The Entire US Housing Market In One Chart

Tyler Durden's picture




 

Last night's IPO filing of American Homes 4 Rent - the latest large "own to rent" vehicle scrambling to cash out while the cashing out is good (if not for its peer Colony which pulled its IPO as we reported last night) may or may not pull the "market conditions" card, but it did provide for an informative S-1 filing, where among other things one can find the following one-chart schematic summarizing the entire US market.

In short:

  • Residential housing is the single largest "tangible" US real estate asset, worth roughly $18 trillion (but well below the total financial assets in circulation in the US).
  • Housing inventory as of May was 133.2 million units, of which owner occupied is 78.9 million, renter occupied was 41.7 million, but most troubling: 12.6 million was Vacant. Some shortage.
  • Of the Owner-occupied units, 3.3 million units were 90+ delinquent or in foreclosure, 2.0 million units were 30-90 days delinquent, and 5.8 million were current but with negative equity.
  • It is this mismatch between 11.1 million in negative equity "owner occupied" units and 12.6 million vacant units that all those who peddle the rent-to-own dream are focused on as America becomes increasingly a society of rents.
  • It also means that the millions in soon to be formerly owner-occupied homes (once the anticipated switch to rental ownership takes place) have to stay on bank books and not enter the market in other to generate the illusion of scarcity (see: foreclosure stuffing), or else the myth that there is a housing shortage will be blown right out of the water.
0
Your rating: None
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 06/05/2013 - 11:53 | 3626470 SheepDog-One
SheepDog-One's picture

Must....Somehow Pump....FED's....REIT holdings....1.2.3. LIFT!....

Wed, 06/05/2013 - 12:12 | 3626502 jbvtme
jbvtme's picture

12 million houses are vacant.  and this is called troubling?  i'd say more like a nightmare.

Wed, 06/05/2013 - 12:14 | 3626522 Rainman
Rainman's picture

Yes, but how many are located in nightmare urban areas..?? W. Philly, Camden, Detroit, E. St Louis, etc. < present and future urban wastelands >

Wed, 06/05/2013 - 12:17 | 3626531 Careless Whisper
Careless Whisper's picture

Where's the chart that shows the pro forma net income per unit vs. the price paid per unit? In other words, since the purchases are usually for cash, what's the net return? I'm gonna take a wild guess and say they predict something in excess of 5%. Owning rental units means inflation is your friend.

Wed, 06/05/2013 - 12:38 | 3626593 Jack Napier
Jack Napier's picture

Not to worry, China has far more vacant cities than the US, and look at their GDP growth!

Wed, 06/05/2013 - 12:46 | 3626628 Professorlocknload
Professorlocknload's picture

Yep, whisper.

Cap rate, cap rate, cap rate.

Screw location, location,  speculative capital appreciation.

That's contrary to "Depreciation Allowance" anyway.

But, inflation is nobody's friend, just less damaging when hedged.

Wed, 06/05/2013 - 13:01 | 3626715 Careless Whisper
Careless Whisper's picture

yup. Actually I think these REITs with the single family rentals are going to be screaming shorts. The business model is flawed. There's a big difference in managing 500 single family homes spread out in the Las vegas suburbs (if you can call it that) and having one skyscraper of 500 rentals on the corner of 65th and 3rd in Manhattan.

Wed, 06/05/2013 - 13:25 | 3626821 blindfaith
blindfaith's picture

 

 

Maybe we are seeing the ultimate write down, the one that the banks should have been made to take.  I mean, they buy for cash, and when the reality of renting sets in with these 'novis' landlords they will be pounding the table to get out...at any cost or loss.  So much of it is money laundering anyway, and that is the clean side of the story.

Wed, 06/05/2013 - 13:42 | 3626903 SafelyGraze
SafelyGraze's picture

"Housing inventory as of May was 133.2 million units, of 12.6 million was Vacant."

instead of "vacant", we like to call it "housing reserves"

trying to bring it to the 10% mark as part of our re-cap program

Wed, 06/05/2013 - 16:10 | 3627425 eatthebanksters
eatthebanksters's picture

Funny how $30million ocean front homes in Hawaii and Malibu are selling, but little starter home shitboxes can't sell for shit.  Hmm, what does that tell you about Bernankes QE policies? Motherfucker!!!

