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The "New Normal" American Dream Of Renting Is About To Become Very Expensive
Much has been made recently of the government's renewed efforts to spark the housing market from its dismal slide, however we fear there are yet more unintended consequences lurking just around the corner. The various ideas being posited for a broad REO-to-rental program is one of these steps as BofA points out in accommodating the dramatic shift from ownership to renting (with 4.2mm new renters and 1.2mm fewer homeowners since the end of 2006). Of course removing foreclosures from the for-sale market reduces competition for voluntary sellers - which should help to support prices for non-distressed homes but here is where the crux of the unintended consequence lies. We have a squatter epidemic. There are millions of 'homeowners' currently living mortgage-payment-free (by choice) who will soon be forced (as the foreclosure process ramps up post-settlement) to pay rent (since they will not qualify for a mortgage). This will have the double whammy effect of reducing overall discretionary consumption spending (as rent is greater than 'free' - unless the cardboard box is preferable) and driving inflationary forces into rental costs (something we are already seeing). Of course these are the much larger second-order effects and we will only be told of the primary benefits of clearing foreclosure inventory, but at the margin (along with gas prices) the household will have less discretionary iPad-buying ammunition as opposed to more.
Since the end of 2006 there are 4.2 million more renters and 1.2 million fewer homeowners...
Distressed property prices continue to turn down (and re-accelerate) as the foreclosure pipeline starts to unclog...
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Rent Seeking
Bitchez
wonder why Obamunist doesn't let this robosigning debacle drag on through after election. Clearly the addiontal billions of dollar on rent could very well boost spending. Maybe Barry is not so smart after all.
get those properties on the market and drive down rents and prices...bingo, MORE discretionary spending for the legions of renters.
"get those properties on the market and drive down rents and prices...bingo, MORE discretionary spending for the legions of renters".
From what base !? Any increase in discretionary spending will be abosrbed into higher fuel prices due to peak cheap oil and deteriorating refining infrastructure, higher medical and insurance costs, higher food costs, and ever flattening to decreasing real world inlfation adjusted wages.
Sure I'm all for real mark to reality.....ugly, brutal, reality....of all these properties. But this is no panacea for what ails us. And in fact it will make matters far worse in the short to medium term. Not saying it shouldn't be done...but let's get real about the concequences and our ability both financially, economically, and pyschically to handle it.
They intend to let those properties lie vacant until they melt into the ground.
The only thing that will stop this is local governments forcing sales.
And as far as this is concerned:
the consequences to me and my family are NOTHING compared to the BANKS. Pensions, SS, etc. are allready looted from currency debasement. Those that didn't prepare aren't likely to take steps now, so they're going to take in in the ass.
So to the whole fucking thing I say: SO FUCKING WHAT!?
Yep. Local governments are presently on 2006-2008 vintage depending on your jurisdiction... in short, properties delinquent due to the 08 crash (and since) haven't really seen their day in the sun yet... should be next year though.
There IS a cost to shadow inventory... and it WILL be paid if the banks want to eat their cake and have it too.
So to the whole fucking thing I say: SO FUCKING WHAT!?
Hey Lloyd.....how's it shaking? Still doing God's work?
Rent seekers rejoice! You win either way! Society loses either way.
Anyone having skated mortgage free thus far has only been waiting for the toll to drop. Time to pay your dues.
And isn't a 30 year mortgage just a glorified rental with tax advantages anyway?
You sure there's a tax advantage to owning? The marginal income tax savings on the alternative-minimum-tax-adjusted mortgage interest is often much less than the annual property taxes.
Correct. A tax advantage is never a good primary reason for a decision. Think of it this way, if you don't make the interest payment, you don't have to earn that money, with all the associated taxes attached to earned income. The rule of thumb is 2 to 1 (hey, that rhymes!) That is, each dollar not spent/earned is worth 2 dollars spent/earned due to taxes, vehicle expenses, secondary expenses due to employment, etc.
It's a deflationary argument, one which the masses will slowly wake up to.
no there is no tax advantage. Do the math. It's all an illusion. Either you pay uncle sam or you pay the bank. If you pay uncle sam, the bank will eventually get it any way. Mortgage deduction is fraud, illusion for the sheeple. There is one critical difference; you take all the riks when you take out the mortgage. I rather pay uncle sam; if I make more I pay more, if I don't make anything I don't pay. WIth the bank, you pay regardless, or you'll be on the street. Hope this clear up the confusion for anyone still thinking that mortgage deduction is a gift.
