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 - 11:31 | 4707874 tarsubil
tarsubil's picture

Barring unscheduled medical personnel shortages, medical checkups are on the third Thursday of every month at the FEMA education and habituation centers. See you in line.

Tue, 04/29/2014 - 12:09 | 4708058 HardAssets
HardAssets's picture

I agree with all your statement except - "exactly the opposite of what it was intended to do"

These programs do Exactly what they are intended to do and usually that's not what the paid-off politicians say is 'the purpose'.

Actual purposes:

- Whatever are the objectives of the insider special interests who finance politicians - the Big Money boys

- Bribing voters in the short term

 

As an example, research LBJ and his actual statements regarding minorities - what he really thought about them. And he was the guy spouting talk about his 'Great Society' and coming up with all sorts of so-called 'social programs'. 

Tue, 04/29/2014 - 13:18 | 4708486 MisterMousePotato
MisterMousePotato's picture

Abraham Lincoln, too. If he was alive today, he'd probably own a basketball franchise.

Tue, 04/29/2014 - 12:20 | 4708135 rlouis
rlouis's picture

Quite true!

We've all been Barney Franked. Now bend over for your free Obama Care prostate exam.  Ladies, if your insurance doesn't provide coverage it must be considered an inadequate policy and subject to future cancellation.

Tue, 04/29/2014 - 12:34 | 4708239 dontgoforit
dontgoforit's picture

Wasn't it Clinton (Bill) and the Bawney Fwank, Dodd, or someother pissatician who set that crap up that we now call the great double-bubble of 2007?  "Everyone deserves to own a home."  - Sure, and we all deserve Corvettes and college for free, too.  What a moronic way to run a railroad.

Tue, 04/29/2014 - 11:02 | 4707746 Der Wille Zur Macht
Der Wille Zur Macht's picture

Remember when a single income could buy a house? Those days are long gone my friends. 

Tue, 04/29/2014 - 11:09 | 4707774 imapopulistnow
imapopulistnow's picture

I also remember the days when two incomes could by a house.....

Tue, 04/29/2014 - 11:13 | 4707787 Der Wille Zur Macht
Der Wille Zur Macht's picture

All in due time good sir. Soon, that will be a distant remnant of the past and we'll be pooling resources in groups of 3-5 for housing. The government will advertise them as "social community hotspotz".

Tue, 04/29/2014 - 11:20 | 4707833 SilverIsKing
SilverIsKing's picture

With free wifi for sure.

Tue, 04/29/2014 - 12:35 | 4708248 dontgoforit
dontgoforit's picture

Caves.

Tue, 04/29/2014 - 11:28 | 4707793 Bunga Bunga
Bunga Bunga's picture

Or a single bread winner could feed a family with 8 or 13 children. I admire how my great grandfathers could do that with very simple jobs like a baker or a carpenter.

Tue, 04/29/2014 - 12:09 | 4708074 Better_late_tha...
Better_late_than_never's picture

No, I wasn't born yet. It's been broken that long.

Tue, 04/29/2014 - 11:03 | 4707750 Smegley Wanxalot
Smegley Wanxalot's picture

Basementsquattership rates are thru the roof ... which is why I am bullish on trekkie memorabilia.

Tue, 04/29/2014 - 11:04 | 4707754 NoDebt
NoDebt's picture

Just an observation, but seems like a lot of what happened since the start of the current Depression involves the number 5%.

5% drop in GDP (at it's "nominal" trough, give or take a few temfs)

5% drop in labor force participation rate

5% drop in home ownership (not quite there yet, but clearly well on it's way)

5% increase in government spending relative to GDP (from ~20% to ~25%)

Don't know what that means exactly, but it sure looks a lot more like a structural problem to me than a cyclical one.

Tue, 04/29/2014 - 11:05 | 4707756 DavidC
DavidC's picture

And still, STILL, this fucking market keeps going up.

