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Spot The Rental Bubble
Earlier we showed what was driving the housing market: nothing but rental construction, as the average American can no longer afford the American dream of a suburban, picket-fenced house. Next, we show where this building panic is taking place.
The 160% "answer" is highlighted in the charts below.
Source: Census
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what you can't afford a 1000 sq condo for 2.1 million? well then leave
That's not a bubble, that's enthusiasm. Wanna buy some tulips?
Irrational Exuberance
Moar 600 sf flats for $3K/month. What better way to live and raise a family. At least they are close to the subway.
Why the hell would anyone want to live in SF?
zh, finally you posted what wanted you to spot earlier .. I have been asking this question to you and many others on different forums.
Question: I buy a new house from a builder for $720,000 at 5% p.a. cost (interest on mortgage is 5% per annum). Find out the risk_free-zero_profit lease price for this property at 5% p.a. price_inflation? Yes, just based on the above information you need to find out what should the landlord charge the tenant as the first month rent such that the landlord does not make a profit. Also find out the next month rent if rents are raised monthly or find out the starting rent for the next year if the rents are to be raised annually.
My blog address is in my profile and was submitted at the time of accout creation.
http://just-a-thought-from-thinair.blogspot.com/
zh, I am waiting for your answer.
720,000 dollar house is a fucking mansion on a lake where I live, no one is renting those.
if every person knew the answer to this question world would have been a better place to live ... it is the duty of every one to know the answer to this question... today I have been asking this question all around the world .. to people and to presidents and prime ministers alike .. .. no body knows honest pricing is all about. nobody gives a damn.
You rent them mansions on the lake weekly for $5,000+.
"720,000 dollar house is a fucking mansion on a lake where I live, no one is renting those."
In SF, Vancover, or Sidney Austrialia, Its a one room shack and "maybe" it has indoor plumbing.
In High value areas, people are converting their homes/condos into barracks with perhaps 4 to 6 beds per bedroom. Then charging $3K a month per bed.
A former co-worker of mine, took a job in SF for $135K/yr. Can't afford to get his own place. Shares an apartment with three other people.
30 year mortgage = 1.8mil / 30 = 60,000 /12= 5,000
+
30% for maintenance/taxes/insurance (wild ass guess)
=
Rent needs to be priced at $6,500/month.
What's the point?
In reality anyhow, there are capital expenses, estimated upkeep and repairs, estimate insurances and taxes, etc. Lots of factors that come to bear on "profits" from a rental property. In addition, is the goal to pay down the mortgage? Just making the required payment of course does this per amortization schedule (potential capital gains, or at least can be considered an asset - assuming the market does not tank... which also begs the questions: risk free? How is this accomplished?)
Cost of everything is so high, making enough money to purchase a house and save for maintenance/upgrades is just simply out of reach for most people...even ones that make average salary. Good job FedRes you are really are contributing to stability of this nation's economy.
Shit, I would wager we are talking 90% of the country that cannot realistically buy a decent house, maintain it, save for retirement, and put 2 kids through school. And that is with both people working.
I think that number is low, 97, 98 is my guess.
You wouldn't really know it though, the golf course was packed yesterday.
I think this stuff is priced so high that even if you scrimped and saved its just impossible to get there so....fuck it I'm going golfing, I can pay my rent and still golf every weekend.
Considering forward projections, say you are probably right! The vast majority is getting squeezed from every angle.
Modest house, reasonable car, adequate insurances, decent education, and retirement at 60+ which does not involve Alpo and a refrigerator box... hmmm.... gonna have to make some choices here. Can't have all this anymore. So, folks throw off the retirement for now. Then start slicing the insurances hoping not to get really sick. Make the car last longer, maybe a 10 year auto loan on a new one. Screw any non-mission-critical house repairs that don't get the HOA crawling up one's ass. And so on... every day one step closer to an unresolvable financial crisis.
You forgot the Reverse Mortgage
Also, our food supply is so absolutely horrible in this nation. Eating organic products costs a fortune, it's insane how much you have to spend to eat food that isn't tainted with poison or made of plastic.
Yeah. I know for sure. In my house we only eat "real" food. Is getting stupid expensive. And the problem with growing food at home (garden) is time. Hard to keep up when my wife and I both work full time and are involved (as we should be) in our kids school activities, etc. Been working on DIY hydroponic systems this year that are showing some promise though. Wish I grow some steaks in it though. lol.
Hey Center, here's a shameless pitch for Grandio Ascent greenhouses. You can grow almost year round.
Basically water the planters and pull off tomatoes and peppers. Check it out.
If you would get into aquaponics, then you could simultaneously grow a solid protein source... Won't taste as good as beef, but will get the job done... worst case scenario, you can barter for some beef.
Interesting how it seams we are being worked and expensed right out of being able to reproduce. Ahh the progressive's dream come true. So when do the pitch forks and torches get broken out.
exaclty. Obama has fundamentally transformed the USA into a 3rd world serfdom. Can't fight the system so just go golf
Hey, he walks the walk.
