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Renting: The New Buying; A Primer On Housing 2.0

Tyler Durden's picture


Wondering why the future for housing as an asset is so bleak, why median housing prices continue to tumble and recently saw their biggest three month drop ever, and why there is no bottom in sight? Simple: the American public appears to have woken up to the reality that homes are no longer a flippable asset, and in fact continue to drop in price, an observation that is obvious to virtually all now. So what happens next? Why renting of course. Here is Morgan Stanley explaining (granted in a pitchbook for REITs but the underlying data is quite useful) why the Housing 2.0 paradigm is all about renting.

From MS' Oliver Chang:

Across the country, more Americans are becoming home renters, and fewer Americans are becoming homeowners. The beginning of the rentership society is upon us. But all renters are not equal – of the roughly 40MM rental housing units in the country (representing roughly $6 trillion in asset value), about half are multi-family and half are single- family. In this joint report between our US Fixed Income Housing Strategists and US REIT research teams, with contributions from our Chief US Equity Strategist and Large-Cap Banks Analyst, we take a closer look at what the growth of the rentership society implies for both the single and the multi-family rental markets. What opportunities will be created? How will the two sides of the rental market benefit from this transition? What are the greater implications for those industries closely tied to the development and financing of single and multi-family housing? And most importantly – how can institutional investors participate in these opportunities and position themselves for this change?

Full report below:



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Fri, 10/28/2011 - 10:37 | 1820736 imaginalis
imaginalis's picture

I've been renting since 2004

Fri, 10/28/2011 - 11:03 | 1820850 redpill
redpill's picture

Bottom line is that it is going to make more sense to find a good friend or family member, and own each others' houses and treat them as income properties, especially after they start tinkering with the mortgage interest tax deduction.

Fri, 10/28/2011 - 11:10 | 1820873 Dr. Richard Head
Dr. Richard Head's picture

Stupid question, but I need help. Currently hold a mortgage with 5/3.  Challenged the holder of the note but the servicing clause in the mortgage has them covered on secondary market.  Currently underwater, but talked to them about a streamline refi that would keep mortgage payment the same, but would cut off 5 more years off of the mortgage.  $2,250 closing costs.  Am I just securitizing a new note and getting fucked or would this make sense to do?

Fri, 10/28/2011 - 11:23 | 1820926 jcaz
jcaz's picture

"servicing clause in the mortgage"-  what mortgage?

Tell them to produce the ORIGINAL mortgage agreement, not the copy they're referencing.

Other than that- yeah, they're cash-flowing on the deal.....  Tell them you'll take 5 years off the mortgage for free, else they can have the house right now.

Once you agree to a "new" note, you're covering their ass on the mortgage 5/3 lost when they securitized your original note.

Fri, 10/28/2011 - 11:26 | 1820946 Dr. Richard Head
Dr. Richard Head's picture

Thank you for that advice.  Come to think of it, they simply sent me a copy of the mortgage that wife and I signed and there was no counterparty signature to be found on it at all.  Chumba sent a link about mortgages in the past that I think I need to go look into a bit further.

I guess this is why they were so eager to get this done. 

Fri, 10/28/2011 - 11:31 | 1820967 TuesdayBen
TuesdayBen's picture

Tell them to be sure to show up at refi closing with your original loan docs

Fri, 10/28/2011 - 11:35 | 1820983 Dr. Richard Head
Dr. Richard Head's picture


Fri, 10/28/2011 - 12:11 | 1821160 cranky-old-geezer
cranky-old-geezer's picture



No, tell them produce orig docs NOW, before any negotiation, before any loan application.

Call their bluff now.  They'll fold.

Fri, 10/28/2011 - 12:39 | 1821287 Ghordius
Ghordius's picture

good advice

you know how many German Households rent? 60%

Sat, 10/29/2011 - 10:06 | 1824104 shortus cynicus
shortus cynicus's picture

Yes, but only because build land is an artificially limited resource.

If land would be created by a free market, housing would be affordable for much more people.