DavidC

Tue, 04/29/2014 - 11:11 | 4707780 101 years and c...
101 years and counting's picture

of course. anything that punishes the working class is good as their money goes "pouring" UP THE LADDER due to fed policies.  no one can afford homes now, so they get to becoem forever indebted to the banks/investment firms that have purchased all foreclosed units in the last 5 years.  the fed continues to fuck the middle class and will continue to do so until there is an uprising.....

Tue, 04/29/2014 - 12:13 | 4708092 sleigher
sleigher's picture

Guillotines in Times Square.  Nationally televised.  Think of the ratings.

Tue, 04/29/2014 - 12:22 | 4708148 SheepDog-One
SheepDog-One's picture

But don't worry....the SEC assures us that markets are like totally non-manipulated and are 100% for reelz.

Tue, 04/29/2014 - 11:06 | 4707757 rsnoble
rsnoble's picture

Instead of rents lowering they will change ordinances and allow 10 families in one home.

Tue, 04/29/2014 - 11:11 | 4707781 TheFreeLance
TheFreeLance's picture

Localities will fight that tooth-and-nail cuz they know property values would plummet. So Blackrock will have a handy counter proposal: Why don't knock down all these single fams and replace them with nice tenements, you'll have to finance them via a TIF of course -- and we'll help you take the bonds to market, natch -- but it is wins all around.

Tue, 04/29/2014 - 11:18 | 4707816 Sudden Debt
Sudden Debt's picture

the way to sell it to the people is with a good soundtrack

http://youtu.be/3RGWE6zJKXk

Tue, 04/29/2014 - 11:22 | 4707845 SilverIsKing
SilverIsKing's picture

I'm forming a line outside the Playboy mansion.  If I'm going to have to live with a group of people, I want to enjoy my limited space.

Tue, 04/29/2014 - 11:23 | 4707850 Sudden Debt
Sudden Debt's picture

+1000! HAHAHAHAHAHA! SHOTGUN! :)

Tue, 04/29/2014 - 11:19 | 4707824 robertocarlos
robertocarlos's picture

A way to counter that is to require one registered parking spot per vehicle. Another way is to move.

Tue, 04/29/2014 - 11:07 | 4707758 evernewecon
evernewecon's picture

 

 

 

 

Note it's a pdf:

http://ucop.edu/student-affairs/_files/regents_0607.pdf

 

Page 34:

 

, "debt that requires between 5% and 9% of a student’s postgraduate earnings is 

considered to be manageable..."

 

but where does that leave them when 

the mortgage, monetary and housing

markets are privatized, including 

with housing supply consummately 

manipulated?

 

 

 

Tue, 04/29/2014 - 11:08 | 4707766 Professor Fate
Professor Fate's picture

This is the new normal as the buy-to-rent Wall Street hedgies suck the last drop of disposable income from the vanquished middle class.  The Fed continues to maul the Amercian Dream while the banks enjoy high cotton.  The more the Blackrocks buy, the more rent control they have.  There has to be a very, very special place in hell for Ben Bernanke.

Fate the Magnificent
"Push the Button, Max"

Tue, 04/29/2014 - 11:17 | 4707807 Dr. Engali
Dr. Engali's picture

Fate the Magnificent
"Push the Button, Max"

 

A reference to one of my all time favorite classic movies, The Great Race.  

Tue, 04/29/2014 - 11:27 | 4707865 infinity8
infinity8's picture

+1 for use of "vanquished", "maul", and "high cotton". As well as sentiment for Berfuckface.

Tue, 04/29/2014 - 11:08 | 4707767 starman
starman's picture

USA =  "dreamaholics anonymus"

Tue, 04/29/2014 - 11:08 | 4707768 Obama_4_Dictator
Obama_4_Dictator's picture

I pay 1225 a montyh to rent a 1317 sq ft, 3 bed, 2 bath home.....getting a little crazy

Tue, 04/29/2014 - 11:16 | 4707798 NoDebt
NoDebt's picture

I feel your pain.  Do you happen to know how much of that rent check goes towards taxes?

You see, you really have TWO landlords.  Just mentioning that in case you ever decide to go postal over this situation, I want to make sure you shoot the right one.