Naw, I saw Obama's "Julia" cartoon. Everything works out great in the end.
go long---->mobile homes!
Yup!
Tiny house nation.
Except now those cost 80K+
And you can't put them anywhere you want.
go long------> vans and cardboard
Stealth Rv'ing
https://www.youtube.com/watch?v=M0sg99odF3Q
Yeah, I forgot that most people these days don't know how to swing a hammer or wire a circuit. And can't imagine living more than 15 minutes from a Walmart.
OK. That's unfair actually! It really does boil down the jobs. Proximity to major population centers is the biggest factor. Housing options therein options are limited.
This weekend I’m’ buying two ‘Bagsters’ and will break-up two 12’-0” x 8’-0” driveway squares.
My team of illegals want to much $$$…..
"Major population centers" make me ill. If I were to give advice to any young sprout it would be, choose a vocation/profession that allows you to live well away from a "major population center."
Yeah...? Where...? All they have to do is raise your monthly plot fee, and what are you going to do...? This ain't about cheaper living, it's about Greed - writ Large...
Tents are cheap.
Word is double-wide futures will be listed on the CME soon...
imagine the paper on double-wide. They could supress the price to like $15K!
cant. Basically no loan industry for mobile homes. Unless you have 50K cash, you are SOL. If you have 50K cash, you are not buying a mobile home lol
Ha ha, one mans "mobile home" is another mans "trailer house."
Shit man, my refrigerator box is "mobile."
Even the brokers are inflated in the NYC area:
https://instagram.com/emilyhelenbarry/
Why is she reading a book on advanced selling strategies when she's already sporting a set?
I see two big bubbles there
Not hard to imagine what happens when she goes through airport security.
(Or leaves Cosco.)
Hey, the Barista's, burger flippers, prostitutes, maids, and landscapers/pool cleaners that service the elites need a place to live too!
700.00 for a one bedroom ghetto/ crack infested apts is the norm in most cities.
Minimum $1000 in Newark, Jersey City, or any of the boroughs of NYC
$1500 per month for small one bedroom suite in Vancouver, in a nice area
How much for the HazMat suit to shield oneself from smug CommieCanuck liberals?
How much for the HazMat suit to shield oneself from smug CommieCanuck neocons?
It's twice that in any livable area in NYC and everywhere in SF.
Maybe good use will come out of all of the excess shipping containers. Have you ever seen how high they are stacked on a ship? I guess the ones on the top will be penthouses.
If you have a few minutes to kill, look for rentals on craigslist in NJ for $1000 or under. Thanks to Benny, Barry, Janet, and the FED policy of pouring trillions into the housing market allowing Hedge funds to purchase all starter home inventory for cash, no one can afford to buy a home anymore. Its getting to the point where tent cities will spring up again as rental prices are growing to 50% of after-tax income.
The only solution for most American's is to just quit. Get on the govt dole and drink freely from the tit. You can get Obamacare/Medicade, Section 8, an Obamaphone, Free cable, EBT, and who knows what else.
Work just doesn't pay off anymore.
lending requirements are going to tighten, when you get to zirp and you still cant get any inflation you have no choice but to tighten lending. now those people paying twice as much for rent as they should be paying will have the extra burden of higher consumer credit costs. i made this point once a long time back, that when banks borrow from the fed for zero interest, and consumers pay 20% on a CC, whats wrong with this picture? usury and loan sharking are big business (montel williams sells his people on pay day loans, money mutual) no presidential candidate should run against a retiring president, but Obama has really impoverished HIS people. its possible jobs will return, but after ten years of entitlements who wants to get off the couch, and thats when the hardliner gets elected, who cuts all this free stuff off. its all part of the political cycle. gonna get worse before it gets better
Believe it or not, lending requirements are considered to be tight right now. I can only speak locally, but the market here is dominated by people running around with cash, looking for 3bd/2bath for rental investment.
I can't believe the shit I am seeing. We built an new house in 2013, pulled out all the stops on details . . .My real estate agent is showing me shitholes in the $250k range that cost way more per square foot than my own house. And they are selling.
W. T. F.
I've found locally that the selling price of a home, per square foot, is largely the same, regardless of the condition of the home, all else equal. Apparently, as they age, homes defy any deterioration. This has lead to new home construction (for anyone with any sense) and sprawl. The real estate agents will dump their clients in something they've got negative equity in, just for the hell of it...
Yes sir. ONe does tire of seeing half of his earnings taken away. Then wondering why he's sacrificing the majority of his waking hours just to bring home less than people on full bennies. No more maximization of productivity. Fuck that.
Obamacare has helped me decide on my new vocation: generate as little income as possible. And that will remain my career until O-care is revoked and/or the government goes down the shithole into which it belongs and never comes back. Or till my survival time line ends, whichever comes first.
I refuse to work hard to support handouts to banks, corporations, the MIC, EBT, Section 8, illegal immigration, to fund false flags, and to fund these lawmakers that hate my freedom so much that they work tirelessly every day to take it away and replace it with regulations, cops, and fines/imprisonment.