Fri, 10/28/2011 - 12:18 | 1821204 Piranhanoia
Piranhanoia's picture

They can't produce the mortgage, deed of trust or promissory note.  They aren't on any of them anyway.  Anyone that pays a bank for their claim is really out of touch with reality. 

Fri, 10/28/2011 - 11:23 | 1820930 TuesdayBen
TuesdayBen's picture

Tell 'em you'll take the deal and stay in the home and allow them to not have to take a hit on foreclosure, if they'll act in good faith (as you have by continuing to service an underwater mortgage) and waive the $2,250. 

Fri, 10/28/2011 - 11:36 | 1820986 Careless Whisper
Careless Whisper's picture

if they'll act in good faith

what planet are you on?


has anyone seen page 28 of this report? i'm confused. page 28 headline says: "Longer-term Migrate to Riskier Banks as the Market for Distressed Housing Builds"  so that's a Strong Buy for JPM long-term because they lead in distressed properties?


Fri, 10/28/2011 - 10:37 | 1820737 Seasmoke
Seasmoke's picture

buy a trailer and pay no property taxes and kill the parasites

Fri, 10/28/2011 - 10:41 | 1820751 Capitalist10
Capitalist10's picture

Live in a van down by the river.

That'll show the man!

Fri, 10/28/2011 - 10:45 | 1820771 I think I need ...
I think I need to buy a gun's picture

cramer called the bottom 2 years ago u mean he was wrong?

Fri, 10/28/2011 - 11:47 | 1820990 The Limerick King
The Limerick King's picture



With market collapse unrelenting

The wave of the future is renting

If you follow Jim C

You should seek therapy

As your future abode will be tenting

Fri, 10/28/2011 - 11:52 | 1821065 Spastica Rex
Spastica Rex's picture

+1 for good meter and rhyme.

/former English teacher

Fri, 10/28/2011 - 11:04 | 1820852 malikai
malikai's picture

New handle, Robot? Did you mean PigMen?

Fri, 10/28/2011 - 11:21 | 1820922 Spastica Rex
Spastica Rex's picture

Keep stroking the man.

That'll show the hippies!

Fri, 10/28/2011 - 12:13 | 1821188 Hearst
Hearst's picture

Where it came from.  Hilarious!

Fri, 10/28/2011 - 10:41 | 1820746 Iriestx
Iriestx's picture

There's nothing worse than being anchored to a house in a horrible job market.  The ability to get up and move to a new location to take a job, without having to negotiate the sale of a home, is beyond HUGE.  Even if you weren't in the most horrible housing market in history, being anchored to a home when you need to be mobile and flexible to get a job is horrible.


I'm a renter, and have the flexibility to move when things go bad.  I have buddies that are in horrible job situations, and have had a number of opportunities to get out of that bad situation, but can't simply because they can't sell their homes.

Fri, 10/28/2011 - 10:43 | 1820762 EL INDIO
EL INDIO's picture

It's also a great advantage not to own a house when you need to flee the country

Fri, 10/28/2011 - 10:46 | 1820773 Iriestx
Iriestx's picture


Repurpose a Bug-out bag.  Keep any identification, cash, etc that you need to flee wherever you are at a moment's notice.  They're just good to have, even if you think you'll never need it.  

Fri, 10/28/2011 - 13:55 | 1821649 Milestones
Milestones's picture

Might be finding out about that aspect shortly.

Come to Colorado for a vacation;

Leave Colorado on probation.


Fri, 10/28/2011 - 15:06 | 1822106 Citxmech
Citxmech's picture

Of course the freedom owning land gives you to grow your own crops and raise animals is pretty powerful also. 

The big issue will be property taxes.  It'll be interesting to see how this plays out.  There's no way the masses will stand for all of their land being auctioned for back taxes if things get that bad.


Fri, 10/28/2011 - 10:45 | 1820772 oddjob
oddjob's picture

'....because they can't sell their homes.'

