It’s not really that bad, you just have to realize that everything you do is political, and while generally helping the company is a good thing to do, it’s not always that clear cut.
My favorite example of this is when a newly hired employee was talking to her sort-of boss; she reported to someone else but the person she was talking to was the head of the corporate initiative she was working for. Basically the boss was the head of the division Lean Manufacturing initiative and the new employee was someone trying to implement Lean Manufacturing at our plant.
What are you working on, the boss asked? The new employee went over a few projects, then said, OK, this is the best one. We’ve been having problems with bearing failures (there’s hundreds of bearings on a paper machine and any time one fails the machine is down for an hour or two or three, it’s a big deal). So we investigated it and we’ve found our bearing grease is failing almost immediately. It’s separating into the binder and the oil and leaving a puddle of oil below the bearing (this is bad). So we consulted with a few different grease manufacturers and switched grease, the new one is working much better and our bearing failures are down 90%.
“WHAT???” the boss asks. “You’re not using Mobile grease? You have to use Mobile grease!”
Turns out the boss negotiated an exclusive contract for that type of grease. Saved the division like twenty thousand dollars a month (this is nothing). We switched without telling corporate because the purchasing department wouldn’t approve the switch because it was an exclusive contract. And our new employee was unknowingly ratting us out to the person who set the whole disaster up. But we couldn’t sustain the downtime incurred, we knew we couldn’t get permission to switch, so we just put in a few purchase orders for different types of grease to see if we could slip it through the idiots at purchasing. One did, thanks to a vaguely worded invoice and we just started buying and using that, and our disastrous bearing failures stopped.
So this went on for like 10 months before we were found out, and the worst part is that the boss lady responsible for all this was claiming savings for this project the whole time. Worse than that, she was claiming EVEN MORE savings because we weren’t buying that grease anymore, and she was tracking the savings by comparing that grease purchase to our baseline grease purchase. And since that was the only grease we could buy, that’s the only grease purchases her project was tracking. So once we abandoned her grease, her project savings looked even better.
Not really sure where we are at in the economic part of the cycle, but based on all of the housing market stuff, people are sure accruing the debts to have to be liquidated in step 7.
It’s utterly insane. I think there are several contributing factors, a lot of it having to do with COVID.
My sister sold her condo last year and has been house hunting for months now. She has put in over a dozen offers so far, some as much as $55,000 over asking price with a $10k good faith deposit and a larger down payment. She is a “good buyer” and is just getting relentlessly outbid. Houses listed for $350k are selling for $450k cash with a waived inspection.
A lot of it here (suburban southern NJ) is buyers coming in from Philadelphia and New York with heaps of cash. My guess is that the pandemic has motivated a ton of people to move out of the cities while simultaneously putting more money in their accounts via saved expenses (no vacations, no entertainment, loan pauses, etc) if they were fortunate enough to not be negatively affected financially in 2020.
It sucks and doesn’t seem to be slowing down. Every open house we go to has a line literally wrapped around the block. Like 40+ people waiting to see it. It will be the first day the house is on the market and final offers will be due by that evening or the next morning. No time to even process the decision before you have to offer hundred of thousands of dollars for a home.
On the other end, I’ve got people cold calling me to see if I just randomly want to sell my house. I don’t know how standard this is, but it’s about 2x a month now. Down from about 2x per year last year. And basically never pre-2019.
In the past, sometimes people would press and ask how much it would take me to move, and I quote some obscene figure (about 50% over what I’d get if I sold) and I’d get a “LOL, no”. If it happens again, I’m not sure someone wouldn’t accept that, which, on the one hand, I should like, but then I’ve got to turn around and buy a house, and I definitely don’t want to deal with that shit right now.
I guess I’ll go with 2X the next time it comes up. If someone is that desperate, I can’t possibly turn down that kind of money.
You could google the cliche reasons behind the high housing prices but the rent prices has a lot to do with it.
Back in 2006, when the housing market was super high again, I rented a one bedroom apt with my fiance for 1,050 a month. The 3 bedroom houses near by were 800k. Now that exact one bedroom apt is going for 2,450 and that 3 bedroom house is back up to 800K. The rent would have to burst first with the current interest rates as well as some folks now having the opportunity to work from home or wherever they please.