Not only is it not a gift... it's a sort of bribe as well. But the point of the article shouldn't be missed. It's deflation in the things you own and inflation in the things you need. There is nowhere to hide. Suckers who own homes (raises hand) will be punished, but there won't be easy relief in paying rent. I agree with your position that renting is safer than owning, but there aren't a lot of great moves here. Isn't credit money grand?
It's deflation in the things you own and inflation in the things you need.
Great description of what's happening. And spot on. The inflation-purists and deflation-purists argue 'til they're blue in the face here, not realizing that it's both, and just as you say. And it will get worse. The more inflation there is in staples (things you need), the less fiat will be able to service the debt underlying the durable goods (things you own).
+100
Because of the biflation you mentioned and inflation in general, I'm glad to be a renter. Perhaps we'll get back to the day when rents were collected in part commodities too as a hedge against inflation. If I were a landlord, I would be seriously tempted to write the contracts with silver as a % of the payment. My landlord is clueless about the economy though and cannot raise my rent any more than 3-5% a year regardless of what happens in to the market. The law is of course on my side as a renter too, not that I plan to abuse the relationship.
The only way I'll own a house again is when I can buy it out right. Even then of course it really isn't mine due to property taxes, but at least them it is not as bad of a decision over all.
that's right. Owning outright... it's the least bad decision, but out of most people's grasp. But you are correct on property taxes... we are all serfs.
Do not for an instant think that the law is on your side as a renter... ask yourself who has the stronger lobby, landlords or tenants?
In my jurisdiction, if you want to contest getting booted out on your ass, then you have to pony up the rent into the registry of the court... can't do it? The landlord's attorney will be in a judges ear that day getting a writ of possession and the sheriffs will be there the following day to watch the locksmith change the locks and take an inventory of anything left by the tenant, which will likely get auctioned to pay for any deficiency.
The entire process could take as little as 10 days from the time the initial notice to vacate is sent by the landlord.
As a paying renter, the law is definitely on my side. I'm not the typical broke renter either. My access to lawyers and my cash flow to pay them has always been better than my landlord's. It's one of the things I look for while shopping for a landlord. Again, I'm not talking about being an abusive renter. I'm talking about one that honors the contract but also doesn't want a landlord that turns into a slum lord or one that abuses their end of the deal.
How many legal obligations do I have as the renter? How many does the landlord have?
We shall call you Mr. Pacific Heights.
"Even then of course it really isn't mine due to property taxes"
And that is the ultimate rub. There is no private property....there is no "ownership". You will pay either a bank rent on the money borrowed to buy and then once paid off you will pay a government rent on the land on which that house sits. It's double for mobile homes, since in most states they have to be tagged which is taxed just as a car tag is.
You can argue that the law gives you certain rights as a property "owener" so that you can say you are an owner and not fear you are lying. But reality always trumps your personal delusion. As long as you pay somone for the privilege to own you in fact do not own. As long as no one enforces the law equitably if at all the law can state whatever it wants in terms of property rights.....it still does not mean a thing.
We are all renters. There is no home ownership and true property rights and there never will be.
Remember this......
If you own a home....you are simply a renter with benefits.
Hasn't liquid and mobile always been a good strategy?
According to a conversation my congressman had with Art Laffer, the mortgage deduction addresses the double taxation issue on mortgages because the mortgage holders are taxed on the interest income.
Sure there is advantage...you just can't play by the "rules"...
There's a huge tax advantage if you tithe. But in this culture and society I suppose I'm the outlier.
How do you get an advantage from giving $1 and getting $.33 in return? You gonna make that up on volume?
Worse. It is a 30 year old lease agreement wherein you have to maintain the property. Not to mention added liability (personal, property, and financial). And your mobility is impaired. Add recourse to the equation and you are really fucked.
I'm in an aging rental, and the property manager has sunk almost 1K in repairs into the place since we moved in less than a year ago. I'm helping by repairing little things like shower drains, screens, etc. Still, the owner is not making any money off the deal. He's paying the taxes and for the majority of the maintenance while the value continues to drop!
Worse for him and better for me too is the rental market around here is set. He cannot raise his rent any more than what the other rentals in the area go for, and newer and better homes hit the rental market every day. He's stuck renting it at low prices with no way to raise the rent.