They can sell, just not for their price.

Fri, 10/28/2011 - 11:14 | 1820892 spartan117
spartan117's picture

Is your avatar the dude from Austin Powers?  You know he's a convicted rapist right?  May be time for a new pic.  Just sayin', no hatin'.

Fri, 10/28/2011 - 11:27 | 1820947 oddjob
oddjob's picture

Never seen Austin Powers, is that a Texas synagogue?

Fri, 10/28/2011 - 11:32 | 1820970 Don Birnam
Don Birnam's picture

Spartan, have you ever heard of Aurick Goldfinger ?

Fri, 10/28/2011 - 12:51 | 1821321 Schmuck Raker
Schmuck Raker's picture

"No Mr. Bond... I expect you to DIE."

Fri, 10/28/2011 - 11:18 | 1820908 equity_momo
equity_momo's picture

Fucking bingo.
Cash buyer right here but im still not paying these levels. I can stay a renter longer than The Bernanke can shit dollars out his ass. Just a shame i lost my gold hedge in a boating accident.

Fri, 10/28/2011 - 11:57 | 1821094 Mercury
Mercury's picture

Now there's a story....

Fri, 10/28/2011 - 10:47 | 1820782 kridkrid
kridkrid's picture

Yup.  I even live in an area that has not been particularly hard hit and it's still an anchor.  What's amazing to me... people who finally do sell... only to buy.  I have friends who just moved... took a hefty loss on the sale of their home... and BOUGHT.  Now they are unhappy with their new school district.  I'm have to bite my tongue to not say "I told you so"... I pitched them like crazy to rent for a year until they got more settled.  They are fairly screwed (and stupid).

Fri, 10/28/2011 - 11:03 | 1820844 dwdollar
dwdollar's picture

"They are fairly screwed (and stupid)."

Definitely stupid for putting their kids in a government school. Government schools have created 2-3 generations of idiots with no practical skills (upon graduation). Why parents treat them like the source of all truth in the world is a great mystery to me.

Sat, 10/29/2011 - 08:43 | 1824034 imaginalis
imaginalis's picture

Perhaps they also like playing frisbee with table saw blades

Fri, 10/28/2011 - 11:26 | 1820944 ZeroHedgeFan
ZeroHedgeFan's picture

Well said Iriests. If you depend on jobs and have to move to wherever companies tell you to, it's better not to get a house in bad economy. However for people who are their own boss, the stability from owning their own houses outweights the flexibility. Sadly so many low earning employees bought into the idea of home ownership and trapped themselves in homes that they cannot sell when they need to move.

Fri, 10/28/2011 - 14:38 | 1821921 Rhodin
Rhodin's picture

Even if you "own", have no mortgage and don't need a job, the local municipality can screw you by raising your rent (property taxes).  This constitutes an instant devaluation and resale problem on top of the increased bill.

Fri, 10/28/2011 - 12:02 | 1821118 poor fella
poor fella's picture

If it's a decent job, find a rental and keep paying on the house (if you like it). Or turn it into a rental property (and pay the difference if it's not producing income). Most people still working have enough to do this in a pinch. Might be a little 'house poor', but at least it's something.

This is what I would do after experiencing both situations evenly split between renting and owning a home. The freedom is great I'm sure, but pissing away that much fiat (rental rates are ludicrous), would get to me. There's a point where the van down by the river starts to sound pretty good (unless you like to date or stay married).

Couch Surfing - the new American pastime.


Fri, 10/28/2011 - 13:21 | 1821468 toady
toady's picture

I've been leaving a rental behind every time I've had to move for work.

Now I make more in rental income than I do at work.

There are tricks to it, buy low and pay it off, don't buy big mcmansions, small, functional homes are best, get good property management, don't do it yourself...

Probably most important, DO NOT be emotionally invested in the rentals. The wife gets upset when she sees how the renters tear the place up. Thats the hardest part for me!

