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Rents Soar To Record High As Homeownership Rate Plunges To 19 Year Low

Tyler Durden's picture




 

Each quarter, when we perform our regular update on trends in US homeownership and rents using Census Bureau data, we say that "The American Homeownership Dream is officially dead. Long live the New Normal American Dream: Renting." One thing we added in 2013 is that the American Dream has now officially became a full-blown nightmare after mortgage rates exploded, even if declining modestly afterward, and in the process pummeling the affordability of housing as well as grounding any new mortgage-funded transactions to a complete halt (don't believe us - just ask the tens of thousands of mortgage brokers let go by the TBTF banks in the past 6 months) while sending mortgage origination activity to record lows. Which is why it was not at all surprising to find that the just updated Q1 homeownership rate was 64.8% - the lowest in 19 years!

 

Furthermore, even as household formation has continued to implode (more on that in a subsequent post) despite the shrill promises of housing bulls who still have to realize that the transitory pick up in home prices has nothing to do with organic growth or a stable consumer, and all to do with the Fed's balance sheet, the now effectively finished REO-To-Rent program, and illegal offshore cash parked in the US, Americans have to live somewhere. That somewhere is as renters of Wall Street and other landlords. As the next chart shows, the median asking rent has soared to fresh records and hitting an all time high of $766 as of the first quarter.

 

Luckily Owner Equivalent Rent is largely adjusted (hedonically) by the Fed in its CPI calculation making it seem quite friendly, or else its all time highs may give the impression that inflation is not quite as dead as the Fed portrays it. Although don't tell that to renters in the Northeast, where the average rent just soared to $1,043, a record increase of 16%, or $147 compared to a year ago.

At least one entity is enjoying this wealth extraction from the middle class which no longer being able to afford buying a home is forced to hand over an ever greater portion of its paycheck to America's largest landlord - Wall Street's very own Blackstone.

 

Finally, why are any of these upward trends in significant jeopardy? Because while the 0.01% are getting wealthier by the day, everyone else... isn't. As can be seen on the chart below.

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Tue, 04/29/2014 - 10:57 | 4707730 Haus-Targaryen
Haus-Targaryen's picture

I think we could materially increase home ownership rates if the Federal Government would subsidize and guarantee mortagages for people who wouldn't qualify for a home loan otherwise.  I know this is a new idea, but I think it might just do the trick. 

Tue, 04/29/2014 - 10:59 | 4707735 RSloane
RSloane's picture

Brilliant idea! What could possibly go wrong?

Tue, 04/29/2014 - 11:00 | 4707741 SilverIsKing
SilverIsKing's picture

Everyone does have the right to own their own home so your proposal seems like a good idea.

Tue, 04/29/2014 - 11:10 | 4707761 lordylord
lordylord's picture

Ever hear of Freddie Mac?  How about the Community Reinvestment Act?  Don't you know the government ALWAYS makes things worse (usually by design).  The tax-payer should not subsidize this nonsense.

Tue, 04/29/2014 - 11:12 | 4707783 NoDebt
NoDebt's picture

You missed the sarcasm.  Try to keep up from now on.

Tue, 04/29/2014 - 11:13 | 4707788 SilverIsKing
SilverIsKing's picture

Thank you.

Tue, 04/29/2014 - 11:53 | 4707982 Latina Lover
Latina Lover's picture

You know the rental market is tight when the homeless are competing for the best places to live a bridge.

 

 

http://inhabitat.com/nyc/homeless-people-are-moving-onto-the-manhattan-b...

Tue, 04/29/2014 - 12:02 | 4708031 nope-1004
nope-1004's picture

Wonder if MDB's mom will see this chart and raise the rent for the basement suite?

 

Tue, 04/29/2014 - 12:17 | 4708085 Oh regional Indian
Oh regional Indian's picture

Graduating students housing options:

1) Let's share, it's so much fun to live with 7 people, 4 of whom you cannot stand.

2) Tiny place on the wrong side of the tracks, 2 hours away from work

3) Your childhood bedroom

4) Basement below said room (mom is renting out yours to make up for SS being tied to a CPI that excludes food and gas)

5) Couch surfing (my favourite)

that is quite an option set.

 

I knew a gent in NorCal who was buying up apartments in 2001-3 when single family was all the rage. Guy had foresight. He spoke of this time, confidently, then.