The way that houses and appliances are built today... they just dont go the distance. It really weights on the equation. In some places the weather is brutal and makes it even worse. Most homeowners I know (including myself) have suspended any major repairs that are not mission critical. Likewise, capital reserves for future repairs that are not avoidable are gone and not being replenished. Pretty much the same for alot of small to medium sized businesses as well. Borrowed time is what it amounts to.
Worse. It is a 30 year old lease agreement wherein you have to maintain the property. Not to mention added liability (personal, property, and financial). And your mobility is impaired. Add recourse to the equation and you are really fucked.
Not arguing with anyone, but when this is taken as gospel we will be near a bottoming process in housing.
Or a step along the way towards the eventual elimination of private property. I don't see the equation changing anytime soon. Everything hinges on energy (oil) here - hence, costs will only go up on maintenance. It will affect the rental market as well of course. Rather, some other shift will have to occur and that will come at a cost to the standard of living in a big way - at least in the near term. Long term - who knows.
I've been posting this all day so might as well do it again. Here's what the leadership of the U.S. and the U.N. have in mind for you with regard to private ownership
http://ppjg.me/2012/03/14/agenda-21-on-steroids/
As far as the owning vs. renting debate, I'm on the side of ownership. I'm side stepping the property tax issue by using my land to raise various livestock (cattle/chickens/eggs/turkey) to sell and apply towards the tax. Without a hell of a lot of effort I cover my taxes plus some. The added benefits are multiple tax deductions and credits for any capital expeditures, etc.
Plus I get the benefit of using my spare time to prepare and become more self sufficient for when that is necessary. It is not that labor intensive if set up correctly and you get to eat organic meat and veggies that you can be assured are safe for your kids. Even if you find land to rent you are just giving the landlord the improvements that your labor provides for free. Plus unless the landlord is going to spring for the occasional maintenance or outbuilding to make your life easier then you are stuck with a substandard operation.
Unless you are fortunate enough to live in a state that doesn't allow deficiency suits. If you're in one of those states, you can play the rich mans game of "socializing" your loses ie "strategic default".
Economic war in Iran just took another turn...
SWIFT financial service cuts Iran offhttp://rt.com/news/swift-iran-ban-oil-667/
US threatens India over Iran oil
http://www.youtube.com/watch?feature=player_embedded&v=6QRsyQtVy40
iRent
Isn't rent the backbone of the core CPI number? So if that goes up, how are they going to hide the truth about the 8%+ inflation rate?
they will use hedonics and say that because the eroding middle class has less stuff (as they had to sell the stuff to pay for rising cost of living), they therefore do not need as much square footage in an abode, so the rental cost will come down for them as they all relocate to tiny units, cram all their kids in the same bedroom, or just move into cardboard boxes under the nearest bridge and live rent free.
Hedonics? You mean like "that roach-infested studio is palatial now that the landlord slapped a fresh coat of eggshell white on the walls?"
I'm glad I paid cash for my house in 2003. I plan on staying in it.
djsmps
I'm glad I paid cash for my house in 2003. I plan on staying in it.
BINGO.............................same here,just as long as I pay the property taxes, it's MINE<>
There in lies the problm with real estate - you can never get outside the carry. Quit paying those taxes and you'll find out pretty quick who really owns that property.
Tyler, where/how do you get the squatter data?
The banks
Maybe I should stop paying my mortgage and start saving the money. If I could live like that for three or four years I would have a lot of money saved for precious metals Knowing my luck though I would be the one the bank would foreclose on 90 days after the first missed payment.
Depends on how much equity you have (or don't have) relative to the other folks on the list...
I have sincere doubts that there will be any meaningful ramp job in foreclosures simply because the banks can't withstand the losses... I realize they've managed to dump a significant amount of the risk onto the FED or GSEs, but still... plenty of CRE out there to roll over too.
Bullish for AAPL!
also bullish for the vagina rental market
They'll choose to live in a van down by the river.
Energy costs, taxes, materials for upkeep, insurances, and so forth are all rising fast in most areas. This will affect rentals as well.
The big question here regarding the foreclosure process is how the banks are going to deal with marking these assets once they are in a position to realize the current value.
The only way increases in costs will affect landlords is through margin compression... those landlords who are levered to the gills are going to see a decrease in takehome.
I don't think there is a meaningful way for the banks to write off the losses... as a result, I have a hard time seeing how shadow inventory organically clears... the parties have always been able to work out their differences outside of foreclosure... first to blink gets to blow up first?
Agreed. That's the way I read it. Something looms on the horizon though and I suspect it will be ugly.