Wed, 06/05/2013 - 13:21 | 3626805 Georgiabelle
Georgiabelle's picture

Exactly my thought. Real estate is all about location, location, location. Too many of those vacant units are in urban "no-go" types of places that can't attract buyers at any price. It's a seller's market where I live. 

Wed, 06/05/2013 - 14:12 | 3627003 Blankenstein
Blankenstein's picture

That's what the realwhores want you to think - that there are no empty homes or foreclosure in the more "desireable" areas.  That's not the case, though, if you look behind the curtain.  Maybe not as many vacancies as the locations mentioned, but they are there and so are the foreclosures.  In my area the people who couldn't unload their albatross before, have put them back on the market for bubble 1.0 asking prices waiting for the next round of greater fools to jump in. 

Wed, 06/05/2013 - 14:21 | 3627019 Joe Davola
Joe Davola's picture

Follow an Escalade and they'll lead you, more often than not, to delinquent (or soon to be) homes.

Wed, 06/05/2013 - 17:48 | 3627723 Georgiabelle
Georgiabelle's picture

Well that explains it. My neighbors tend to drive Lexuses (Lexi?) or Acuras, with the occassional Prius or Mercedes for variety. All throughout the meltdown and ensuing recession there have been no foreclosures or short-sales in my neighborhood. I attribute that to great schools and non-flashy neighbors who live within their means.  

Thu, 06/06/2013 - 00:43 | 3628751 kareninca
kareninca's picture

Or, those of your neighbors who are not paying their mortgages, have not even been contacted by their banks.  There's a lot of that.  The banks have no incentive to take even the first step in foreclosing.  Why should they?  They don't have to mark to market, and they make money via the Fed.

I doubt your data.

Wed, 06/05/2013 - 15:50 | 3627372 hatchaser
hatchaser's picture

To pile on:  Suburbs are bound for the wasteland as well.  Plagued by inadequate infrastructure, crappy construction, traffic  resulting from growth & poor design, and, just darn, uninviting.

Wed, 06/05/2013 - 17:36 | 3627689 Georgiabelle
Georgiabelle's picture

Families with school-age children will continue to move to the suburbs because they want to raise their kids in safe neighborhoods with good schools. This simple fact is unlikely to change, hence the seller's market in locations that offer safe neighborhoods and top-notch schools. 

Thu, 06/06/2013 - 00:47 | 3628744 kareninca
kareninca's picture

Are you a RE agent, Georgiabelle?

The young people I know have sh** jobs if any, and likely won't be having kids. let alone raising them in the burbs.  Unless the burbs go down in price a whole lot more.

BTW, if you are a RE agent, please go fuck yourself and your "top notch schools."  If you're not, then they should be paying you shill fees.

Wed, 06/05/2013 - 15:53 | 3627387 CrashingDollars
CrashingDollars's picture

It's gonna be like playing fallout 3 just without the nuclear war. . . yet

Wed, 06/05/2013 - 12:21 | 3626542 CrashisOptimistic
CrashisOptimistic's picture

No one has any idea what bank balance sheets truly look like.

That's what abrogating mark-to-market did.  Now they mark to fantasy, and it's accepted as GAAP.

Wed, 06/05/2013 - 12:00 | 3626472 Mercury
Mercury's picture

All housing shortages are local.

But even under more optimal conditions the whole mega landlord of single family homes thing is a very untested business model.

 

I'll take a large, no butter please.

Wed, 06/05/2013 - 12:08 | 3626501 PiltdownMan
PiltdownMan's picture

GREAT chart! 