Interesting thign is to see India follow this loop, almost tick for tick...only 10 years after and far more messily...

http://aadivaahan.wordpress.com/2010/07/13/whither-india/

Tue, 04/29/2014 - 13:18 | 4708483 HardAssets
HardAssets's picture

Hmmm. . . maybe swinging and group 'play' will be in vogue again like in the 60s and 70s

But now it will be primarily for the purpose of sharing limited bed space with as many people as possible to 'spread' the costs (so to speak)

Tue, 04/29/2014 - 11:16 | 4707800 lordylord
lordylord's picture

Sorry everyone!  I hear so much "fair share" bullshit around the NYC area, that even obviously sarcastic remarks seem like genuine Statist talking points.

Tue, 04/29/2014 - 11:35 | 4707896 JMT
JMT's picture

The area really sucks now (if you are not under 35 and in the top 2%).. I have to come to NYC for business once or twice a month. After around five days I just want to get the hell out..  I don't anyone over the age of 35 (who isn't in the top 2%) who was born in the area and hasn't moved out. 

Tue, 04/29/2014 - 21:23 | 4710328 Old Poor Richard
Old Poor Richard's picture

They ARE genuine statist talking points.  I'm sure you can find articles advocating a resurgence of no income verification loans on huffingtonpost and salon.com.  Progressives are parodies of themselves, and you have to use context to figure out when it's real and when it's satire. 

Tue, 04/29/2014 - 11:12 | 4707785 pods
pods's picture

I do declare that Opposite Day is officially open.

MDB will now have to be the lone critic of our unicorns and skittles system, unless Methman made it out of rehab.

pods

Tue, 04/29/2014 - 16:32 | 4708440 HardAssets
HardAssets's picture

pods:  "I do declare that Opposite Day is officially open."

Maybe George Costanza could be the Patron Saint of Opposite Day ?

https://www.youtube.com/watch?v=_vyb5dkQZPw

 

Tue, 04/29/2014 - 11:15 | 4707794 Der Wille Zur Macht
Tue, 04/29/2014 - 11:19 | 4707825 max2205
max2205's picture

Does EBT now include rent?

 

Movin on up to the East Side.....

Tue, 04/29/2014 - 11:26 | 4707862 NOZZLE
NOZZLE's picture

How the fuck do people not get the sarcasm in this?  I see this all the time on this board, obvious sarcasm that blows right over readers heads causing them to downarrow a legitatimate comment.

Tue, 04/29/2014 - 11:33 | 4707879 lordylord
lordylord's picture

"How the fuck do people not get the sarcasm in this?"

The only way to read sarcasm in his comment is to identify it as so outlandish that it must be sarcastic.  The problem is that it doesn't sound like an outlandish statement.  It sounds as though it is a genuine Statist talking point. Sad, I know.

Tue, 04/29/2014 - 11:34 | 4707886 Kreditanstalt
Kreditanstalt's picture

Because he's right.  There ARE a lot of statists and socialists here, always screaming about "the evil rich", how taxes on everyone but themselves should be raised, how social programs should be expanded, how wonderful the government is...&c., &c.

Tue, 04/29/2014 - 12:04 | 4708046 sleigher
sleigher's picture

Well, maybe if we expand those social programs infinitely we will come out the other side all good.  Like drinking yourself sober.  </sarc>

Tue, 04/29/2014 - 12:14 | 4708100 Kayman
Kayman's picture

NOZZLE

Now you're being sarcastic.

Tue, 04/29/2014 - 11:07 | 4707760 imapopulistnow
imapopulistnow's picture

Of course they should be charged a higher interest rate and have larger monthly payments, but if we pool these loans and securitize them, the default rate is essentially zero.  A great investment for global municipal pension funds!!!

Tue, 04/29/2014 - 11:27 | 4707775 lordylord
lordylord's picture

Don't you know that rising home prices is a GOOD thing???  The more people who can't afford homes because of easy hot-off-the-presses money floating around, the better!   Just like FDR who thought that the depression was caused by falling prices.  What a bunch of thieving central planners. 

Tue, 04/29/2014 - 11:49 | 4707964 HardAssets
HardAssets's picture

And the real money isn't even in the stupid houses. Naw, that's just an excuse. The Real Money is in all the new 'financial products' that we can leverage using those stupid houses. We'll tell all the dummies out there that 'your house is your greatest investment' and they'll eat it up. We could care less if its houses, no earnings internet stocks, or freakin' tulips.