I sold my home in 2005 and have been renting ever since. I'm looking at homes now, but my rent for my house is still a better deal than buying an equivilent house. The owner is offering to cut my rent to have me extend the lease. Let's see, let me do the math:
Own home: Mortgage + Taxes + Upkeep + Yardwork + Pool Service + Fees to buy + Fees to sell + declining value + utilities
Rent home: Rent + utilities
At this time, rent still wins.
Don't forget the fascist HoA and condo fees. My landlord pays those as well. I really should send him thank you cards.
The apartments with cockroach problems are pretty cheap.
Making squatters pay rent is raciss.
Bullish for my rental units and the folks who can afford them. Otherwise, time to go long cardboard boxes.
As long as they don't try to squat in your rentals.
This, in the end, all effects vacancy rates.....which in turn, give landlords/rental properties the green light to jack up prices in cities' without rent control.
Rent control is a hot button issue; but the thing is, this all goes back to property taxes, Fed Res Note inflation, average median income, cost of living, and of course, the vacancy rate (supply/demand).
But when you have property managers and companies trying to cut costs, like a Cambridge firm who got fined for not allowing a woman with 3 children move into an apartment because they didn't want to pay to remove lead paint, this can be a social cash and morality drain on society.
Cities with low vacancy rates, like NYC/Boston/SF, are generally places with jobs (Greater Boston for example has a UE rate of 6.9%, and a vacancy rate of 2%). These are also the places where taxation is high, and cost of living is high as well. Prosperity has a price in today's America, especially under our (denied) inflated currency world.
The Boston Globe was just advertising "awesome" 2BR apartments that start at a "great deal of $2000!". 1/2-1/3 of my paycheck going to the rent man each month....man, what a deal! I guess I can just listen to The Bernanke and "go on living my life"!
And forget it if you make 30K a year and try to get Section 5-8 housing if you are a white person; I got to the final process of assisted housing, and I basically had to open my asshole (taxes, *3* recommendation letters, places I live in the last 10 years, employer recommendation, etc) to get them to even LOOK at approving me (they rejected me for making too much, at the time $28K....methinks a Chinese or Russian immigrant didn't get the same treatment).
On top of that, since you get so many people in a condensed area, you get competition for those vacant rooms. Add reality fees, security, etc......it all adds up.
On top of that, this affects commercial real estate. That means more companies, lusting to save a buck, move out to the outskirt burbs.......places that tend to be inaccessable to public transit (or include a longer transit that drains from our wallets).
BTW here in Boston, we are having a fare increase on the MBTA by 43%!!!11111
That means longer commutes for workers, who basically have their transport income passed onto them, by their employers, through more gas to buy, more tolls to pass. Add the stress factor to all of this on top of debt and living expenses, and it is very draining on not only the disposable income of low-to-middle class workers, but just not sustainable for humans in general.
The tortoise is not only catching up to the hare, its kicking the hare's ass.
Rent still dropping ion many places due to massive oversupply. Dr Housing Bubble reports over 1,000 rent fre eplaces in Craig's list in Las Vegas (it's too expenisve to carry insurance on an emprty house so it's cheaper to rent it to anyone for free).
I think rents will continue dropping or at least stabilize for quite awhile as long as this huge inventory exists.
Plus, with taxes, insurance and maintenance costs rising, it's still cheaper to rent then buy in most places given houses are still overpriced in most locations. Plus, mortgage rates are dreeping up...house prices will continue their long decade long correction downward.
GL!
Bingo. As defaults are finally recognized in the housing market and the loans vaporized and light shed on the shadow inventory, it's magic what happens to the cost of renting.
If our system wasn't so fucking corrupt, then the creditors would have been renting these places long ago... now our pound of cure is to sell the things, en masse, to the principal actors in the fraud at pennies on the dollar... who will just become landlords... good if you can get it.
Rents should be dropping or at least staying the same. But out of the blue I heard on the local news that rents are going up in the city near here. I immediately thought it was another self-fulfilling screw-the-average-person story like the ones during Enron's heyday: Flood/drought/heat/cold/hurricane/terrorists could cause energy prices to rise = energy prices will get jacked tomorrow because we can.
Landlords will hear stories like these and raise rents regardless of whether they need to or not.
there is going to be a serious smackdown for EVERYONE when the squatters are foreclosed on....be careful what you wish for
Increasing rents will lead to more building, then overbuilding. Always does. Already starting, actually.
