US Middle Class Stays Dead: Homeownership Drops To 48 Year Low; Median Asking Rent Soars To All Time High

Tyler Durden's picture




 

Three months ago, just as the last Census Homeownership and residential vacancy report hit, Gallup released its latest survey which confirmed just how dead the American Dream has become for tens if not hundreds of millions of Americans.

According to the poll, the number of Americans who did not currently own a home and say they do not think they will buy a home in "the foreseeable future," had risen by one third to 41%, vs. "only" 31% two years ago. Non-homeowners' expectations of buying a house in the next year or five years were unchanged, suggesting little change in the short-term housing market.

As Gallup wryly puts it, "what may have been a longer-term goal for many may now not be a goal at all, and this could have an effect on the longer-term housing market."

Earlier today, the US Census released its latest homeownership data, which confirmed that for what is left of America's middle class, owning a home has become virtually impossible, with the homeownership rate plunging from the lowest level since 1986, or 63.7%, to just 63.4% the lowest reading since the first quarter of 1967.

Three months ago, when compiling this data we said that "at this rate, by the end of the 2015 and certainly by the end of Obama's second term, the US homeownership rate will drop to the lowest in modern US history." That moment, as shown on the chart below, came far sooner than ever we had expected. The only question is whether the lowest homeownership print on record reported in 1965 and standing at 62.9% will be taken out in the next 2 quarters or in early 2016.

 

There is no surprise why this is happening. As Bloomberg notes, the biggest culprit is wage growth which "hasn’t kept up with surging home prices. The average household income in June was 4 percent below a record high set in early 2008, even as unemployment dropped to its pre-recession rate, according to Sentier Research LLC."

“We’re still suffering the effects of the housing collapse and the financial crisis,” said Mark Vitner, senior economist with Wells Fargo Securities in Charlotte, North Carolina. “We may have another percentage point to go before we see a bottom” in the homeownership rate, he said.

Yes, it is safe assume that the imminent lowest homeownership print in US history may be the "bottom."
Still, the ongoing death of the middle class is not bad news to everyone: landlords, of which private equity firm Blackstone recently became the biggest in the US, are reaping unseen profits courtesy of runaway inflation in at least one item: rent.
Because as homeownership falls, demand for rental housing is booming. The vacancy rate for rented homes in the U.S. fell to 6.8% in the first quarter from 7.5% a year earlier. It was the lowest first-quarter rate since 1986.
And the punchline, which should come as no surprise to anyone: the median monthly asking rent just rose to a record $803 across the US.

Words, however do not do the relentless increase in rent justice, so here is something far better. Charts.

 

The same, only broken down by region.

 

And as we showed just two days ago, these are the cities where rents have increased by at least 10% in the past year:

Our condolences dear former members of what was once the world's most vibrant middle class and is anything but any more. Our only advice, the same as last quarter: BTFATH as you turn off the light, and pray that central banks never lose control of this so-called "market" or else having any roof above your head will promptly become an unaffordable luxury.... As many Chinese investors just found out the hard way.

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Tue, 07/28/2015 - 11:21 | 6362983 Harlequin001
Harlequin001's picture

'Asking' rent?

That's not 'getting' rent is it? Which could be significantly lower.

You can't get blood from a stone...

Tue, 07/28/2015 - 11:23 | 6362993 UndergroundPost
UndergroundPost's picture

Grab the popcorn and watch all of the "experts" laugh - wait, not just laugh but disdain, ridicule and berate Peter Schiff on Fox back in December 2006 for saying that we were no where near a "housing bottom".

https://www.youtube.com/watch?v=_HFNJw7xGSA

Those who forget history...you know the rest.

Tue, 07/28/2015 - 11:36 | 6363052 knukles
knukles's picture

Talking about history, so glad we're redacting it at ever increasing rates these days in the name of political correctness.
Probably wind up working ever so well.....

Tue, 07/28/2015 - 11:39 | 6363061 NoDebt
NoDebt's picture

That plunging line in the first graph... that's going to bottom out and rebound any day now.  Any day now.  Any day now.

Give it a couple years and the headline will be "Home ownership in the US lowest ever in recorded history"

 

Tue, 07/28/2015 - 11:51 | 6363112 Countrybunkererd
Countrybunkererd's picture

Who wouldn't rent, with all the housing credits to illegals and others.  Just don't expect it to only need a carpet cleaning for the next renter.