Tue, 04/29/2014 - 16:41 | 4709338 neidermeyer
neidermeyer's picture

We could securitize the whole shebang ... but keep the shares in streetname in our vault.. that'll let us write insurance on it as if we own it ,,, many times over since all the deals will be private. THIS WILL WORK!

Tue, 04/29/2014 - 11:06 | 4707744 lordylord
lordylord's picture

"the Federal Government would subsidize and guarantee mortagages"

Your first mistake was thinking government can interfere and improve the situation.  Government is the problem, not the solution.

Ask yourself, why is a shit-box in NJ that I wouldn't even pay 100K listed for 400-500K? 

Tue, 04/29/2014 - 11:07 | 4707764 pods
pods's picture

pssst, it's sarcasm.

Tue, 04/29/2014 - 11:11 | 4707778 lordylord
lordylord's picture

Darn.  Now I read the sarcasm.

Tue, 04/29/2014 - 11:36 | 4707898 Kreditanstalt
Kreditanstalt's picture

"...why is a shit-box in NJ that I wouldn't even pay 100K listed for 400-500K?"

Because, due to the constant counterfeiting of money & credit 400-500K is the same amount as 100K was a few years ago...

Tue, 04/29/2014 - 11:55 | 4708000 HardAssets
HardAssets's picture

For a real eye opener take a look at the receipts of items you bought years ago. I have many items that I left the receipt in the box and its just about always a shock at how high prices have gone. There are many items that I just wouldn't buy today because of the current price. I find myself saying "I'm glad I bought it back then."

Tue, 04/29/2014 - 12:00 | 4708023 Kreditanstalt
Kreditanstalt's picture

And a whole lot of stuff I paid ridiculous prices for ten or twenty years ago NEW and now find second-hand for 25 cents...LPs, appliances, books, tapes, household stuff...

I'll never pay retail for anything new again.

Tue, 04/29/2014 - 12:24 | 4708127 HardAssets
HardAssets's picture

Yes, that's a good point. It is a good time to be creative. A 20 yr old nephew of mine gets a lot of his clothes at thrift stores. Really nice stuff for next to nothing. Last winter I asked him about a really nice down jacket that he was wearing. He told me he bought it the previous August in a thrift store for $5. Retail it would go for $300. (And years ago when I lost a lot of weight, I gave away a lot of very nice, new, unworn slacks that still had their tags & labels.) My brother is a contractor and has gotten an electronic keyboard, oak desks, etc from people for free. They were happy that someone would cart it away to free up some needed space.

Americans have filled their homes with a lot of junk. For many 'shopping' is a major form of entertainment/diversion. There's so much of this junk that we have to rent out storage space to store the overflow. (I'm guilty of this myself).  Maybe we'll be forced back to the kind of common sense thinking that our great-grandparents practiced.

Thu, 05/01/2014 - 15:14 | 4717185 shiftless
shiftless's picture

Last year I was sentenced to a week of 'community service' (forced labor) for violating one of the king's bullshit laws. They sent me to the 'transfer facility' which is where people drop their trash to be crushed and shipped away. Day after day, all day long people will throw away perfectly useful stuff. Could not even begin to tell you the number of perfectly working microwaves, TVs, stereos, musical instruments, furniture, books, wood, insulation, mirrors, computers, electronics, etc, etc, etc which people were throwing out.

Sometimes you could tell people felt guilty about it and they tried to give stuff away to us helpers. The first day I loaded my truck bed with all kinds of goodies. Got two perfectly working Coleman camp stoves (with a full tank of fuel!), a couple good chairs, some speakers, a 21" CRT computer monitor, some fireplace logs, a couple pieces of plywood, and all kinds of other useful items. The next day the bitch in charge griped me out and said we were not allowed to take ANYTHING. I still took stuff anyway over the next few days and ended up in a yelling match with the bitch in the parking lot, who cussed me out acting like I was the worst scum of the earth.

I'm like, you really think I'm going to apologize and feel bad for saving good stuff from the crusher? Fuck you. If I had it all to do over again I'd have taken twice as much. Can you imagine the reaction of a typical third worlder from any country if he could see all this going on? He wouldn't believe anyone could be so stupid to throw out all this good stuff.