I guess in micro markets... I think the general rule though is that the overbuilding has happened on an unprecedented scale and now we're on the backside...
Yes real estate is local. Here in San Diego building has already started.
They are all condos right now in NY. I expect them all to start converting to rentals shortly as no one wants a condo that they can never sell
Yet another misleading article that spending will go down because people have to pay rent. I have 205 units of which 21 are vacant. If someone now rents those, yes - they have less money to spend, but guess who now has more to spend?
All it does is takes money out of the hands of those that don't deserve to spend, and puts it in mine, who spends and invests.
sorry buddy, but you are killing the churn
No I'm not. I have been able to purchase dirt cheap apartment buildings - around $10k a door. I have spent hundreds of thousands of dollars in Home Depots bid room, and currently am employing 12 people to rehab all the units. Rents that I collect will continue to be spent in this way. Way more productive long term than just buying the next igadget that dquatters do. The idea that spending will go way down now that they have to pay rent is misleading at best. The underlying tone is that spending will evaporate completely, when in fact, it will still happen, but just be focused differently. If you deny that, you deny logic.
I didn't know there was an entitled spending class?!
Well, when you refuse to pay for your housing, you shouldn't be allowed to spend elsewhere on discretionary items. If you wnt to call it spending entitlements, fine. Sounds like you are all for free housing and food for people and they get to spend on luxuries they want?
Absurd.
You'd better start buying a lot of iPads.
I don't think many of the squatters realize that they owe the IRS income tax on each and every missed mortgage payment. It is going to be one hell of a nasty surprise when that 1099 arrives in the mail. Probably right after they have to start paying rent EVERY MONTH or be evicted.
Lots of IRS debt settlements in the future. U
gh, even more commercials for those IRS settlement firms.
Take a look at The Mortgage Debt Relief Act of 2007, where debt discharge on a principal residence is excluded from income. www.irs.gov
Tough luck is, only applies through 2012.
Just because you haven't paid it, doesn't mean it has been "discharged". That would require "debt forgiveness" which is most certainly not occurring here. In fact, banks may even seek judgments against these squatters for the amounts owed.
If they're not paying their mortgage, they won't be paying their rent either.
The coming wave of 'renters' will be a wave of deadbeats. The temptation to live 'rent free' won't be an easy one to kick. Today they're freeloading off their bank (until evicted). Tomorrow they'll be freeloading off an individual property owner (until evicted).
so it tis the march-to-market that marks the disemboguing damned headwaters
the internecine maelstroms ill contempt which follows in tandem
that of a serf's vassal prostration, to a feudalism forte`
thusly all shall capitulate to the 'God's of the Land'
the Machiavellian Way!
Was your objective to write every word in the conspiracy theorist dictionary, or to communicate a coherent point? You got the first one...... nice work!
double post
sorry :-(
the tbtf's new time was on their side as was the fed buying their 'used toilet [toxic mbs's assets] paper' --- take note of treasuries inflating - wages deflating - wanna be homeowners can't get in a bolted door, and renters options slipping away as the fed dangles an illusive, intangible, "twist of fate', down a dead end street" [where your damned if you do, and damned if you don't] - the consumer is fucked either way --- this is not a conspiracy,... this is the neo-americana USSA's way forward to feudalistic fascism! jmo
http://www.mybudget360.com/no-debt-ceiling-for-federal-reserve-double-st...
http://www.bankrate.com/finance/federal-reserve/fed-day-sep-2011-1.aspx
How are these squatters going to be able to rent a place after the landlord confirms their battered credit history?
Because most of the renters applying will have a battered credit history - it'll just be a matter of selecting the best possible tenant candidate by references, etc.
As a landlord I'm not too bothered by a foreclosure - been there myself 20 years ago.
What matters is ability to pay and willingness to honor future obligations.
What matters is ability to pay and willingness to honor future obligations.
---------------------------------------------------------
Isn't that what credit history is suppose to confirm?
Yes and no.
As a landlord I try to assess reasonably whether they will pay me.
Serial bad credit is a no no because they have nothing to lose stiffing me.
But if someone lets their house go as a sensible business decision while keeping credit cards utility bills etc current that's probably OK.
I've rented and owned, and two of the rentals I rented didn't even pull my credit. Cash is king. A stable job and good reputation help a great deal too. If they haven't been paying their mortgages and squating, they had better have a large cash pile to use as a deposit. When the deposit is big enough, the landlord doesn't give a damn about what your credit says.