 

Tue, 04/29/2014 - 11:31 | 4707875 Obama_4_Dictator
Obama_4_Dictator's picture

Haha, yes, I am well aware.  Money talk and bullshit walks - if an investor has the money to buy a property and I don't, then I have to rent from him.  I like to put my money in other tangible assets.  When this house of cards falls down, these investors are going to be hurting....I'm not worried

Tue, 04/29/2014 - 11:32 | 4707883 JMT
JMT's picture

Where exactly? you can't even find a studio apartment for that in the NYC metro area not even in CT or in Massachusetts. $2,000 a month to rent a small one bedroom apartment is the new normal

Tue, 04/29/2014 - 12:56 | 4708372 Pemaquid
Pemaquid's picture

Sounds like you are bragging.

Tue, 04/29/2014 - 11:09 | 4707771 onewayticket2
onewayticket2's picture

demographic.....GenX and GenY are saddled with debt and increasing taxes and costs.

 

 

Tue, 04/29/2014 - 11:09 | 4707773 i_call_you_my_base
i_call_you_my_base's picture

Home ownership at lows while prices continue upward. Makes a lot of sense.

Tue, 04/29/2014 - 11:15 | 4707795 Peter Pan
Peter Pan's picture

House prices rising faster than wages is the biggest culprit leading to foreclosure, marriage bust up, delays in forming households, delays in having children and the like. Housing needs to be principally about shelter rather than speculation.

Too many western societies have squandered their efforts on becoming home owners when society would have been better off in investing in research and infrastructure.

Tue, 04/29/2014 - 13:22 | 4707932 813kml
813kml's picture

But capitalism demands to book profits today and let the lack of planning for tomorrow shake out in the "markets".

You must be a socialist, a communist, or a realist.

Tue, 04/29/2014 - 11:15 | 4707797 John McCloy
John McCloy's picture

        No idea why anyone would ever consider buying in this nation in the way this nation has progressed over the past few decades. Why not just rent and pay no property tax, no water bills, no homeowners insurance, no condo/co-op feeds, no expenditure on repairs because that all falls upon the landlord and if you take your time you can find something more affordable than the mortgage handsdown and you are mobile and can move into a newly renovated place every 2-3 years.

     If the market collapses you take none of the hit and are now able to seek a cheaper apt/home to lease. Forget home ownership...renting is the true "Living The Dream"..and if you ever wanna move to another city or state no brokers fee on your sale/attorney fees and waiting period aside from expiration of your lease which you can usually work out with the landlord in rural areas with a 1 month buyout to leave early.

       Government is impoverishing everyone in this nation and they have been doing it more and more as year by year goes past. Used to be able to purchase a nice home on one income now you need both parents working just to afford that overpriced mortgage and the kids get thrown in daycare. And this is because of artificial price inflation because of Fed involvement in home ownership...that is why your tv and cellphones are getting more advanced and cheaper and why your education and homeprices go parabolic...Fed involvement..

   And you no longer get 6% at the bank for your savings..a fucking endless hand into your pocket to buy votes and keep the plates spinning.

Tue, 04/29/2014 - 11:17 | 4707805 SMC
SMC's picture

Home ownership is not having a mortgage and keeping a close eye on the computation and assessment of property taxes - either organizing against or leaving fiscally irresponsible jurisdictions.

In addtion, I have no sympathy for the idiots who are crying about their Home Owners Association - they were fools to buy property with yet another layer of control. Although I enjoy reading about how banks holding property in foreclousure limbo are not paying the local HOA thugs! LOL

Tue, 04/29/2014 - 11:57 | 4708011 toady
toady's picture

I had an. HOA in my first place, back when they were new, and I didn't understand what it was before I bought. The monthly fees kept doubling, people kept stealing the money. It was just crazy. We've avoided them ever since.

It wasn't easy when we moved to Phoenix. Nearly every place we liked had a HOA. We ended up in a place we didn't like as much just to avoid an HOA.

Tue, 04/29/2014 - 12:10 | 4708083 greatbeard
greatbeard's picture

>> just to avoid an HOA.

