Renting In The US Has Never Been More Unaffordable

Tyler Durden's picture

Over the weekend, when looking at the record high ratio in median new home sale prices to household incomes in the US, we concluded that US homes have never been more unaffordable for the average American.

 

What about renting? Isn't it intuitive that if buying a house has never been more expensive, then at least renting should be cheap(er).

Unfortunately no, because not only is renting not cheap(er) in either absolute or relative terms, but when observed through the prism of the only thing that matters, namely disposable income, renting - just like buying a house - has never been more unaffordable.

While it is no secret that rent inflation has been one of the few outliers that the Fed has gotten "right" in its ongoing reflationary attempt, with record rents and rising shelter costs accounting for most of rising CPI during the current centrally-planned business cycle...

... the question of whether these rising costs have left the average American behind has been largely ignored. Which is unfortunate, because with rental costs growing faster than disposable income for 22 consecutive months, what the chart below shows is that as of September, rent ate up more disposable income than at any prior time in history.

Which unfortunately means that while US housing has never been more unaffordable, renting in the US has... well, also never been more unaffordable. Meanwhile, the Fed remains perplexed by the "mysterious" lack of inflation and will keep inflating asset bubbles until it finally realizes that the simplest things in life have never been more out of reach of the average American (or, more likely, until the entire financial house of cards finally comes crashing down).

And so, congratulations dear middle class, or what's left of it, and don't forget to BTFD if you want a roof above your head.

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Bunga Bunga's picture

Yellen does not understand this.

Bes's picture

the rent is too damn high!

Fizzy Head's picture

Quote of the week:
"and don't forget to BTFD if you want a roof above your head."

ReasonForLife's picture

Rents follow Real Estate Values.   Renting is still MUCH better than buying in this market.  If you're buying your own home, you gotta think about it real well...

1. If you buy, you instantly loose thousands of your saved $$$ on the downpayment just to get in the door, and yet still have hundreds of thousands to pay for 30 years.

2. You still have a landlord, except it's the bank.

3. Even if you actually manage to pay your home off, you still owe properly taxes indefinately, which the government can keep raising indefinately.

4. You are trapped in one location and can't easily get up and leave if you find a better job, better place to live, etc. 

5. The market is at and beyond 2007 bubble levels, so you're buying at/near the peak.

6. You have to do all the repairs, maintenance, etc.  Which eats a large bulk of your cash and time you can be spending enjoying life.

7. You can't really get out of a mortgage early without serious consequences to your credit and financial standing.  However, if you want to get out of a rental lease, you can do so a lot easier.

8. If you're renting and fall in love with a home, you may be able to simply buy it from the landlord down the road (especially on the downturn when people get desperate), so your options are more open even if you're renting the place.

It all comes down to math and logic, if you're going to be emotionally attached to material things, this is where you get fucked by the system.  Those with least attachments are freest, and the freest are most happy.

NoDebt's picture

Do you think all of those same "costs" are not reflected in the rental rate? 

Interesting you believe landlords would not think about all of those same variables.

 

Ikiru's picture

I'm in the business, and I can tell you first hand that many, if not most, landlords DON'T consider all of the variables. And most of them are assuming a continued rise in prices. Also, the ones who ARE smart and consider the variables are buying the properties with cash. If you're not damn sure you're going to live at the same house for AT LEAST 7-10 years, it's not a good move to buy at these prices. So, ReasonForLife makes some good points in my opinion.

Conservative Calitopian's picture

The landlords I know are dumber than rocks, and someday they're going to have a wakeup call! Something is going to break, and it will be soon I suspect.

hhabana2112's picture

Paying cash was the way when everything hit bottom back in 2008. I wouldn’t buy now due to prices going up too much. Mortgages are fine, but the key is you want to pay the property off asap so that you can get that cash flow for the next place or to live off. I think it’s interesting how in the 2000’s, the house became an investment vehicle almost like a stock. It was no longer steady appreciation, but prices swinging up and down like a tech stock.

Mazzy's picture

EXACTLY!!!

No landlord is going to lose money especially considering the RISK that comes with any business, especially when dealing with tenants. 

Lets face it (and I'm not saying that ALL people are bad or trying to pick on any renters who may be reading this) right here and now: MOST renters are pretty shitty.  If they weren't they would save up a down payment and buy a home. 

EVERY landlord has horror stories, and if they don't then it's just a matter of time.  Regardless, costs will be paid....by the renter.

ReasonForLife's picture

Its called a lease, you lock in a price that cannot rise more than a set %.

hhabana2112's picture

As a landlord, I have seen more bad than good. Filthy pigs, and bad attitudes. Not a business for the light hearted. You gotta have a mean streak in you to run it right or they will walk on your corpse.