Fri, 10/28/2011 - 10:46 | 1820753 GeneMarchbanks
GeneMarchbanks's picture

At some point housing will bottom and a new buying trend will emerge. My guess: May 21st 2019.

Fri, 10/28/2011 - 10:47 | 1820776 Thucydides
Thucydides's picture

That can't be right! Cramer says the bottom was 2009 and he is never wrong.

Fri, 10/28/2011 - 10:57 | 1820820 Roland99
Roland99's picture

We're all dead in Dec. 2012, though, so what's the point?


Fri, 10/28/2011 - 12:21 | 1821213 WakeUpPeeeeeople
WakeUpPeeeeeople's picture

I won't be. I plan on being in an airplane when it hits. Assuming of course it goes down like in the movie. Otherwise, party hearty preferably with a blonde with long legs, big ????, and a tight ???, and whose middle name isn't Porky.

Fri, 10/28/2011 - 12:56 | 1821344 Roland99
Roland99's picture

just as long as you're not planning on being in a Dreamliner.  Your dream might be delayed.

Fri, 10/28/2011 - 11:12 | 1820884 mrdenis
mrdenis's picture

Would that be before or after noon ?

Fri, 10/28/2011 - 11:35 | 1820981 GeneMarchbanks
GeneMarchbanks's picture

12:57 pm EST.

Fri, 10/28/2011 - 11:51 | 1821063 jonan
jonan's picture

hopefully after, so i can get one more chinese lunch special in...

Fri, 10/28/2011 - 12:56 | 1821350 Roland99
Roland99's picture

Hell, I'm going out with a bagful of White Castles!

Fri, 10/28/2011 - 13:13 | 1821437 Blano
Blano's picture

And nasty gas.

Fri, 10/28/2011 - 13:18 | 1821455 Roland99
Roland99's picture

Wonder how *that* gas would register to some other culture's faraway version of the Hubble??

Fri, 10/28/2011 - 10:44 | 1820763 Hansel
Hansel's picture

The government is extorting the populace by withholding foreclosures from the market, specifically the foreclosures of Fannie, Freddie, and the FHA, all so the banks balance sheets don't get wrecked by still lower home prices.  At much lower prices, housing would be much more liquid, and the U.S. could turn renters into actual homeowners, not homedebtors.

Fri, 10/28/2011 - 10:46 | 1820774 LawsofPhysics
LawsofPhysics's picture

Exactly, this article is more bank-shilling bullshit.  Who benefits from renting?  Owners, I know, I am one.  Now everyone get in your little overpriced boxes and forget all about what the real definition of "equity" is.  More icrap will be forthcoming.

Fri, 10/28/2011 - 11:24 | 1820938 equity_momo
equity_momo's picture

Owners who have 2 properties at least , and one free and clear and dont rely on earned income for a living benefit. They benefit yes. Everyone in a dead end job with 1 home mortgaged , dont. Theyre screwed.
As most people dont fall into that latter category , you may aswell rent. Yes the system wins either way but at least you have some mobility, no mortgage t worry about and no prop taxes or maint.

Fri, 10/28/2011 - 10:45 | 1820770 SheepDog-One
SheepDog-One's picture

'Housing as an asset'...well you never actually own your house except as a legal liability.

Fri, 10/28/2011 - 10:49 | 1820784 LawsofPhysics
LawsofPhysics's picture

Right, until everyone realizes that you don't actually have to pay any legal liabilities on those assets.  Posession is already 9/10ths of the law, soon it will be all that matters SD. 

Fri, 10/28/2011 - 10:49 | 1820788 Infinite QE
Infinite QE's picture

Precisely. I know a few people who "own", have seen their home value cut in half while their property taxes doubled.

Fri, 10/28/2011 - 10:51 | 1820794 LawsofPhysics
LawsofPhysics's picture

While those who "own" rentals are seeing bigger returns on their properties and can now pick and choose the tenants.  Pay rent, I am happy to collect it.