WTF is the problem?  I've got a HOA and love it.  Of course, I'm the only one that lives here and I don't charge any dues.  And I don't have any rules and I don't give a fuck. Seems to work just fine.

Tue, 04/29/2014 - 12:14 | 4708103 toady
toady's picture

And, BONUS! , You don't have anyone stealing the HOA money!

Tue, 04/29/2014 - 11:17 | 4707814 NoDebt
NoDebt's picture

"Why not just rent and pay no property tax, no water bills, no homeowners insurance, no condo/co-op feeds, no expenditure on repairs because that all falls upon the landlord"

You are already paying for it.

Tue, 04/29/2014 - 11:18 | 4707817 JMT
JMT's picture

someone complaining about paying $1200 to rent anything bigger than a doghouse?? get real, in both the NYC metro area and most of Eastern Mass (East of I 495) its hard to find anything for less than $2,000 a month. Utilities, parking, "amenity fees" are extra.  Even water is another $75 a month now. 

Tue, 04/29/2014 - 11:20 | 4707826 Bushogboner
Bushogboner's picture

Know your Rights!

You have the right not to be killed, unless it was done by a policeman or aristocrat
You have the right to food money, providing of course you don't mind a little investigation, humiliation, and if you cross your fingers, rehabilitation
You have the right to free speech as long as you're not dumb enough to actually try it.

Tue, 04/29/2014 - 11:20 | 4707829 tarsubil
tarsubil's picture

In many ways, I'm the typical American. Wife forced a divorce that I wasn't ready for. I rent, I get raped by taxes and I am cash poor. Essentially, money mismanagement and poor choices like marrying my ex-wife got me to where I am. Still, the system is designed to punish the poor and reward the rich. Makes sense since the rich run everything. Living below your means is a tough pill to swallow for most middle class but it is the only way to get out of under the boot of the financial class. While CC debt is decreasing signifying some semblance of lesson from the middle class GenX'ers, student loans and mortgage debt is still increasing signifying something bad.

Tue, 04/29/2014 - 11:26 | 4707858 JMT
JMT's picture

While CC debt is decreasing signifying some semblance of lesson from the middle class GenX'ers, student loans and mortgage debt is still increasing signifying something bad.

at least credit card debt can be discharged in bankruptcy or you can just not pay and wait out the statue of limitations that you can be sued on it. Student loan debt or anything you owe to the govt as well as state & local taxes you don't want to play around with... 

Tue, 04/29/2014 - 12:19 | 4708128 sleigher
sleigher's picture

I am in the same boat as you.  The only difference being taxes.   F'in bitch...   Maybe Handle is right.  Probably better to just kill your spouse than to go through the divorce.

Tue, 04/29/2014 - 14:16 | 4708789 stopthejunk1
stopthejunk1's picture

Living beneath your means will get you solvent, but will not solve the inequality problem.

 

The rich would love for us all to just be content with less, and never question why their "means" far outstrip their social utility.

 

Yes, we should live within our means.  We should also demand an economic system that limits the distance between one's wealth/income and one's social worth.  The market cannot do this: the market only understands economic worth.  The old saw that entrepreneurs would not create the fancy toys that we have without the promise of becoming a billionaire is simply hogwash.  Ask Elon Musk whether he dreams about electric cars and rocket ships because of money?  Of course he doens't.  And if we could have asked Hank Rearden, even he would have told us that Ayn Rand was full of shit.  Tesla and Franklin and Edison and Newton and Einstein didn't do it for money, either.  Frankly, we don't need the ones that are motivated by profit: we don't need the Carnegies and the Rockefellers.  We do need the Fords and the Hersheys, and it is clear that they were motivated by their love for what they did, not by the attendant wealth.

 

It's possible to fix this inequality problem; other countries have begun to do so.  The "socialist" northern European countries (where people live much better lives than in America) have similar pre-tax inequalities to the U.S.; but their after-tax incomes are far more equitable.  Of course, they still have not addressed their wealth distribution problems.

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