Inventory in almost all major areas is extremely high now. Bubble hotspots like Austin, Boise, Phoenix, Asheville, Jacksonville, Las Vegas etc etc haven’t seen much price reduction even though inventory has returned to pre pandemic levels. Inventory is sitting for months.
Why?
Because there is no active suffering. There is no current pain for most people who own homes. Anyone who is holding stocks is doing pretty damn good right now. 401k’s are nice and fat for most people of homeowner age. The people in pain right now are those who don’t own assets, aka most consumers. Future home buyers.
The only thing holding the entire stock market together is AI. AI is in massive hype mode right now. It’s in the “this time it’s different” phase. While it really does produce a massive productivity increase, it’s not the magic people seem to think it is. It’s more like Excel or a calculator. Or the original computers. A productivity and efficiency booster in short. Investors seem to think it can replace everything. It won’t. At least not anywhere in the near term.
When the reality of this sets in, and it will, the entire market will start coming down to reality again.
Why?
Every single company is reporting that consumers are in a very weak spot right now. Demand for almost everything is coming up less than anyone predicted. Companies are downgrading expectations for the year. People are fed up with inflation and the massive cost of living increases. Salaries are not rising to keep up with the cost of living. Even companies that are historically bulletproof such as McDonalds are surprised by a very weak consumer. Credit card debt is higher than ever right now. Student loans are sky high and aren’t being forgiven. People are graduating from STEM degrees and Master’s degrees yet they can’t find jobs in their field to pay back their loans. People are extremely risk adverse due to layoffs right now. Job openings for anything other than low paying jobs are worse than during the beginnings of COVID.
Direct consumers make up 66% of the entire US GDP. The consumers are at their weakest in a very long time yet many companies and the broader market are near all time highs
Why?
Markets are being propped up by AI hype within a few certain companies.
When this hype dies, the domino effect of pain and suffering will ensue. The panic selling of housing will ensue. No one will want to buy because no one can time a bottom (but they will try). People will be worth a whole lot less with no way to buy and will seek to off load their houses as quickly as possible to make up for their net worth loss. When retirement accounts and markets are down, this causes severe financial duress on people – mentally and literally. If we had current inventory levels during the crash in 2022, real estate would have crashed as well. Instead, it was propped up by low interest rates and an extremely strong job market. Picture the current weak consumer, with his 401k now cut down severely.
When will this happen? I don’t know. How much more can hype propel the market? I don’t know. How low will the bottom be? I don’t know. It’s almost impossible to accurately time the market. But this will be the catalyst.
The AI bubble bursting will be the catalyst for the incoming housing market crash. Here’s why.
byu/ComputerTrashbag inwallstreetbets
Posted by ComputerTrashbag
49 Comments
Let the idiots panic, their worries are inconsequential.
this seems like it makes sense. how do i profit off a weak consumer
Housing market is already/ has already corrected in the aforemention the demographics.
The percentage of people with 3-4% mortgages is still too significant to unlock the inventory
Rates are not coming down to those level again for the foreseeable future
AI is hype but it’s not correlated with the housing market so much.
Your base case should be that SPY and QQQ are at ATH , and there’s a nice juicy pinata ready to pop some candy out. But it’s not going to the ground unless there’s some kind of earthquake or some shit that no one saw coming
I think your general gist is somewhat correct. As someone who lived through the dotcom bubble where *nothing can ever go wrong, this is the new future, the new permabull revolution, can only go up up up up! Pets dot com is going to be a $100 trillion company!* only to have reality come crashing down like Armageddon with the 2000 dotcom bust — and stay busted for a number of years — I see a lot of the same rhetoric these days. Same for in the run-up and aftermath of the GFC. Trends can both be true long-term yet also far too early and be absorbed more slowly; not nearly as potent as the dopamine-running hype is at the moment.
I think where you might be wrong (or there’s more uncertainty) is the problem with looking backward to predict future outcomes, because we are largely in unprecedented, unknown, territory. Particularly, we had close to 15 years of ZIRP producing infinite money like never before. Never in contemporary history have we had a long decade of ZIRP printing like it’s no tomorrow like this period.
That means there’s still trillions of liquidity sloshing around with no idea what to do itself except speculate on the best returns, further juicing the underlying speculative asset. There’s no real comparison at all to past events.
What this has also led is to a severely bifurcated (k-shaped) socioeconomic system: there’s the ‘Premium Consumer’ and then there’s The Masses. The Premium Consumer is still riding high on the results of years of ZIRP, sitting very pretty, and will be for the foreseeable future even if there’s a big market pulldown. The Masses on the other hand? Meh.. As far as plutocrats are concerned at the moment, they’re simply unnecessary baggage: flotsam.
Now what does that mean for system stability if one line is going up and one is pointing into the ground? To be determined I suppose.
Who the fuck is moving to the 904 to make it a hotspot? I say this with a love but Duval is boring. Retirees go further south, the big employers are the Navy, CSX, and hospitals.
Wouldn’t that be a neat trick?
Last time it was the housing that created the problem and now that it’s the main focus everything will bend right around to attempt to break it.
Fuckin hilarious. 
How do I lose money with this strategy?