Fri, 10/28/2011 - 11:27 | 1820951 jcaz
jcaz's picture

Good- cause I am more than willing to bounce back the expenses, depreciation, and increasing taxation of the house onto you-

Cheap liquidity for me.

Fri, 10/28/2011 - 11:36 | 1820987 ZeroHedgeFan
ZeroHedgeFan's picture

Yeah, it benefits both owners and renters I guess. I'm also happy collecting rent. So far the return is much better than the stock market!

Fri, 10/28/2011 - 10:47 | 1820777 The Axe
The Axe's picture

Median home prices in the hamptons  up over 20% year over year....  Goldman recommended by Dick Bove new buy....all is good.  First snowfall this weekend should clean out the park.....

Fri, 10/28/2011 - 10:47 | 1820778 The Axe
The Axe's picture

Median home prices in the hamptons  up over 20% year over year....  Goldman recommended by Dick Bove new buy....all is good.  First snowfall this weekend should clean out the park.....

Fri, 10/28/2011 - 10:48 | 1820783 csmith
Fri, 10/28/2011 - 10:48 | 1820785 Rainman
Rainman's picture

It's all good. The Pigmen will figure out how to fuck up the rental market too.

Fri, 10/28/2011 - 11:03 | 1820838 RichardENixon
RichardENixon's picture

They won't have to figure anything out. You're going to end up with millions of vacant houses sitting on the banks' balance sheets at pre depression valuations while millions of former "homeowners" scramble to try to cram themselves into overpriced and scarce rental units. Happening even as we speak.

Fri, 10/28/2011 - 10:52 | 1820798 PulauHantu29
PulauHantu29's picture

Chinese RE Developers Profit Plunges:

Australia is next according to The Daily Reckoning

Fri, 10/28/2011 - 10:56 | 1820815 adr
adr's picture

So the idea is to turn all of America into NYC. An entire country built to serve the aristocrats where noboady actually does any productive work and outside a chosen few the rest live in crime ridden poverty where the best job is either on your back or dealing white powdery substances.

Serfdom here we come.

Better to keep your house and not pay your taxes. When the governent tries to seize it  you blow off the tax collector's head. Pretty soon we will have no other choice. The self indulgence class is just asking for it. We flew way past the peacefull resolution point. There is only a French revoluton style solution now.

If 500 people stormed the NY office of Goldman Sachs, destroyed every computer and threw every person residing on the top floor out the window that would be good enough to start changing the world. The rest of the bankster clan would capitulate to any demand to save their skin.

Fri, 10/28/2011 - 11:37 | 1820991 catacl1sm
catacl1sm's picture

It would be spun as 'domestic terrorists' and allow .gov to clamp down further on our rights.

Fri, 10/28/2011 - 14:51 | 1822020 Rhodin
Rhodin's picture

If 500 people stormed the NY office of Goldman Sachs, destroyed every computer and threw every person residing on the top floor out the window that would be good enough to start changing the world. The rest of the bankster clan would capitulate to any demand to save their skin.

Be carefull what you wish for.  They might hire the 500 themselves, just to get the repair bailout.  Meanwhile any inconvenient records could be disappeared.

Fri, 10/28/2011 - 16:30 | 1822483 FreedomGuy
FreedomGuy's picture

You have to do the same with their couterparts in government or it does no good. A new Goldman Sachs will arise almost immediately. Goldman has no power without the assistance of government.

Fri, 10/28/2011 - 16:36 | 1822516 Sokhmate
Sokhmate's picture

an added advantage is that it could be claimed the kemputers were destroyed by the stormers, even though said kemps are in classified locations. (aka virtual shredding)

Fri, 10/28/2011 - 11:00 | 1820833 Caviar Emptor
Caviar Emptor's picture

Austerity for the real people (99%), Prosperity for the cronies (1%)


Fri, 10/28/2011 - 11:14 | 1820896 s2man
s2man's picture

Keep dumping those houses, folks.  I got a nice little, 4yo house on 3ac for 55% of the building price (not to mention value of land and utilities).  The bank dropped their ask to 50% before I could close. 