Tue, 04/29/2014 - 12:19 | 4708132 TheFreeLance
TheFreeLance's picture

Related -- Been in a low-intensity conflict with my insurance guy over rising rates. Personal property policy has gone up about 10% a year past 3 yrs. He keeps telling me how much less I am paying than other people. Finally pulled together the TOTAL I paid for all insurance 08-09 to compare to now, same coverage, same company, ZERO claims -- up about 35%. And I've shopped around, other carriers are even higher. Straight up collusion.  

Tue, 04/29/2014 - 13:18 | 4708487 Uncle Remus
Uncle Remus's picture

Big time. Bastards.

Tue, 04/29/2014 - 12:56 | 4708365 mrdenis
mrdenis's picture

I live in NJ ,the best part is our politicians keep raising property taxes all the while telling our homes are worth so much ,my PT are now over 25K on a 2900 sq ft home ,no updates in 30 years .which my taxes were 3500.

Tue, 04/29/2014 - 13:17 | 4708478 Uncle Remus
Uncle Remus's picture

Transgenerational mortgages - read the fine print on your birth cert. Hey, we're pushing 15 years on auto loans...

Tue, 04/29/2014 - 10:59 | 4707732 idea_hamster
idea_hamster's picture

I, for one, welcome my new Hedge Fund landlords.

A bit of enclosure of public lands, a bit of rent hikes, and we'll all be living in a Jane Austen novel.  OK, so we won't be any of the title characters, but who wants the pressure of "society"?

Tue, 04/29/2014 - 11:00 | 4707738 idea_hamster
idea_hamster's picture

*Jane Austen

Sorry -- I mis-typed "Charles Dickens."

Tue, 04/29/2014 - 12:44 | 4708304 IridiumRebel
IridiumRebel's picture

I can be a lowly street urchin!!

Tue, 04/29/2014 - 13:28 | 4708534 HardAssets
HardAssets's picture

IridiumRebbel: I can be a lowly steet urchin!!

 

http://www.youtube.com/watch?v=hEQDllvuy1I

Tue, 04/29/2014 - 11:12 | 4707782 Ignorance is bliss
Ignorance is bliss's picture

Can I be the butler? I've always wanted to push around my staff.

Tue, 04/29/2014 - 10:59 | 4707737 Sudden Debt
Sudden Debt's picture

rents go up but living spaces go down.

When I see what young people pay for such small appartments... it's just nuts.

 

Tue, 04/29/2014 - 11:17 | 4707804 pods
pods's picture

I prefer to call it cozy.

Going to go garbage picking looking for a long dresser in which all my friends can sleep in.

Our new system of awesome is just that, awesome!

pods

 

Tue, 04/29/2014 - 11:48 | 4707958 Ignatius
Ignatius's picture

co-zy  adjective  ko-ze

small, comfortable and warm

alt:  you sit down to shit and your knees are in the hallway, i.e. cozy

 

Tue, 04/29/2014 - 11:18 | 4707820 TheFreeLance
TheFreeLance's picture

As soon as I have some visibility on where my kid is going to college I start making low-ball all-cash offers for condos. I'll also try to nuke condo fees with a one-time lump sum payment. I always wanted to be a slum lord.

Tue, 04/29/2014 - 11:39 | 4707913 toady
toady's picture

I have a line on a 4 unit complex here in Phoenix. 3 one bedrooms, 1 4 bedroom, 150K. Rents on the low side would be $2500 a month,but, as the article says, rents are going up. Pays for itself in 7-8 years, then it's all gravy.

Slumlord it is !

Tue, 04/29/2014 - 12:31 | 4708217 dontgoforit
dontgoforit's picture

Been there done that.  Be sure to get 3-years of rent as a security deposit.  Those little freaks destroyed the place nearly every time.  Got out.  Saved money doing so.

Tue, 04/29/2014 - 11:23 | 4707742 Mercury
Mercury's picture
The New Normal American Dream: Homeownership Rate Plunges To 19 Year Low

 

Actually, before all this bullshit started, ~65% was pretty much  the old normal.

So, now we've come full circle, factslapped by this one metric and the realization that the whole, homeownership expansion, credit bubble and central planning circus of the last 30 years was a gigantic waste of resources.

Furthermore it has almost certainly resulted in decreased household wealth and financial security for the bottom 50% - exactly the opposite of what it was intended to do.

 

Nice work Uncle Sam. Now, when can I see my doctor?

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