Housing Isn't an Asset Class
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 15 December 2023
⏱️ 14 minutes
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Summary
Today's Post - https://bahnsen.co/3TrUXux
I did a Dividend Cafe exactly six months ago about housing, focusing then on the duel economic and cultural reality of what was going on in the housing market. I think another six months gone by is a pretty good amount of time to now re-address this vital subject in American life. Housing is, for some, a crucial part of their economic story. Even for those smart enough not to think of their house as a “retirement asset” it is still a crucial economic consideration. Almost everyone I have ever met needs a place to live, and the ones I met who did not had very odd theories on the JFK assassination. Very few people own an asset with as much leverage attached to it as their home (assuming one puts 20% down they are 4-to-1 levered on the purchase; imagine buying $1 million of stock and only paying $200,000 for it). Housing costs (monthly) from rent or mortgage to property taxes and maintenance and insurance are the highest percentage of the monthly outflow of nearly every single family in America (even many who do not have a mortgage).
Beyond the economic reality of housing, from the silly (it is an “investment”) to the practical (it cost money to live somewhere), there is a deeply personal reality to housing, including for yours truly. People make memories in houses, they associate periods of their life with where they live, and they form families and social connectivity around houses. And even with all the suburban model has done in a postmodern culture to undermine community, many people’s “houses” are also part of their “neighborhoods” – a Tocquevillian concept we’d be wise to re-affirm. This subject matters.
So today in the Dividend Cafe I want to “check in” on the subject.
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the Dividing Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. |
| 0:12.4 | Well, hello and welcome to another episode of Dividend Cafe. We are down to the home stretch of 2023. It's actually our second to last episode of the year. |
| 0:22.6 | Next Friday will be the final episode as we get ready to go into Christmas weekend. |
| 0:27.9 | The week after that, I will be out of the country with my family and many of you will hopefully be |
| 0:34.0 | distracted enough by the seasons, festivities that you're not wanting a dividend cafe |
| 0:40.2 | anyways. So we're, I'm looking forward to next Fridays. I already know what that will be about. |
| 0:46.0 | But in the meantime, what I wanted to do today is revisit the subject of housing. And I wrote about it |
| 0:52.4 | six months ago, pretty much to the exact weekend. |
| 0:56.6 | And at the time, it was a little bit more of a focus on some of the economics of what was |
| 1:00.4 | happening in the housing market. I want to update some of those considerations, but there's kind |
| 1:05.5 | of a new or additive angle I want to introduce today as well. We find ourselves now six months further into this period of Fed tightening than we were in |
| 1:17.0 | the summer. |
| 1:18.2 | And at the same time, we also find ourselves looking into the nearer future as to where Fed |
| 1:26.3 | easing or loosening of monetary policy is expected. We've got a lot of |
| 1:32.0 | reinforcement of that this week in the bond market in financial conditions and even in Fed speak itself. |
| 1:38.6 | But I would suggest that there's a number of things happening in the housing market that are |
| 1:43.1 | outside of the domain of |
| 1:44.8 | monetary policy. I do believe that more or less, what has happened over the last year or so |
| 1:52.8 | since the Fed got quite tight with interest rates and mortgage rates flew higher, coming out of the |
| 1:59.8 | COVID post-COVID bubble in which house prices went far above their own trend line |
| 2:06.2 | is that we did get a pretty significant push higher in prices. A lot of that was driven by demand |
| 2:14.9 | and a lot of it was driven by very low rates. And then as rates have tightened, |
... |
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