Your experiences are somewhat different from mine. Most places I rented checked my credit history and I was working a very stable job... then.
Several friends of mine have rental properties. They would never rent to someone with a low credit score, recent forclosure/bankruptcy no matter what income they had. I imagine a slum lord who takes section 8 wouldn't care about such things.
Where I work and what I do for a living helps. I also bring a lot of cash to the table. The one instance for example was easy. The man was given roughly 10K up front, and I agreed to sign a lease with a stipulation that my entire deposit would be lost if I went over 30 days late. Part of the 10K was the last two month's rent in advance too. I paid him a huge deposit, the first month's rent, and the last two all up front. He had no worry in the world. If I did not pay, he kept it all and booted me out. With the money I had given him, he would have plenty of time to cover his expenses while he found another tenant too.
By the way though, I do not pay that much up front anymore. The reason is because there are too many landlords who are not paying their mortgages. If I get a foreclosure notice, I do not want to have to sue the landlord to get my money back that I've paid in advance. I suppose I would pay in advance if the place was ideal and something I really wanted, but otherwise I'm just doing the regular one month deposit. It's always easy to negotiate with a landlord though when you have cash on hand.
Congrats on having a spare $10K to give your landlord. I also believe in having lots of cash on hand and being as liquid as possible.
I wonder how many people can give a landlord $10K upfront? Not many I bet.
None that haven't already bought a house...
Nonsense. When those living in their homes that are not paying their mortgage are finally forced to move and most likely rent they are also freeing up a space to rent or for another renter to turn homebuyer. The only thing that is getting these types of nonsense articles to appear is that the investment community is starting to buy cheap houses in mass at steep discounts to value that the public is most likely going to have to pay for the discounts. Some of those are unrented units and are becoming available soon to rent thus increasing the supply. There are also other factors at work to prevent massive rises in rents. The real wages for renters has declined, many multiple housing units are being built and a renter is most flexible in the choices he can make to rent such as moving in with Mom and Dad, adding roommates, actually buying a home because the payments are much less than rents now in many cities, etc. We saw many renters double up when this crisis first befell us. It can happen again in the blink of an eye.
This is the same thing as condo buildings. Units not selling? Turn them into rentals. Tons of brand new properties in my area are being bought by realtors, groups of them, and other investors and being turned into rentals. It's a wonderful thing for me too as a renter because those brand new top of the line rentals keep my rent prices low on the older not as nice homes I seek.
In my area of the Pacific NW, about 1/3 of residential properties are cash sales. It's likely that a significant portion of that is distressed property. Following from there, I'm betting that at least half of those sales are going to end up as rentals once repaired.
Sure, financing for owner/occupants is at low rates, but where's the demand? I think we're going to see lots of single family residences coming into the rental market. The only thing constricting that is the delay in the foreclosure process, but the whole fraudclosure issue will be swept under the rug yet again with more disregard for contract law. One way or another, additional rental units will arrive on the market.
All the press on renting as investment these days is bullshit. I own two duplexes (4 units) in Charlotte NC. Rent here is depressed. There are lots of properties looking for qualified tennants. Many landlords have had to rent to 4 or 5 guys/gals to get the rent covered. Of course the place gets torn up. We own our properties outright (good thing) and I manage as a job (semi retired) so we look for good solid tennants and trade off lower rent (e.g., good value). But all those people that bought and are absent landlords expecting to make a killing are losing their asses. Either they can't find tennants, let their places go down hill, or load up #'s in each unit thus running it down.
Recent and very recent press I've seen all a concerted effort to get people to foolishly by foreclosed property and make a killing renting. Fat chance. Even Grandpa Buffet told the world he'd buy houses if he could. What BS. Also, an article the other day talked about some guy who uses his IRA to buy properties. Again, all bullshit. Can you make money renting. Sure but it's not the easy street they are portraying. Plus, as more apts get built and more houses sold for rent, the supply is going to increase even more. I'm consdiering selling our properites, not for rental but for retirement folks. Perfect fit and still affordable. But Charlotte housing market still sucks big time. We had all our eggs in the banks.
but at least you have the Bobcats
RIGHT ON. I WAS a landlord in the past. Here in Calif the number of laws favoring tenants has triple or more, you can't even evict, basically. The GSEs are going to sell props to the big boys who got bailed out and they get carried interest, but get props at pennies, THE FINAL TRANSFER OF WEALTH they are putting up for sale 65% of properties are already on l-t leases! The ol carrot, then they'll add trailer-trash tranches later. Trying to suck retail is makes sense. Chasing the next bubble, builders are overbuilding rental apts and GSEs dumping for rentals, all will hit at one time. Rents should go down ultimately. We saw it all, every time someone moved, my wife supplied masonite to move refridge, they never used it but tore up the flooring, NEVER BE A LANDLORD, EVER! It's over, stick a fork in that fantasy.
