Yes, with the mass automation of data - pricing of stocks, RE, art, etc. is quicker than ever. Yet, will this also lead to quicker downturns...we shall see!
The stock market acts/reacts quicker than ever with 90%+ of trading automated. March 2020 the index lost nearly 50% of its value within weeks and only recovered after Powell of the Fed guaranteed WS an unlimited source of funds...aka a piggybank with no limits! Basically, the US govt. took over most of the US economy beginning in March 2020...as they did back in 2008...when will we get back to a free market economy again?
How long this extreme boom-bust cycle can continue...who knows?!
How it will affect RE when the piggyback has limits again...we shall see!
Yes, everything is being automated to a degree. Some work ie Amazon, Netflix, etc. Others do not ie AV, housecleaning, house flipping, etc! Homes have so many variables, ie no 2 houses are the same! Also, buy/sell of a primary home is an emotional purchase based mostly on how much you can afford, not what the home is worth as an asset. Investment home "trading" is a good candidate for automation...although Zillow's attempt was a disaster!
Interesting read. It seems that you're well balanced but that you're leaning at least slightly toward technology facilitating booms more than busts. If that's true, the question of sustainability and connection to fundamentals emerges for me as it always does with respect to other writing on asset bubbles. I also wonder if the speed itself insulates against poor decisions making. I don't think it does and the stock market demonstrates this well, I think. This in turn brings me back to the sustainability question. Appreciate your thoughts.
I'm worried that because of technological changes that house prices will be more sensitive to increases in demand, and will general be higher because of that. A housing bust would be bad but so would having higher and higher prices becoming accepted as being "normal." See house prices in Canada, Australia and New Zealand.
Hi. Yes, I follow that. I am in Canada, actually so I'm well aware of the exhuberance. My question was about whether or not technology is a unique factor contributing to the variance in housing prices, or if it's the interaction between tech and human decision making instead. If the latter, then it's hard to see how tech would insulate against poor decision making - and thus prices would go up AND down quickly. Put differently, wouldn't speed simply result in higher and quicker rises and falls because it accelerates the decision to buy and sell but has no bearing on the fundamentals? At the end of the day, in a city such as the one I live in, where the average house is 1.2M and the average family income 120K, with or without technology, these two facts don't reconcile well. All it'll take is a push - granted a big one, given how exhuberant the market is here - and that family with 120K a year is in trouble. So are the investors who are taking monthly net losses in carrying debt on the promise of a higher return in equity. And so on.
Excellent article. I would add availability of funds. Two points: First, mortgage processing is now faster, some lenders can close in 30 days. And given how much information is available, it is more likely to be a successful process. Second, there are many non traditional sources of cash. SoFi for example disburses loans of up to $100K in 48 hours. Similar timeline for a 401k loan. This allows someone to see a house they like online on a Monday, and get the keys by Friday. The result is additional acceleration of the market.
Excellent thesis!
Yes, with the mass automation of data - pricing of stocks, RE, art, etc. is quicker than ever. Yet, will this also lead to quicker downturns...we shall see!
The stock market acts/reacts quicker than ever with 90%+ of trading automated. March 2020 the index lost nearly 50% of its value within weeks and only recovered after Powell of the Fed guaranteed WS an unlimited source of funds...aka a piggybank with no limits! Basically, the US govt. took over most of the US economy beginning in March 2020...as they did back in 2008...when will we get back to a free market economy again?
How long this extreme boom-bust cycle can continue...who knows?!
How it will affect RE when the piggyback has limits again...we shall see!
Your comment about automated stock trading makes me wonder if house "trading" will be automated to some degree. It probably already is to some degree.
Yes, everything is being automated to a degree. Some work ie Amazon, Netflix, etc. Others do not ie AV, housecleaning, house flipping, etc! Homes have so many variables, ie no 2 houses are the same! Also, buy/sell of a primary home is an emotional purchase based mostly on how much you can afford, not what the home is worth as an asset. Investment home "trading" is a good candidate for automation...although Zillow's attempt was a disaster!
Interesting read. It seems that you're well balanced but that you're leaning at least slightly toward technology facilitating booms more than busts. If that's true, the question of sustainability and connection to fundamentals emerges for me as it always does with respect to other writing on asset bubbles. I also wonder if the speed itself insulates against poor decisions making. I don't think it does and the stock market demonstrates this well, I think. This in turn brings me back to the sustainability question. Appreciate your thoughts.
I'm worried that because of technological changes that house prices will be more sensitive to increases in demand, and will general be higher because of that. A housing bust would be bad but so would having higher and higher prices becoming accepted as being "normal." See house prices in Canada, Australia and New Zealand.
Hi. Yes, I follow that. I am in Canada, actually so I'm well aware of the exhuberance. My question was about whether or not technology is a unique factor contributing to the variance in housing prices, or if it's the interaction between tech and human decision making instead. If the latter, then it's hard to see how tech would insulate against poor decision making - and thus prices would go up AND down quickly. Put differently, wouldn't speed simply result in higher and quicker rises and falls because it accelerates the decision to buy and sell but has no bearing on the fundamentals? At the end of the day, in a city such as the one I live in, where the average house is 1.2M and the average family income 120K, with or without technology, these two facts don't reconcile well. All it'll take is a push - granted a big one, given how exhuberant the market is here - and that family with 120K a year is in trouble. So are the investors who are taking monthly net losses in carrying debt on the promise of a higher return in equity. And so on.
Excellent article. I would add availability of funds. Two points: First, mortgage processing is now faster, some lenders can close in 30 days. And given how much information is available, it is more likely to be a successful process. Second, there are many non traditional sources of cash. SoFi for example disburses loans of up to $100K in 48 hours. Similar timeline for a 401k loan. This allows someone to see a house they like online on a Monday, and get the keys by Friday. The result is additional acceleration of the market.
Great points!