthcare to a focus on wellness starting at an early age. 3. People will buy local and will eat much less than today. Obesity will become a thing of the past just like the ill effects of smoking are already a thing of the past for most people. How people shop will change also (already is). Everything will move away from buying at the store to picking things up at Amazon or similar pick up points. 4. Cars as we know them will go away. Cars will be electric and modular. You will have a very small car that will be able to attach things like small modules for storage, luggage, etc. They will all be electric or an alternative energy source. Many people will use electric scooters. We will not see driverless cars dominate the roads, but there will be far fewer vehicles. 5. About 75% of all workers will be independent contractors and the work week will shift away from a standard 40 hour work week. People will do two to three jobs that add up to 30-60 hours per week. Businesses will be mostly service based and with few brick and mortar locations. Everything will be in the cloud. Now let's look at what it was like in 1988 just 30 years ago. 1) Smoking was around 30 percent of the population. It is about half that now. 2) Most workers still relied on pensions and made careers at one or two companies. 401k plans were taking off. The Roth IRA wasn't in place until 1997. 3) American cars were terrible. 4) MRI machines were just becoming available in most large hospitals. The human genome project had not started yet. 4) Every shopping center, most restaurants, and city streets had pay phones that cost a quarter. Find one today. People had cameras that were not part of their phone. 5) Sears was a dominant player in retail. Walmart was just getting off the ground nationally. 6) Video rental stores were becoming an important part of most shopping centers. So the bottom line is that a) 30 years is a long time, and b) societal norms change a lot over a similar time period. I may not be right about my predictions, but I'm not making up the past.

ok, so all those trends means the US is heading towards socialism
I'd like one of those socialistic scooters (or a socialist electric bike)

 

[Big Matt]

Not socialism at all. In my original post I outlined why an elite class of older voters will emerge. They will not be aligned with socialist tendencies. I think more Libertarian and anti Big Government. I actually believe that there will be a crisis in the next 10-20 years that will force us to address the education gap between those people of lower socioeconomic status and those who have more resources/money. I also believe that China and the U.S. will dominate the Global economy. I see Russia and Europe becoming much less of a factor.

 

[Brett]

Not socialism at all. In my original post I outlined why an elite class of older voters will emerge. They will not be aligned with socialist tendencies. I think more Libertarian and anti Big Government. I actually believe that there will be a crisis in the next 10-20 years that will force us to address the education gap between those people of lower socioeconomic status and those who have more resources/money. I also believe that China and the U.S. will dominate the Global economy. I see Russia and Europe becoming much less of a factor.

but those things in your post are happening now!

just last week I saw lots of people were zipping around on electric scooters in a large US city
maybe libertarianism is now like socialism (but with universal health care)

 

[dsmrp]

Well if he works for Boeing, he has done well and that stock has gone up a lot during the past few years. Now would be a good time to take some profits and get more conservative. Congrats to him.

One of the rare times where procrastination paid off , but he was hearing of stock price every now and then.

If he is not designated as a restricted 10b5-1 senior executive, he has nothing to worry about and can trade the stock at any time (sooner the better). If he is designated as 10b5-1 (he will know because they are all over executives for this), then he should start working ASAP with a broker who can sell during the next open trading window (usually a few days after a quarterly close for public companies). He can also set up a 10b5-1 trading plan to sell the stock at designated trigger prices when the trading window is closed (like a blind trust).

Oh no no, he 's not an exec by any means. Just one of many thousands who abides by company ethics norms. He's researching on how to do his own buy/sell transactions, via an online portal.

 

[dsmrp]

I thought as interest rates rise, bonds lose value? This is because bond funds are priced based on the value of the bonds owned by the fund if they were sold, not what their maturity value is. If you are buying and selling bonds, a rising rate environment is bad. If it is buy and hold, you really should be buying individual bonds and not investing in a bond fund.

Yes you are quite right about inverse relationship of interest rate to bonds. I usually forget this. I was mis-remembering having put a little in a gold fund as a trial hedge again interest rates. But gold fund promptly dropped in value after i invested, and has not come up . So it's a long term hold...