We are all rent seekers now
everyone is a renter.
Apple's next product: My-Family-and-iBox.
JPM analist said SQUATTERS fund $50 Billion/yr in windfall consumer spending.
There is going to have to be some kind of government subsidy given to property owners to accept these squatters as lessee's.
As someone who was excellent credit, but was turned down from two apartment complexes because of a incident involving some stolen beer, I can only imagine how hard of a time these people are going to have assimilating into the world of renting given their credit score will now be shit.
One would think any landlord, especially these hedgefunds who have never managed rentals en masse, they will find they still have to deal with ea individual case as to rental terms, & as you say, any background check/credit shows they defaulted, frankly, I hope the assholes end up under a bridge because 90% were willing participants in lying on mortgage apps, FUCK THEM. And fuck the hedgefunds trying to gearup using management firms they will hopefully lose their asses too.
I see a "New" entitlement to be created by the Obama Admin to get all the renter's vote.
The "Rent Is Too Damn High Relief Act"...It will be another "rent welfare" program to have taxpayers pay the rent of the ever growing number of deadbeats and moochers.
GOOD ONE! HAHAHAAAAA
Not funny.
Here in Canada, people come overseas with tons of cash, tell the government that they have no income, and the government helps them with all their expenses, including rental. These moochers won't buy, or else the gov stops pitching in for their rental payments.
Foreclose on one group, load down the youth with large non-defaultable student loans will shut out younger potential buyers.
Pay no interest to the elderly, devalue their currency and then tax them to death. How does this all end up?
Somewhere, Bernanke is saying, "I love it when a plan comes together."
I pity the fool...who plays by the rules.
Revolution.
The "New Normal" also includes millions of Americans moving back into their parents' house. In the future we're bound to see more elders moving in with their children, too.
I think rental prices will suffer accordingly, tempering price inflation or leading to outright deflation. Only time will tell.
US oil use just hit 15 YEAR LOW! Why? Because moving into parents, less trips to store, and work, and Facebook has replaced crusing by teens. Gasoline demand multi-low too, see Mish's blog gasoline demand is PLUMMETING, while the speculation is ripping us off.
Gol(d)msn's Offshore Centre aka England has twice as many mortgages for Landlords as for Homeowners currently
Renting has always been better than buying by and large, but this "american dream" of owning your own burden has been shoved down the populous throat.
Mortgage means "death pledge" in french.
Here is what has been happening in Northern California with the glut of empty Mc Mansions... A few years ago all of these private investment companies started showing up at the Court house steps and buying up all the houses at firesale prices. I know a few people that were the highest bidders however they didn't get the property, an investment company did. Researching the purchases a bit further I found that many of the homes being sold BELOW the auction bid prices were going to the same investment companies. Taking it to the next level we looked into who these investment companies were and where they were getting their money from. Turns out that a home forclosed upon by Bank Of America was being sold at the Court house steps for pennies on the dollar to a property Investment company that was being financed by guess who? Yup, you got it, Bank Of America. So what we have now is the Banks kicking people out, selling their properties to one of their property investment companies, financincing them with .00025% money they are getting from the FED and renting the houses out. You can't make this shit up... Now the Investment companies are jacking the price of rent up since they are starting to control the market. It's a win win situation for BOA because they now make the money through their Junior partners from the rental income and were able to write off the losses on the original sale and in many cases be compensated by the FED or a mortgage insurance company. They have figured it out, the new way to own people is now better then ever. Heck this way if you don't pay your rent they can legally just throw you out in 90days. So squatters beware, the payback is going to be a bitch. They will still own you and you won't even know it not to mention they are going to hold you hostage to supply and demand economics and rape you on your rent price once you finally get tossed out of your foreclosure. This is the new world we live in, the American Dream is now being able to make the rent payment, meanwhile the Oligarchs sit back and continue to rape and pillage using the free money created by the FED... Once again the crisis always seems to lead back to the FED, just like it always has and just like it always will until we free ourselves from the grips of these Zionist puppet masters that always seem to come out winning in the end from every crisis that they initially create in the first place...