Tue, 07/28/2015 - 14:38 | 6363861 Handful of Dust
Handful of Dust's picture

A dirty carpet may be the least of the landlord's problems. These days some renters are seriously destructive; my neighbor thought he could become a wealthy landlord after watching all the hype on TV. He bought two rentals. Lost his shirt in repairs and lawsuits ...huge holes in the wall in one and the other resulted in a big lawsuit when someone got hurt in it. They sued the tenant and landlord-him. Oh yeah, the eviction costs.

 

Have fun!

Tue, 07/28/2015 - 14:51 | 6363914 Theosebes Goodfellow
Theosebes Goodfellow's picture

Sadly Handful, this is the end result of the "Entitlement Mentality".

~"Homeownership Drops To 48 Year Low; Median Asking Rent Soars To All Time High"~

I wonder if this is what Obama envisioned "Hope and Change" to be. The real question is how he could have ever thought it would end with anything but this. Talk about a mental deficit...

Tue, 07/28/2015 - 17:40 | 6364520 847328_3527
847328_3527's picture

+1000

Tue, 07/28/2015 - 12:12 | 6363221 Antifaschistische
Antifaschistische's picture

I would like to see property tax rates blended into this analysis somewhere.

In Houston, you could pay cash for a house, and then pay $1000 per/month for property taxes.  Or $2,000+ if your in the $1 mill neighborhood.

if you buy a home, you're still renting from the tax man.  The way I see it, everyone with an address is a renter regardless. 

Tue, 07/28/2015 - 12:20 | 6363254 Harlequin001
Harlequin001's picture

Ya hit the nail on the head with that one.

On what basis does any government tax you on what's yours?

Trading or transfer I can live with, but taking money off you for what you own?

That's stealing isn't it?

Or maybe you're just on the hook for the whole loan but you don't really own it anymore...

Tue, 07/28/2015 - 12:43 | 6363393 Totentänzerlied
Totentänzerlied's picture

"On what basis does any government tax you on what's yours?"

The power to kill you with impunity.

I do weddings too.

Tue, 07/28/2015 - 12:22 | 6363267 Creepy A. Cracker
Creepy A. Cracker's picture

Very true.  And statistically, the areas run by the "compassionate" leftists have the highest property tax rates and are quickest to throw you and your family out on the street, selling your house for their missing cut, if you don't pay your rent (tax) - as they write laws against the repo man.  Yep, compassion.  They are SOoooo compassionate.  Now give them your money so that they can buy more votes.

Tue, 07/28/2015 - 12:05 | 6363181 lasvegaspersona
lasvegaspersona's picture

As long as the Feds can borrow and spend they will be able to force their opinion on the masses. When they run out of money to pay the stooges....there could be problems. Imagine the NOAA climate scientist who has been forced to skew the data for years. He finds out he is not getting a paycheck this month. What do you suppose his final report wwill look like? Or the cops being laid off. Will they be willing to put life at risk to do confiscation?

The Fed can remain detached from reality because they can now create it. This ends when the money fails to perform.

Tue, 07/28/2015 - 11:25 | 6363000 Tasty Sandwich
Tasty Sandwich's picture

You can if you beat someone with it.

Tue, 07/28/2015 - 11:26 | 6363008 Harlequin001
Harlequin001's picture

Hmmmm...

I could argue that one...

Tue, 07/28/2015 - 11:40 | 6363066 max2205
max2205's picture

Where's that guy yelling THE RENTS TOO DAMN HIGH!

Tue, 07/28/2015 - 11:50 | 6363107 Harlequin001
Harlequin001's picture

I'm over here...

Tue, 07/28/2015 - 11:56 | 6363140 Handful of Dust
Handful of Dust's picture

It's the " Yes we can! " economy.

Tue, 07/28/2015 - 11:21 | 6362984 Temporalist
Temporalist's picture

The problem really starts when they start taxing parking spaces for the people living in their cars.

Tue, 07/28/2015 - 11:22 | 6362990 Harlequin001
Harlequin001's picture

No it isn't. When the bill arrives just park next door.

Fuck 'em...

Tue, 07/28/2015 - 11:26 | 6363009 Spitzer
Spitzer's picture

Move to Canada where its perminantly 2006. Just imagine 2006 year after year after year. Its great !

Tue, 07/28/2015 - 12:59 | 6363032 Harlequin001
Harlequin001's picture

Me, I'm still stuck in 1984...

Tue, 07/28/2015 - 11:21 | 6362986 pods
pods's picture

The real economy is wrapped up by a python.  As more serfs lose homes and more upper class need places to hide $$, rentals will increase. Already seeing it in my hood.

We would leave but where do you go?  With prices inflated and poised to drop like a stone, you just can't logically make any kind of move right now.

pods

Tue, 07/28/2015 - 11:24 | 6362998 Harlequin001
Harlequin001's picture

We're renting. And with the recent pluge in oil prices and all the oil and gas guys buggering off, we're moving.

