The Investment Thread

B4YOU said
Home equity lines in B$ have steadily fallen since 2009 per Fed tracking. I think there are several things to look at:

Listening to the former Walmart CEO say they overbought seasonal retail and now they are stuck with ridiculous amounts of stock. Seasonal items showed up late and cost more.

Increasing food and fuel costs cut into retail for lower income buyers

Walmart/Target still see themselves as retailers with accessory grocery. They are the cheapest grocery option for my market. They aren’t maxing profit on this.

Homeowners have cash but values have shifted. Target CEO talked about a shift to experience based item. Home improvement improves lived experiences. Travel is experience. Cheap Chinese short-term purchases don’t fit homeowner values. Long-term upgrades from a HD project/reno fits those values.

I really like Target. I think their small-format stores are a winner. It’s the Aldi/Lidl of combined retail/grocery. How much leverage do you create when you tell 3 brands you can only fit 1 in this new format?

Edit: Cash-out refi loans did spike in 2021 and refi saved homeowners an average of $2800/yr. Homeowners have cash.

I would say that experienced homeowners, say 5+ years have cash. Newer homeowners, not nearly so much, and that cash will dwindle when it becomes more difficult to access the equity in their homes when prices drop. The current price spike is unsustainable and quite possibly the market will have a hard landing like what happened in '06-'07. Not saying it's a forgone conclusion, but I think the odds are high that we'll see a large drop in housing prices as interest rates continue ticking up.