Thanks for the insight. I still think this mortage free, squatter's rent story is way underappreciated. It's the only thing that is keeping retail numbers where they are. IMHO.
+1
great comment thanks
I can only see these Private equity firms doing this because they want their upfront fees and like sheep everyone still thinks real estate is good.
Sure they are buying houses at 150k when they were built or were selling for 400k but the asset is only ever worth what someone will pay for it, the next sucker.
These guys then rent out these homes on the premise that previous home owners will want to continue to live in the same area. So they were so broke they went bankrupt and have been squatting for years and barely getting by, and now they can afford to live in a rental in the same area? Its the get out of debt by borrowing logic.
I think these guys are buying because its there- easy way to blow a billion and get your 2% fee, now you can even buy homes on auction websites. They think eeking out 6-10% returns is attractive, look at what bill gross said about yields last week- if you aren't making 15% in this economy you are losing money.
I don't see how this move will drive inflation into rental costs. The government is bringing more properties into the rental market, while at the same time reducing the squatters. This may drive an upswing in the low end of the market, as people try to keep their housing standards closer to free, but it does not change the underlying supply / demand balance.
I agree...the banksters will likely go for the "rental program" that has been tossed around. They'll become the worst but the biggest rental entities.
Population dynamic is one variable not mentioned. Declining population growth and aging poopulation mean housing supply will stay quite hearty. Not as material as financial millieu but worth noting. Real Estate is not coming back anytime soon but the media desperately wants you to belive that it is. When you figure out who wins from perpetuating that false perception then you will truly undestand. Before Bob Pisani was running his mouth like the asshole idiot he is CNBS had a piece on Miami real estate's return to grace. Needless to say, I'm very very skeptical. Who wins from making the sheep think real estate is coming back? The National Assocaite of Realtors?? Fuck them all.
We'll all be Kwai Chang Cain from Kung Fu, roaming the earth barefoot, doing justice, dispensing harmony and wisdom.
haha, look at you suckers. I bought back in 06, moved in in 07. Paid it all in cash. Sure, there is property management of like $200 a year, but residents took the company to court and they lost the rights to collect anything legally. So, they just end up making their money other ways. They have fake books that claim they are just breaking even, so whatever.
No property taxes by the way. Sure, land usage rights run out in 2076, but the place will be redeveloped long before that and we'll be compensated with multiple new apartments and cash. The only bill we have to worry about is to keep the lights on, the toilet flushing and the gas coming in. It's all prepay with a card and if it ever actually became a problem... we could "fix" it for about $20.
How nice it is to not have to worry about things :)
Enjoy your taxes I guess.
In America, only suckers pay rent or mortgage. The elite own outright, and the masses move to some trailer park or swipe their section 8.
I don't agree with the article. And if Canada is included, they have the weakest property rights of any western nation.
Some of the reasons include:
1. USA property rights
2. strong tenant rights- tell me a landlord that has never had issues with eviction and non payment. have this happen 1 time in 3-5 yrs and it totally screws up your ROC.
3. Crap boom built spec houses- made with tape, plastic sheeting and Styrofoam. how is that a solid investment.
4. Muni bonds- if Meridith is right, where is the city going to get the money? property tax.
5. Low profit margin. look at any of the public rental reit companies.
6. there is always an equilibrium between renting and buying plus or minus a couple of bucks.
IF you are thinken about making money because everyone got foreclosed on so they have to rent- what kind of tenets do you think they will be? they wouldn't even pass a credit check- how is that mitigation of risk? and if you think that everyone will be renting, then you have bigger issues to worry about then the renters wrecking the paint.
7. Too much leverage.
8. Houses need to be lived in they cannot just sit. Ever see what a water leak can do in just 3 hours? let along a week or 3 when the caretaker comes around to look after an empty house.
9. Overcapacity- would you like to eventually buy one of these former rental units on a street where there are empty houses? Private Equity companies cannot hold these "assets" forever. 5 yrs tops.
10. Professional speculators are coming in. Great sign to get out or stay out.
Now what would work is if the idiots who run the US government would actually follow thru on wanting us in body bags or fema work camps would work but it wont because we don't fucking make anything here.
Do like the commies or Turkey does have R&D and manufacturing tax free zones where workers/slaves work at the factories and get no taxes taken off and the companies get R&D funding and tax holidays or reductions for. Most investment guys get lunch brought to them so the masters can get them not to leave their computers at lunch.
Chicken salad, that's how it starts.