Looking to cut my rent in half now...

Tue, 07/28/2015 - 11:33 | 6363041 Spitzer
Spitzer's picture

Move to Canada. Its been over a year since oil prices collapsed. Calgary house prices still in 2006 range. Vancouver and Toronto are still rising. No sweat !

Tue, 07/28/2015 - 11:38 | 6363059 Harlequin001
Harlequin001's picture

Yeah but the taxes suck...

Tue, 07/28/2015 - 11:43 | 6363071 overmedicatedun...
overmedicatedundersexed's picture

golfed with an RBC realestate exec this weekend..he said toronto realestate is on fire..other parts of canada not so much..

fueled by foriegn buying ..a great system ship our wealth overseas and then sell our assets to those who got the business. the path to the third world just got shorter for all the west.

Tue, 07/28/2015 - 11:48 | 6363092 Countrybunkererd
Countrybunkererd's picture

A comment RE California yesterday got me thinking... Incorporate a new business, get a personal loan to go into the new corp, buy a house in the corp, rent it back to self and write off all improvements, etc. within the corp.  Forget the Schedule A mortgage deduction, use it all direct expense via corp.  It would work for a while... but the downside of getting caught keeps me from digging deeper.  I don't suggest this, i just can't stand my tax dollars going into this hole we still call America.  We think about leaving weekly, but it is the same or worse everywhere.

Tue, 07/28/2015 - 13:44 | 6363653 MachoMan
MachoMan's picture

Not only are you not the first person to think of this, you're probably not within 5 digits of the first.  I wouldn't suggest it, as there are so many very easy ways to catch you doing it...  You can rent a room to yourself for a home office or sometimes rent your house to your corp for business purposes, but there are a lot of caveats that go along with it...

Tue, 07/28/2015 - 12:06 | 6363197 lasvegaspersona
lasvegaspersona's picture

pods

as Tom Petty said: The Waiting is the Hardest Part.

Tue, 07/28/2015 - 14:28 | 6363817 PTR
PTR's picture

logically

There is the fallacy of your conundrum right there, pods.

 

Insane times, insane actions.

Tue, 07/28/2015 - 11:21 | 6362987 FreeShitter
FreeShitter's picture

15K property taxes.....FTW.

Tue, 07/28/2015 - 11:23 | 6362996 Temporalist
Temporalist's picture

We can fix this all with $15 minimum wage.

Tue, 07/28/2015 - 11:33 | 6363038 Temporalist
Temporalist's picture

Should I have said we can fix this all with $15 minimum wage and oral sex from Bernie Sanders?

Wed, 07/29/2015 - 16:14 | 6368472 Not My Real Name
Not My Real Name's picture

You should have quit while you were ahead.

Tue, 07/28/2015 - 11:28 | 6363007 JustObserving
JustObserving's picture
US Homeownership Drops To 48 Year Low As Median Asking Rent Soars To All Time High

But we have no inflation.  Old Yeller says that, so it must be true.

US inflation data is all fake.

If you plug in real inflation then GDP was 8.9% lower in 2014

Just look at how we fix inflation:

Chapwood Index shows real inflation in US.

In 2014, it was 9.7% - 1212% of official US inflation (0.8%)

http://www.chapwoodindex.com/

The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.

Let's use a Zero Coupon Bond Calculator to see the effect of fake inflation on a $1000 bond  for 30 years:

A zero coupon bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity

With Fed's 0.8% fake inflation, Zero Coupon Bond Value = $787.38

With Chapwood inflation of 9.7%, Zero Coupon Bond Value = $62.20

So with Fed's inflation assumption, you can borrow $787.38 for 30 years and pay $212.62 as interest

With Chapwood inflation, you borrow $62.20 for 30 years and pay $937.80 as interest

With Chapwood Index, if you borrow $787.38 for 30 years, you pay $11,871 as interest.  Or 55.83 times  that with the Fed's inflation  adjustment.

Tue, 07/28/2015 - 14:10 | 6363757 Sam Clemons
Sam Clemons's picture

So in that sense, doesn't it make sense to take out a mortgage?  Even though you're paying back the principle 30 years later, and not the interest, you're paying it in dollars worth far less.  And your rent (mortgage payment) doesn't continue to inflate the way rents are.

I'm considering buying a house.  Yes, at these insane levels.  I think the Fed is going to turn on QE4 if anything goes wrong with their interest rate rising plan, and the real estate market is going to continue to blow up.

All that money's gotta go somewhere.