Again, FUCK YEAH!
There was a surge in building permits filed by apartment developers in NYC in order to take advantage of a tax break that expired June 15th. Watch permits there fall off a cliff in the July numbers. In the meantime, a building permit doesn't necessareily mean a project is going to be built...
Excellent driver analysis and totally true. It's called 421a for anyone interested. Poor doors, bitchez!
http://ny.curbed.com/tags/421-a
i think its pretty obvious the mortgage lending business is going to tighten up considerably. even hedge funds are in the rental game. after Las Vegas runs out of water (take a look the El Nino precipitation path for next year, it bypasses the upper portion of the Co River basin) millions of people will leave, causing untold relocation problems, unemployment, refugee camps. there are mostly people in the services industry. mexicans may discover old mexico is a better place to live.
They are measuring the el nino by the warm water in the pacific...they take no consideration that the warm water may be beause of fukishima...which it probably is...they have screwed up then earth so bad, its difficult to use history as a guide.
And meteoroligists are totally in the dark.
A nuclear power plant gone awry could heat up the Pacific Ocean? That is a massive heat sink dude. Reminds me of the term "drop in the bucket".
this is one link, along with dozens that show the theory of radioactive waste is warming the pacific ocean....and the theory is a valid theory...You dont have to agree, but unless you are learned extensively in the subject, putting me down is not appropriate.
http://optimalprediction.com/wp/fukushima-radioactive-contamination-is-r...
Who is putting you down? I am an engineer who understands the concept of heat capacity and orders of magnitude. Who needs links? I will take a look anyhow.
You know, we might be overusing the term "bubble." It seems like every spike in every chart gets labeled a bubble now. "Bubble" is a very specific term, denoting a speculative mania in a certain asset class characterized by the entry of unsophisticated investors using their limited funds to chase returns without consideration for fundamentals. Outside of the Chinese stock market, you'll have a hard time finding many bubbles today. The truth is that the Fed is now the buyer of last resort. Whenever a banker-run market goes to crap, the Fed will step in with free money to buy up what ails. (Notice I say "banker-run markets," any other market will be left to die). When you have a committed and very sophisticated buyer with unlimited funds buying assets at any price, you cannot have a bubble, by definition. Please let's stop imaging markets and look at what we have.
Everyone is getting into the act in the ATL. Even churches. One is trying to kick out a school for the disabled on a parcel it owns in order to build mid-rise apartments (I kid you not). No other multifam let alone 4-5 story units nearby. Another church right around the corner from me sold a parcel smack underneath high tension lines to developer who is trying to rezone to -- multifam. Who cares if the kids glow in the dark so long as the check clears?
Most Americans worship mammon despite where they go on Sundays or words to the contrary.
Profit Uber Alles Bitchez. That's the American Way! Can I get a FUCK YEAH?
After last decade's housing debacle, many people don't want to buy a house period. Many more people simply cannot qualify, despite the nonsense you might read it is way tougher to get a mortgage now than it has been in at least 50 years.
Supplying the market with what it wants hardly constitutes a "bubble".
But the market is fixed. I can assure you that loan officers everywhere pray daily for the perfect borrower: an employed black couple with a hispanic log somewhere in the pile. Wards off the disparate impact police.
a huge monkeywrench in getting approval from FHA is they now count student loans in the dti ratio. No more deferrals. Minimum of 1% of outstanding balance unless payments are in place (nightmare for ibr or icr payments).
the logic cracks me up. it goes like: people can't afford their mortgage payments and thus will have to rent and the rent will be about the same as the mortgage they couldn't afford. never go full retard.
They don't have the choice to begin with. But you forget that you can't write off 20,000 in Rent payments from your income. You can write off $20,000 in mortgage interest.
Sounds like my wife. The more we spend, the more we save.
It is worse than that because the mortgage interest reduces your taxable income. The first thing anyone smart does who starts paying $10-20K a year in mortgage interest does is increase their exemptions, which increases your take home pay.
increases your take home pay
Yeah, and what you didn't pay to the tax assessor, you pay to the bank instead. What a deal!
I have a 2000 s.f. house with a full basement with a 20x24 ft. screened in back porch, good roof, on a woo0ded lot that overlooks my city, in a pretty good section of town - needs only minor work. Its listed. I can barely get anyone to look at it.
There are some super house bargains for young potential house buyers. I think about how much better of they'd be if they weren't paying that $200 or so PER MONTH to 'stayed connected' and built wealth with savings and the purchase of real assets. But, of course, they blame others.
Proximity to money printing centers may have something to do with it... Well that and the fact that northeastern states have the largest governments except for maybe IL and CA in terms of # of gov 'workers' per citizen.
FUCK YEAH!
Sadly though, for those of us in the hinterlands far from the money printing don't see as much propsperity and economies are much worse outside the money bubble corridor that stretches from Southeastern Maine to DC.
Crap, right when I'm looking for an apartment... $1200 for a 1-bedroom made me suspect something was up.