You vastly underestimate the speed of development/advancement of AI. It’s getting better at a rate fast enough to scare a lot of AI researchers, and newer, faster hardware to power it is coming soon. Is it a bubble? Maybe. In the longterm? Haha, no.
Why?
You give many good points. But saying the market is propped up due to AI is straight out ridiculous. The magnificent 7 is producing way more profits than it was in 2021. The market isn’t propped up on false hopes. Companies are earning more.
Not bad for a ber
Nothing crashes anymore, everything always goes up.
>Every single company is reporting that consumers are in a very weak spot right now
citation needed
Net Long.
Austin home prices are already down like 15%
As an AI Engineer, I do not think AI is going away any time soon.
This might get some hate, but it is way more useful than NFT, metaverse, and crypto.
It increases worker productivity and therefore has value.
I dunno … sure AI is overhyped. Language models are pretty underwhelming. Jut try seeing how far you can get using them to automate your job. The breakthrough(s) needed to do meaningful work are not here (yet).
BUT both the companies raking it in by building/offering compute infrastructure AND the companies buying that compute are in the same index. It is in fact mainly money going from META/Amazon/MSFT to NVIDIA.
The AI money is just the NASDAQ 100 constituents trading their cash pools amongst themselves to see how much of their software stacks can be replaced with Neural Networks… prob the realization that AI isn’t too useful will just re-adjust the NASDAQ down a bit , huge market crash? Seems unlikely.
The sharp rise of unemployment rate will crash housing market and AI hype. But politicians are too scared to let it happen. So money printing will keep going on and JPOW will shit around every month pretending doing sth, but it is actually Yellen pulls strings in the back
If COVID couldn’t pull us into a deep recession, then I don’t think anything short of global war is going to stop this train.
??? Based on the 1st Q GDP inventories decreased in US. Recent reductions in manufacturing employment is due to ports plugged up and low inventory.
> it’s like excel.
Welp, you proved it’s not a bubble and I need to invest more. Excel was released in 1987.
MSFT was $0.20 then. One single share bought then would be worth over $100,000 today.
TWENTY CENTS INTO ONE HUNDRED THOUSAND DOLLARS.
Stocks up – people & companies can spend money on Ai – Ai stocks go up – repeat
Post not long enough to be convincing. So I didn’t read.
Source: trust me bro
Ok, but why is my coffee making my tummy rumble this morning?
I can’t wait for the McChicken prices to crash…
You lost me at
“The only thing holding the entire stick market together is AI.”
“The only thing holding the market together is AI” – wild hyperbole
GE, NRG, CEG, CMG – lots of good stocks out there other than AMD and NVDA
Lots holding the market up
No one will want to buy cheap houses? There’s a whole generation or two that will 👀
Extremely high housing inventory? Nah fam
Austin has been going down like a hot potato
So you are telling me I have another shot at buying cheap land and a cabin on a mountaintop.
“it’s no big thing”proceeds to compare it to the invention of computer (yes,the fist ones weren’t as useful and costly but you must pass by those to get what we have now)
Is the AI bubble in the room with us?
Maybe.
That point when you realize that every dime spent to pay our lawless tax collectors goes towards servicing the debt and everything is paid for by deficit spending. Starts to make the gears turn again in people’s minds. The central planners have painted themselves into a corner and have allowed the veil to be lifted on the wizard of oz.
https://preview.redd.it/ofx5neiof60d1.jpeg?width=739&format=pjpg&auto=webp&s=0b02f1f97905785fea1e57e55626ab95c94e55fc
Another day, another broke bear selling us his bear thesis.
You know people with 401ks aren’t using the money in them to pay for goods and services, right?
While the AI hype is surely inflating the market right now, it’s somewhat of a stretch to say that it will be the main catalyst in bringing down the housing market. Your points on consumer weakness and inflated asset prices are on the money, but it seems a bit much of a simplification to ascribe that all to AI. More than just technological overvaluation, housing crashes throughout history have more to do with high interest rates, job loss, and credit crunches.
Yes, you may well be right, and stock markets may well take a dip when the AI bubble bursts, but I suppose relating that directly to the housing crash might be bypassing other major factors in the form of government policy responses, international economic pressures, or unforeseen global events like pandemics. Plus, a lot of people buy homes for long-term living, not short-term investment, which may help mitigate the damage a bit. But then again, I think it is not as simple as this; the situation does go beyond just the AI factor in an economy. What are the policy implications we should be considering here?
Discounts
Discounts
Discounts
Discounts
AI is probably a bubble, but this doesn’t mean it’ll cause economic pain in the real economy. Stock market going down 10-20% doesn’t necessarily lead to job loss.
So much dumbness in one post.
Poor people 🤦♂️
Buyer demand far outpaces available supply. This drives prices
The wealthy don’t give a shit about your *upcoming housing market crash*. Thats why they keep buying even with inflated interest rates, not everyone is poor my guy. Cope
🤡+ 💊
Recession already happened bruh
Did you just skip looking at available housing inventory charts over the last 10 years and say, “fuck it, people need to hear my regarded opinion anyway”?
Stopped reading after comparison of AI to Excel or a calculator. You don’t know what you are talking about
You keep crying about a housing crash. This isn’t 2008. People are putting 20 percent down or just buying in cash. Nobody with a 3 percent mortgage needs to or wants to sell.
WSB.ai