Tue, 07/28/2015 - 20:51 | 6365300 englishvinal
englishvinal's picture

Sam... just don't.   You will NOT like your future if you have taken your resources to "buy" a house in this economic mess.

I have 300+ hours of real estate and a lot of years of experience and I warn you ..... just don't.

Tue, 07/28/2015 - 11:27 | 6363014 knukles
knukles's picture

This is exactly why Obama should be elected for another 6 terms.  To rectal-fy these wrongs, to make housing available to every last single piker who doesn't have ownership and lets the place go all to crap on governmental money.  In fact, by putting the section 8 debacles in with the Beverley Hills crowd might make somebody change their behavior.  Assholes. 
And another thing.  It's all caused by Global Warming (Man Made, dontcha know)

https://stevengoddard.wordpress.com/2015/07/27/mind-blowing-temperature-...

http://www.dailymail.co.uk/news/article-3176630/Video-shows-Hillary-Clin...

Tue, 07/28/2015 - 11:27 | 6363015 onewayticket2
onewayticket2's picture

Baby boomers are not helping things.....they never saved and need the remaining equity in their homes to pay their rent as they downsize.

Tue, 07/28/2015 - 11:33 | 6363037 Tasty Sandwich
Tasty Sandwich's picture

They could do us younger people a favor and die.

Tue, 07/28/2015 - 11:58 | 6363147 roadhazard
roadhazard's picture

Same to ya, son.

Tue, 07/28/2015 - 12:11 | 6363205 Countrybunkererd
Countrybunkererd's picture

Wait until their dieoff to see a REAL slump in home prices.  That coupled with their use of their offspring's money for their second homes in Florida and such will really get the prices going...downward.  Japan 3.0? 3.8? coming soon to the USSA.

Tue, 07/28/2015 - 20:17 | 6365161 Bobbyrib
Bobbyrib's picture

"That coupled with their use of their offspring's money for their second homes in Florida and such will really get the prices going...downward."

Do you mean Baby Boomers using their own money to buy a winter home in Florida then their kids selling it as part of the estate when they pass? I don't get how Baby Boomers would use their offspring's money. Identity theft?

Tue, 07/28/2015 - 13:21 | 6363533 actionjacksonbrownie
actionjacksonbrownie's picture

Actually, most of us did save. However, we were promised a 7% return on our savings, and are now offered 0.75% "safe" return. So I guess we are to blame for not saving $6 million dollars each to fund our middle class retirement.

 

Sorry... I should have read the fine print.

Tue, 07/28/2015 - 13:47 | 6363671 MachoMan
MachoMan's picture

If I show up in your bedroom, wearing nothing but a ski mask, with a raging hard on and a napkin of chloroform, are you going to believe me when I say I don't want to rape you?  However, I doubt your apathy and naivety will keep you from stealing from me to pay for these "promises."

Tue, 07/28/2015 - 13:50 | 6363687 Babaloo
Babaloo's picture

You weren't "promised" a 7% return.  In fact, one could argue the risk-free return should be zero. 

Tue, 07/28/2015 - 20:21 | 6365177 Bobbyrib
Bobbyrib's picture

The Baby Boomers finished the gutting of the US economy. You guys are the ones who officially put "banana" in the term Banana Republic (not the shitty store owned by GAP). There is no patriotism left in this country, only greed.

I was happy to see half the generation did not save for retirement.

Tue, 07/28/2015 - 21:05 | 6365348 englishvinal
englishvinal's picture

Clearly you are NOT "happy" with me then...... I can't WAIT to spoil your day...... My husband and I not only saved, but we lived far far beneath our "means"...  And even worse, we bought 43 acres of property in a country that is now part of the BRICS group..... where the weather is good, the soil is fertile, the ocean is close, the people are decent family oriented human beings, ...... a property that has appreciated in value over the 20 years to a good peice of change in ANY currency today.

We saw the handwriting on the castle (empire?) walls, and paitently worked to make provisions for "what if"......  We never drew unemployment, or welfare... I still do not collect SS... I STILL work doing foot baths, massages, facials etc, and I am 76 years old.

But I know that that 43 acres is there secured and waiting if I need to have a place to go.

What we did takes some measure of courage, and I can't fathom why people in the US are scared, nervous, apprehensive, but still the are determined to "sit in the middle of the RR tracks, trying to figure out a way to survive the impact when the train hits them"....   LEAVE the country for goodness sakes. If there is ever a day when "things get better", you can always come back to the US, (or whatever it is called then).

Tue, 07/28/2015 - 11:28 | 6363020 WTFUD
WTFUD's picture

Long Tents!
Refugee Camps are the future with Boko Haram represented by Blackstone & .Gov monthly raids.

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