Today's plunge in mortgage applications with a small rise in mortgage rates points to how sucky the US housing market really is.

http://confoundedinterest.wordpress.com/2013/06/05/whoopsie-mortgage-applications-dive-11-5-as-rates-surge-and-adp-employment-misses/

Wed, 06/05/2013 - 12:14 | 3626520 Spacemoose
Spacemoose's picture

i'll second the point that all housing is local.  drawing conclusions about the scarcity of housing by looking at the housing market on a national scale is a futile exercise.  does anyone really think that the stock of vacant homes in detroit has an impact on the housing market in san diego?  show me the stock of vacant houses where the jobs are.  now, that would be actionable information. 

Wed, 06/05/2013 - 13:31 | 3626848 crazyjsmith
crazyjsmith's picture

" well, I guess I don't buy your premise, it's a pretty unlikely possibility, we've never had a decline in prices on a nationwide basis "
July 2005 The Bernank

Are we saying the Bernank is wrong? Again!?

Wed, 06/05/2013 - 14:15 | 3627014 Buckaroo Banzai
Buckaroo Banzai's picture

Well it depends how you define "nation". If you define "nation" = NYC metro area + Washington DC metro area + Bay area, then he's right.

Remember, they view anything outside those areas as a grim wasteland populated by knuckle-dragging racist retards.

Wed, 06/05/2013 - 12:16 | 3626527 CrashisOptimistic
CrashisOptimistic's picture

Friend of mine in the industry got drunk with me over the weekend and ** he talked **.  It went like this.

"We're cutting our own throats.  The business model was . . . a young family buys a house.  They add babies and need to upsize.  That's another commission.  Then they get a promotion at work and transfer and that's another real estate agent's commission.  Then maybe they upsize again to maximum family size.  That's another commission.  Then they want to retire and downsize.  Another commission.

We are flushing all that.  These assholes come in and buy 1000 houses to rent out.  They may NEVER sell.  They may rent that thing out for 40 years.  We get no more commissions!  Yeah, some want to flip, but anywhere other than the hype areas, if you see a owner with LLC after his name, there will never be another commission from that guy"

 

Wed, 06/05/2013 - 12:27 | 3626551 Mercury
Mercury's picture

...if the LLC's business model actually works as advertized.

Wed, 06/05/2013 - 12:32 | 3626577 ParkAveFlasher
ParkAveFlasher's picture

Zi-i-llow killed the mi-i-ddleman

Wed, 06/05/2013 - 12:36 | 3626590 Timmay
Timmay's picture

...if wages were rising and/or there was a bubble joe six pack could participate in. The dream of buying more and more house to "keep up with the Jones'" is over.

The coming rise in Healthcare Insurance premiums will crush housing and rentals. Rates don't need to rise to bury the housing markets, a declining disposable income will be enough to do the trick....

Wed, 06/05/2013 - 12:45 | 3626624 machineh
machineh's picture

So future vacancies will depend on how active the death panels are.

Unless the government starts cloning a new race of submissive zombies.

Oh, wait ... !!!

Wed, 06/05/2013 - 13:12 | 3626768 spine001
spine001's picture

Marihuana/Cannabis/Zombies. They are doing it. That is exactly what it does, it reduces you amigdala, the primitive  brain that rules your flight/freeze/fight reaction. Makes you mellow and tolerant. Only problem is that 10% of those who try it, get caught and start using daily, then thier probability of developing schizophrenia goes up by 500-1000% depending on family history.

"Unless the government starts cloning a new race of submissive zombies" 

Wed, 06/05/2013 - 15:13 | 3627248 What you talkin...
What you talkin about Willis's picture

bull fucking shit

Wed, 06/05/2013 - 12:38 | 3626598 jcaz
jcaz's picture

Which it doesn't, because we've seen this trick before....

Doesn't matter what scale it is, it always comes down to property appreciation over time-  the cash flow from the rentals will only cover taxes and maintainance,  it's a zero-sum game there- the only way to make a net profit is from a capital gain on the ultimate sale of the property,  which historically has been a 1-2%/yr gain- yawn.

People act like they're Christopher Columbus with these LLC's- please....  A couple of dumbasses who failed at being a hedge fund think they've found gold by turning themselves into REITS.......