 

[3kids4me]

1) people will either not buy houses as we know it today or they will buy very small houses. The asset called a house gains 4-5% in value annually over a long period of time. Take out cost of living adjustment and that's not a great investment, especially given the asset size. Homes will be mostly be made in factories and assembled on a site of your choice. This is happening in the modular home market now. 2) modern health care will shift from a pharmaceutical oriented model to a genetic modification model. Wellness and Eastern medicine will continue to increase in popularity. Diet will change radically away from sugar, and many local and state governments will outlaw sugar based products. Most care will be preventative in nature shifting the cost of healthcare to a focus on wellness starting at an early age. 3. People will buy local and will eat much less than today. Obesity will become a thing of the past just like the ill effects of smoking are already a thing of the past for most people. How people shop will change also (already is). Everything will move away from buying at the store to picking things up at Amazon or similar pick up points. 4. Cars as we know them will go away. Cars will be electric and modular. You will have a very small car that will be able to attach things like small modules for storage, luggage, etc. They will all be electric or an alternative energy source. Many people will use electric scooters. We will not see driverless cars dominate the roads, but there will be far fewer vehicles. 5. About 75% of all workers will be independent contractors and the work week will shift away from a standard 40 hour work week. People will do two to three jobs that add up to 30-60 hours per week. Businesses will be mostly service based and with few brick and mortar locations. Everything will be in the cloud. Now let's look at what it was like in 1988 just 30 years ago. 1) Smoking was around 30 percent of the population. It is about half that now. 2) Most workers still relied on pensions and made careers at one or two companies. 401k plans were taking off. The Roth IRA wasn't in place until 1997. 3) American cars were terrible. 4) MRI machines were just becoming available in most large hospitals. The human genome project had not started yet. 4) Every shopping center, most restaurants, and city streets had pay phones that cost a quarter. Find one today. People had cameras that were not part of their phone. 5) Sears was a dominant player in retail. Walmart was just getting off the ground nationally. 6) Video rental stores were becoming an important part of most shopping centers. So the bottom line is that a) 30 years is a long time, and b) societal norms change a lot over a similar time period. I may not be right about my predictions, but I'm not making up the past.

There is a lot that I don't agree with here, but I'll focus on two items:

1. You have forgotten to add the "opportunity cost" (or loss) of *not* owning a house. To be able to live in a appreciating (or even stable) asset is typically better than to be spending money and not gaining any equity. I highly doubt people will stop buying houses.

2. Small cars may be fuel efficient, but in parts of the country where weather is a huge factor, 4WD vehicles, and larger, heavier vehicles, will continue to be needed. And in other parts of the country, they would need to invent a smaller car that is as safe as a larger one, and/or people would have to stop needing to transport their families.

It's always fun to speculate on the "what ifs" and if we all knew for sure what would happen in 20 years, we could get rich on investing in the right companies who will move these things forward. Certainly medical advances will continue to be made, and things will continue to become more digital - but we also have much stricter privacy laws than we had a few years ago. GDPR will be coming to the US and elsewhere, and that will also change the landscape of what is manageable vs. not "on line."

 

[bogey21]

3. People will buy local and will eat much less than today. Obesity will become a thing of the past just like the ill effects of smoking are already a thing of the past for most people. How people shop will change also (already is). Everything will move away from buying at the store to picking things up at Amazon or similar pick up points.

Liked your post but I question that "Obesity will become a thing of the past" I just got home from Subway. Even at Subway everyone I saw was way overweight. Most all were buying 12" sandwiches, sloshing on mayo or some other dressing, buying chips, super large sugar drinks (and a few) cookies in addition...

Me at my less than 150 pounds add only pepper to my 6" sandwich and drink water...

George

 

[TravelTime]

but those things in your post are happening now!

just last week I saw lots of people were zipping around on electric scooters in a large US city
maybe libertarianism is now like socialism (but with universal health care)

Libertarianism and socialism are very very different. Opposites in many ways.

 

[dsmrp]

Can we have a "jobfull economic recession"? or is that an oxymoron?

There are a lot of people living on the edge, afraid another downturn with increased cost of living or job loss, will force more people towards homelessness. Although we've had a bull market, I've read articles that it hasn't translated to higher wages. (I work for state gov't so not keeping abreast with private sector wages.)

My group did some community service a few weeks ago, handing out sack lunches. One team reported being able to give lunches to a man and his son who stopped and pulled over car on the street. The father said they were living in their car. I gave a few bucks to a middle-aged couple on the bus, for fare on a different bus system to go 30-40 miles north to get to a shelter by the time it closed for the night.
Not meaning to sound political but I equate recession with more homelessness.