Thanks for the reply Harry, much appreciated!! I'm out of San Diego and purchased some condos and smaller homes (all single family) ten years ago. Real estate has tripled, in most cases, in my location (since I purchased). I look at these and think... wow.. I'm happy to hold them but at these prices I've already tripled up and at some point you just cash the chips and run. Then again, there aren't many great options to park the proceeds (and inflation is real, as noted in this service)... at least these assets harvest rental income at a very low tax rate (what I meant by passive income), and rent increases hedge the inflation. Well, thanks again for your response, maybe the right answer is to refinance them to draw out capital, then let inflation do its thing... ugh but re-setting my amortization schedules will be a bitch. I feel like there may be no clear right answer :). I'm in my late 30's so time is probably on my side, assuming I hold them and forget about valuations (appreciation/depreciation cycles).

I have a hard time too! Increasingly I find myself having conference calls with Private Equity guys, which tells you that stuff must be very expensive. Otherwise why would I even countenance paying those fees! I suppose it depends what you mean by "time". I suspect the multifamily market may do quite well in the short to medium term because of upward pressure on rents. Of course, it always matters what price you pay, and its still very hard to find "cheap" rental buildings. That said, I saw an interview with Michael Taylor where he suggested he was finding precisely that in NJ. As for the phrase "passive" income, Im guessing you dont own any multifamilies right now. It was certainly not my idea of "passive" when I owned buildings. Perhaps my mistake for self-managing? When JB says builders are worried about valuations (affordability) he is referring to them avoiding carrying inventory. They build them and they sell them. In many locations the market dynamics are very bullish even if affordability is stretched. Austin for example. So many potential buyers and so little inventory. Or the Californian cash-out retirement locations like Boise. Only you will know the precise dynamics of the market you invest in. It does make me worry about the locations people are cashing out of though. The trend is out of high cost into lower cost. I dont see how that changes. If I were going to worry about real estate in the medium term, my biggest concern would be the point Raoul raised not so long ago. The tax environment is very likely to change over the next 10 years. It doesn't do to make too much money (attracts the wrong sort of government attention), and the big problem with real estate is you cant move it to get away from high taxes. But for macroeconomic purposes, single family home ownership in expensive legacy markets is increasingly unaffordable. We are not going to have a continued boom in the tri-state area or the bay area in single family homes cos we are running out of people who can afford those homes. That might change if the next fiscal package is big enough. But right now, rents are heading higher, and that means headline inflation is heading higher.

Bubble..

I just checked and the report in question went live in Feb 2019. So I couldnt find it on the website although maybe if you email the site admins they might find it and send you a copy.

Hi Miguel. I spoke to JB about your question (which I think is right on the nail). Whether we get wage inflation ultimately depends on how determined the US authorities are to ensure it happens. So far they have shown an admirable commitment to the cause. Its worth noting that inflation is the rate of change of price indices. Those price indices seldom go backward. So you have already experienced inflation eroding the value of your dollars, unless you bought TIPs where the principal is inflation indexed too. What we are all debating is for how long that inflation will last. The Fed tells us it is transitory, and Im sure the bulk of it is. But I also think by the time it recedes, the CPI will be 10%-15% higher if not more, even if its rate of change ultimately falls back to zero. Plus, what then? We will be in a secularly stagnating economy if they are right. We will need iterations of expansive monetary and fiscal policy to prevent a deflationary spiral. So its hard to be very bearish real estate when ultimately money itself will be depreciated. Of course you are right, that this will provoke a social backlash. Even more reason to be committed to substantial fiscal and monetary intervention. JB wrote a piece called "RIP-Corporate Capitalism" a while back. Worth a read if these questions are your focus.

Thanks Raj. I will pass on your comments to JB.