Wed, 06/05/2013 - 12:47 | 3626635 KidHorn
KidHorn's picture

I don't know where you live, but where I live the rent will do a lot more than pay for taxes and upkeep. If you have a mortgage to pay, maybe you break even, but if there's no mortgage, you can get good free cash flow from renting.

Wed, 06/05/2013 - 12:51 | 3626657 CrashisOptimistic
CrashisOptimistic's picture

It may be that part of the appeal is that it's a non financial asset and property laws tend to be far, far more strict about land ownership than . . . pretty much anything else.  Guns, gold, whatever.

These LLCs may be trying to insulate from inflation via rent increases.

Wed, 06/05/2013 - 12:58 | 3626702 Variance Doc
Variance Doc's picture

"These LLCs may be trying to insulate from inflation via rent increases."

Good luck with that.  As I've told many, many people, you cannot leverage rent.  Blank stares in return.  'Merikans don't have the income stream (nominal or especially real) for rent to keep up with housing prices.

It never ceases to amaze me how dumb people are.

Wed, 06/05/2013 - 14:31 | 3627038 CrashisOptimistic
CrashisOptimistic's picture

Not an expert.  But my drunk buddy somewhat is.  He says it works when there's no mortgage.  The bulk buys are cash.  His own buys are cash.

The youngsters are screwed.  This sort of thing requires that you can make cash buys.  It takes time to accumulate money.

There are a lot of folks who think you can have inflation when there is no demand for things.  Rent is a big part of the inflation equation, which some may dislike, but it's true.  If you have housing expense, it's likely the largest item in your monthly budget.  If it's not, you're an aberration.  Talk to your friends.  House price increases (which are pretty much bogus, he says, via the bulk buys of foreclosures) are NOT rent increases.  Check your craigslist apartment rents.  See if they are spiking.  They're not.

So if inflation goes up, it's because rent went up.  If rent doesn't go up, it erodes food and gasoline rises.  That's just mathematics.  So if rents are going up, you get inflation insulation.

Wed, 06/05/2013 - 16:10 | 3627424 Variance Doc
Variance Doc's picture

Not targeting you, but mearly making a statement on the dumb money plowing into real estate.  "House price increases...are NOT rent increases."  Exactly, but what people are buying into is that housing prices are going to continue to go up and up - I'd better get in now!  The late to the party (aka, dumb money) REO-to-rent theory follows the same logic.  The costs are not yielding the returns desired now, hence the smart money is exiting.

I'm simply saying that if people are dreaming of be coming the next Trump of the housing rental world, stop dreaming.  It's going to end very bad.

I don't understand your rent and inflation directional flow, perhaps 'casue we differ on what is inflation.

Wed, 06/05/2013 - 17:29 | 3627666 CrashisOptimistic
CrashisOptimistic's picture

Nod, good reply. 

My buddy is not thinking appreciation.  He is thinking retirement income flow with a property manager to eliminate hassle while he travels.  He says (rightly) that stocks and bonds are a joke and he wants an income stream from something not involving them.

We may differ on inflation.  Many argue it.  But the definition is what the CPI survey says it is, and they make very clear that rent or housing expense is the dominant item of American budgets.  If apartment rents are not going up, if duplex rents are not going up, then arguing about "imputed rent" being invalid is itself invalid.  Rents of all sorts of abodes are not going up. 

Hence no inflation to worry about.  If they are going up, then the rent you would charge on your rental holding would seek to be competitive and presto, you have an indexed pension.

Wed, 06/05/2013 - 13:12 | 3626769 blindfaith
blindfaith's picture

 

 

Sounds like a plan until the continuing unemployment picture advances (which is will), and inflation eats up that declining salary (which it is) and property taxes go up to pay 'automatic salary increases' for county and city employees (which it ALWAYS will), and on and on and on.

Oh, and don't forget that when the tenant can't pay it can take a year or more to get them out and if they claim hardship...good luck.  It is easier to get a homeowner out than a tenant renting.  So much for cash flow..... Nuts, forgot about the expense to get the damn place back into rentable shape for the next 'cash flow' application.  Did I mention handicap and discrimination law suits?  Oh well, it works for some.