Regarding the price to rent, you forget the utilities like sewer, water, garbage many of us pay for and these prices never go down. Here in Sacramento, the big complexes now charge the tenants for water, garbage and even pet rent! I know a gal that pays $25 per month for that cat. This on top of her pet deposit.

The rent is up too because expenses for bringing up to snuff when they move out. Prices at Home Depot have gone up dramatically over the last 10 years.

Lastly, if they don’t like it than get a house. Save your money and stop buying bullshit. You would be surprised how many people could buy a house, but would rather pay rent. Interesting business.

Refuse-Resist's picture

Hmm. I wonder what happened to kill wages and drive up housing demand so much since 1965?

Hmm... What could (((it))) be???

 

 

ReasonForLife's picture

If what you saying was true, we would not have the crisis of 2007, people would not be buying up properties at the peak if they were smart, yet, somehow they continue hanging themselves.  What makes you think this time it's different?  The world looks crazier, dumber and more insane than ever before, like your comment.

ReasonForLife's picture

Are you comparing owing the banks 400k versus a $2000 monthly payment?  Where are you more in debt?

ReasonForLife's picture

Too bad you didn't actually read what I wrote, there are many differences between landlord and tenant which currently favor the tenant.

ReasonForLife's picture

There are more stupid people than smart, in case you haven't noticed, take a look at the state of the world affairs.

XBroker1's picture

Nice try. I love how renters try to twist the world around to work for them. lol Did it in the WSJ as well. Whatever home OWNERS have in costs, renters have that and then some (profit for the landlord and his spendthrift wifey). Renters can't just pick up and leave either. They have upfront costs of moving and lease start up costs. My biggest reason for being a homewner since age 23 is chemical sensitivities. I control what materials go in to the improvements of my homes.

Started w/ a 33k home back in the early 80's, that quickly doubled in value. I recently paid cash for my retirement home in TN. Under 250k, which is relatively cheap in the U.S. for a new home. If it does what I think it will do, I might even sell it and move again. It's already worth over 300k. When you're done renting, you have buttkiss.

Sanity Bear's picture

During housing bubble 1.0, I rented a condo for over $400/mo. less than what the owner was paying for mortgage alone.

They didn't care... they were getting the free money from just owning the place, they thought. (Turned out they bought literally on the day of the top of the bubble, oops haha.)

CultiVader's picture

So, no kids, huh? Having a home to raise the kids in and spare them a transient life is imperative. Ever here of putting roots down? Talk about materialism.

foodstampbarry's picture

Sure she does, she simply doesn't give a shit. Get assets, like Mr Yellin says, or get fucked, your choice.

holdbuysell's picture

On plan:

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, Tragedy and Hope

Mazzy's picture

In other words, as NEOCON1 put it: "Jews at it again?"

Most definitely good sirs, most definitely.

ReasonForLife's picture

Last I checked, evil and greed wasn't exclusive.

WorkingClassMan's picture

No, but 2000 years of "poisecution," spanning countless ages, races and nations versus one particular group of individuals leads me to think that the stink they accuse everyone else of creating just might be their own upper lip.

ReasonForLife's picture

And I assume you were there to witness these 2000 years first hand and not just going by heresay are you?

 

 

NEOCON1's picture

Jews at it again?

Mazzy's picture

That was pretty much going to be my comment, but I gave a more in-depth response since I'm in the building trade.

Mazzy's picture

It's all about SUPPLY.

There simply aren't enough units to go around.  Couple that with all the restrictions on zoning, the cost-prohibitive building codes (the sprinkler system scam, arc-fault breaker scam, etc.) and cost-ballooning environmental regulations and you can see why it simply isn't profitible for builders to go gung-ho and just do what they're meant to do.

Mass immigration certainly does not help.

The only thing that will alleviate the problem is more units.  Period.  Of course there are vested interests in not allowing that to happen.

red1chief's picture

Maybe mass emigration would help. If we can get over the wall...

Bigly's picture

Can't we just agree that rent or mortgage+tax is just a ball and chain around one's neck, regardless?

ReasonForLife's picture

So put up a tent and rid yourself of the suffering.

tion's picture

There are a lot of sub $50k houses in decent middle America blue collar neighborhoods.  Takes some hunting, nothing glamorous but prices never recovered because most banks won't bother mortgaging things in that range.  I think a lot of people even with lower incomes could save towards buying one of these cash if they made it a goal and exercised self-control and learned to be more frugal.  I was really shocked to see how many people were running around in BMW's in one of these neighborhoods I am familiar with but were still renting.... I wonder if the BMW's were on lease.. they used to be a rare sight in those parts.  