Living on 30K a year in a non expensive part of the country without kids sounds pretty cush. I probably lived on 10K last year, but I don’t live in SoCal so I’m basically a philistine.
everything Riverman said, plus there are Real Estate consortiums who have accumulated assloads of money via housing crash + subsequent recovery and can afford to buy over price because what else are they gonna do with the money, and then price it for a profit.
also boomers/gen X with inherited houses/paid houses that have appreciated 2x-25x that don’t need to sell unless they get their price
also people with existing houses who got a second or third for investment/rental with their magic money from space (the market and interest rates at or below inflation) who have no downward pressure except boredom.
Yeah this. Bottom line is I had to idea how much it cost me just to exist in LA until I went on my trip. I got to see the world and have an amazing experience for 2-3x less than my monthly nut in LA.
It also completely changed my ideas about how soon I could retire, or semi-retire more accurately. Not retiring in LA = a decade more retirement. I couldn’t even afford to even semi-retire in LA right now without a lot of stress about where my next paycheck is coming from.
I met people who were living in Mexico and Honduras on nothing but Social Security. So I got that as a final fallback on the 1 in a million chance I live to 95. I have no problem dipping into principle shooting for that sweet spot of dying a little over 80. I think people go crazy trying to plan for that .1% chance they live well into their 90s.
I went from living in Southern California, paying about $2,000/month in rent and about $4-5,000/month in total living expenses, to living in semi-rural Japan with affordable healthcare and a house and car paid for in cash.
Needless to say, my living expenses are a fraction of what they were in my previous life, to where I could now easily live on $30K a year without feeling like I’m sacrificing much if anything in terms of lifestyle…
I think there is a real FOMO on the low mortgage rates because they are increasingly looking unsustainable. Everyone can see inflation coming everywhere.
I must move to a hot area in New Jersey by end of the year or lose my corporate relocation package and I am accelerating the pace to look at houses this month despite knowledge I will likely put a good chunk of my life savings into an overpriced asset because if I miss this window to lock in a 3% mortgage I don’t think we see it again for a long time.
I also expect this latest career move puts me in the permanently highly paid but long tenured corporate guy track, and if I now want to focus more energy on the kids than the career I can kind of cruise through the next decade in that low impact, highly paid but still secure dream role you guys are talking about.
… just like they have for the past 20 years or so. Broad based inflation is possible but even so I would say the % of home buyers that factor this in is south of 1%.
You could rent for a while, and buy when prices come down/rates go up. Doing the thing that everyone else is doing at the same time is not always the best strategy. Even if you end up with a 6 or 8% mortgage a few years down the line, the leveraged asset inflates, and you have the option to refinance if rates come down, so you end up making money. Rentals in good school districts can be hard to come by sometimes, but even in our former suburb, there are a lot of Avalon-type rentals.
Why? I expect that real estate agents and others are putting the idea in buyers heads, “like new home prices are going up due to increasing lumber prices and there are more buyers than sellers in the suburbs for existing homes”
I guess I could rent but I would lose a lot of my relocation benefits if I don’t buy a house. I doubt the math actually works out for me in the same way it would for someone doing a traditional transaction.
It’s also possible interest rates go up and housing prices stay flat or continue to go up.
I thought you meant that general price inflation meant rising interest rates, which can be true but is not what typical home buyers consider. Of course buyers are always told by RE agents that housing prices are going up and the best time to buy is now, but thats totally independent of market conditions. They’ll say that no matter what’s happening.
I feel like in a majority of cases you should avoid doing the thing that everyone else is trying to do as you probably already missed the boat, but who the hell knows with houses right now.
There are a ton of people who have been waiting for Bay Area home prices to correct for over a decade, during which time prices have increased 2.5x - 3x.
Right. I agree with the sentiment of @Tilted 's post, but I would word it a little different. In things like real estate transactions and investing in the stock market, you should avoid doing the thing that everyone else is trying to do if your main motivation is FOMO. However, if for your own personal circumstances the right thing to do is buy a house in City X then you should do that, unless current market conditions just price you out of doing that at all. Same with investing, if your situation is that you have some net positive cash flow and you want to grow it for long term gain, you should invest in the stock market no matter what you think about the current prices of stocks.
All of this stuff needs to be done with good fundamentals (be Tim Duncan with your finances). Buy the smallest house you need, not the biggest house you can. But low cost index funds and hold them long term, don’t try to time markets.