It is the little details that make rockets bow down to gravity.

Wed, 06/05/2013 - 14:11 | 3627000 MachoMan
MachoMan's picture

A foreclosure is dramatically more difficult, longer, and expensive (on average) than an eviction...  Look at it this way, a foreclosure seeks to not only rid the owner of his possessory interest in the real estate, but also his ownership in the land...  needless to say, there are a few more hurdles for taking peoples' homes.

Wed, 06/05/2013 - 14:34 | 3627094 CrashisOptimistic
CrashisOptimistic's picture

THESE ARE CASH BUYS.

If you think it's hard to evict, cut their rent and explain how you're trying to help them avoid a bad credit rating.

They'll pay, and then leave when they feel like it.

And when you cut their rent, you are cutting the national inflation rate, if your situation is common.

Wed, 06/05/2013 - 14:16 | 3627020 pursueliberty
pursueliberty's picture

Where I live I can easily, as in today, buy two or three homes that will cash flow a down right incredible without using cash.  I've got a duplex that grosses almost double the property tax/payment/insurance.  Since December of 09 I've had less than three months of rent loss due to vacancy. 

It is all local.  I'm only interested in actual money that makes it way to my pocket, true income producing property where I can carry a mortgage. 

 

That said, there is no way these companies are going to be able to make a true return.  The amount of man hours used for renting/maintaining, repairs, etc. along with vacancies will destroy any return they are hoping to see in single family units.  I'm done with single family unless it is truly too good a deal to pass up, and with currently multi family prices it looks like I'm out of that market unless I build.

Wed, 06/05/2013 - 14:35 | 3627099 CrashisOptimistic
CrashisOptimistic's picture

Suppose you inherit the single family place free.

Wed, 06/05/2013 - 13:17 | 3626790 spine001
spine001's picture

Property Value interest rate

"it's a zero-sum game there- the only way to make a net profit is from a capital gain"

The property value depends on the discounted free cash flows (CF) that it generates and the rate of increse/decrease of those cash flows. CF = Rent - Expenses - taxes (all income, property, etc)

 Value = CF/R where R is the expected rate of return. Guess where R comes from? Well from the return that you could obtain with an alternative investment of similar risk. For instance an A quality bond? Or BB? do you think that rates are going up? or down? From there se what happens to your Value (capital gain) as the interest rates go up?

And if you are right and CF = zero, then Value is actually cero.

Finance 101

Wed, 06/05/2013 - 12:34 | 3626580 tip e. canoe
tip e. canoe's picture

throat was already cut back in 2005.   this is just sicking leeches on the still gaping wound while putting clean bandages on everyday and calling it healed.

Wed, 06/05/2013 - 12:33 | 3626568 CheapBastard
CheapBastard's picture

Even the WSJ (or maybe it was the NYT) reported there were over 109 months supply of empty houses.

 

That's alot. And since then builders have gone wild adding thousands of houses to the market thinking an endless supply of zero-down (or near zero-down, depending on yoru area) mortgage loans .... loans to people for Giant houses they cannot afford.

 

I see lots of sellers in the Burbs listing their houses for about 40% higher then estimates ....they simply don't sell and the Sellers get very frustrated. Many are stuck with a massive lead weight (mortgage) tied to their ankles. Unrealistic prices and a tad of irrational exuberance. Remember, an American moves on the average every 4-to-5 years...this is painful in a alling house market. I know, I've been there and done that.

And "No Thanks!"

Now, I'm a Cheap (and Wiser) Bastard and not paying for ANYTHING unless it's at least 40% reduced.....(preferably 80-90%). Patience.

 

It's getting ugly.

Wed, 06/05/2013 - 14:03 | 3626971 Rustysilver
Rustysilver's picture

CheapBastard,

You should rename your handle to

 

CheapWiserBastard

It would be more appropriate, since I am in total agreement.

Wed, 06/05/2013 - 11:55 | 3626474 Ham-bone
Ham-bone's picture

Silly Tylers...reality is for doomers.

Do NOT follow this link or you will be banned from the site!