Go out into the sticks and replace the water bill with a well and the garbage bill with a burn barrel and you can lace your shoestrings even tighter.  I'm really surprised at how many people out in the sticks are running around in $60k trucks though, outsourcing the raising of their kids to instead continuously farm fiat to pay for said trucks.  Sigh.

spacemonkey99's picture

What state has decent sub 50k homes anymore?

XBroker1's picture

Mom kicked you out of her basement & now you want us to help you make the argument?

Dragon HAwk's picture

Buy a small Place, pay it off early and live Debt Free.

Xena fobe's picture

Too many investors and flippers in the market.  A regular buyer has no chance. 

Mazzy's picture

Investing is fine, but those flippers lose money in my market. 

"Hey!  Isn't that....isn't that lipstick on that pig?"

Even average people see right through some of the crap flippers try to pull.

Herdee's picture

Mike Maloney,episode7 from YouTube. find out what's really happening and prepare:

https://www.youtube.com/watch?v=P4_1pwsm5LY

Ben A Drill's picture

Either way your screwed. Taxes, insurance, HOA fees. The real killer is your job. How long is that job going to last? How about your spouse’s job? Yes things change drastically when one loses their job. How far will the commute be for the next job? If their is a next job? How long can you live on one income? Trust me, no more toys when the wife doesn’t have job.

Mazzy's picture

"The real killer is your job".

Nah, the real killer is just not having all those "toys" in the first place. 

Trust me, it's better to have never bought than to have bought and tried to sell at a yuge loss.  Sorta like the reverse of love in that regard.

freedom1798's picture

If we deported all the illegals, and I mean ALL the illegals, and abolished the anchor baby law retroactive fifty years, rents would drop.  Home prices would also drop, but not as much.   The unemployment rate would reach record low.  White people need to take back America.

Conservative Calitopian's picture

I and family have lived in CA since 1930's. It's the weather and agriculture that started it here- plus the gold of course!

It's the unfettered imigration and restrictictions/codes on buliding that has fired this housing market oven up.... and it can't be stopped unill there is a plague,  exodus due to taxation/ earthquake- or some other aweful event.   The renters I know in small towns USA Sierras are really worried! When push comes to shove; they're not going to be pushed anymore.... they have nowhere to run to...  Thank you Freedom 1798! 

AS FOR SANCTUARY STATUS, WELL IT CAN'T BE FOR THE CITIZENS OF CA IF YOUR'E GOING TO FLOOD IT WITH MORE IMMIGRANTS THAT NEED HOUSING, EDUCATION AND SERVICES!

freedom1798's picture

It can be stopped if ALL illegals are deported as soon as possible, and the anchor baby law is abolished retroactive fifty years.   If that happened, rents would drop like a rock.  Of course you know why that isn't happening.  Because rents would drop like a rock.

Yellow_Snow's picture

Bifurcating housing markets...  Prices cratering where I live...

Here in Central Texas, homes are dirt cheap and prices keep on falling, rents are like $450/mo.

My small home cost $49K two years ago and now it's probably worth about $45K

I wish home values would go up...  Your unlikely to recoup your home investment here.  This same home is worth like $125K in PA where other family of mine live

IPlayNaked's picture

Same here in Toronto.

Conservative Calitopian's picture

I don't pay rent but have evil property taxes.... have a very soft spot for any renter's plight plus any homeowner facing the evil of a tax lien on their house to pay for the free education of any child  that happens to arrive here.... I got a serious problem with fking property taxation. I would love to print up the Federal Reserve's amount of dollars they have printed up and shove it up the  county tax collector's asses! Now that would be justice....

[ this of course does'nt include the education of my Ca natives, which include old white and mostly Mexican families that have been here a long time. But as to the new foreigners.... they need to stop sucking on our tit and get the hell out of here!] [AND NO LAND SHOULD EVER BE SOLD TO ANY FOREIGNERS]....

peterk's picture

Most people in the property market are just ...well  PLAIN.. . Thats a nice way to say  DUMB.

The real estate market  has its cycles , just  like the  stock market. But real estate cycles  are longer.

Realestate is  SLOW compared to  financial cycles, i guess its because its a more general  market and i think its proper to classify it as a a retail market,  as oppsed to a specialist  market like  financials.

You must differentiate between  INVESTMENT homes and  a place to LIVE.

THe latter you should not care about in what it costs you, as you live there. If its too expensive then dont buy.

Like my stupid cousin who bought a  $200,000  japanese sports car, usinf home euity in a house not yet paid off....  he basically said " its a big investment"...... hes just confused. The car is an EXPENSE , not an investment.  Yet because the bank  was willing to lend him $200000 for it, he knows best!

Similarly , houses  are can be an investment or jus home. But with yellen and co.  its all about it being an investment now.

bh2's picture

Dramatically reduce immigration and rents will follow.

Refuse-Resist's picture

They have to go back