Once paid off, all I'll need to worry about is making the property tax payment.

Fri, 10/28/2011 - 11:31 | 1820965 jcaz
jcaz's picture

Yep, great plan- until it's worth 40% of the building price next year.

Your personal house isn't an investment- it's an expense.   Food, clothing, shelter.


Fri, 10/28/2011 - 11:15 | 1820898 Long-John-Silver
Long-John-Silver's picture

You can't be mobile if you're tied to a home. If you rent you can move to another job if you lost your current job or you've found a better paying job. The American Worker is now a Gypsy moving from job to job.

Fri, 10/28/2011 - 11:26 | 1820943 Caviar Emptor
Caviar Emptor's picture

Just like in the Dust Bowl of the 1930s: Gotta move 

Fri, 10/28/2011 - 12:15 | 1821197 FreedomGuy
FreedomGuy's picture

I actually have done that. Lost two good jobs in two years and have done three moves. Can't do it anymore and watching rents go up. So, I planted myself, bought a house and will only look for work in my city. My thought is that there will eventually be hyperinflation and I will get my home for free while rents rise.

Still, it's not bad advice. I even considered a luxury bus-type RV for awhile, lol! Sign of the times.

But government will "help" us.

Fri, 10/28/2011 - 11:19 | 1820913 TheSilverJournal
TheSilverJournal's picture

"The American public appears to have woken up to the reality that homes are no longer a flippable asset, and in fact continue to drop in price, an observation that is obvious to virtually all now."

This statement is just not true. I talk to a lot of people that talk about what a deal houses are right now and they're looking for housing to rise. Some of them are on this very site.

Fri, 10/28/2011 - 11:33 | 1820971 jcaz
jcaz's picture


Wake up.

Fri, 10/28/2011 - 11:42 | 1821013 TheSilverJournal
TheSilverJournal's picture

Yes, a lot of people do still need to wake up to the fact that housing is due to drop 70%-80%.

Fri, 10/28/2011 - 11:21 | 1820920 DaveyJones
DaveyJones's picture

buying, the new renting - at some point you walk away with nothing... except a bad credit report 

Fri, 10/28/2011 - 11:33 | 1820972 BillyTheBlade
BillyTheBlade's picture

I have only rented and have a credit score in the 770's.  Pretty decent from what I can tell.  You are also forgetting something else... You CAN STILL walk away.

Fri, 10/28/2011 - 15:06 | 1822092 DaveyJones
DaveyJones's picture

I meant "except" to mean an exception

Fri, 10/28/2011 - 11:54 | 1821077 SoCalBusted
SoCalBusted's picture

A bad credit report is a benefit.

Fri, 10/28/2011 - 15:07 | 1822108 DaveyJones
DaveyJones's picture

badge of honor

Fri, 10/28/2011 - 11:23 | 1820928 puck
puck's picture

forward this as received, but without comment. 

Yes, he told us in advance what he planned to do. Few were listening.    The following is a narrative taken from a 2008 Sunday morning televised "Meet The Press'.   From Sunday's 07 Sept. 2008 11:48:04 EST, Televised "Meet the Press" THE THEN Senator Obama was asked about his stance on the American Flag.   General Bill Ginn' USAF (ret.) asked Obama to explain WHY he doesn't follow protocol when the National Anthem is played.   The General stated to Obama that according to the United States Code, Title 36, Chapter 10, Sec. 171...   During rendition of the national anthem, when the flag is displayed, all present (except those in uniform) are expected to stand at attention facing the flag with the right hand over the heart. Or, at the very least, "Stand and Face It".   NOW GET THIS !!   'Senator' Obama replied:   "As I've said about the flag pin, I don't want to be perceived as taking sides".. "There are a lot of people in the world to whom the American flag is a symbol of oppression.." "The anthem itself conveys a war-like message. You know, the bombs bursting in air and all that sort of thing."   (ARE YOU READY FOR THIS???)   Obama continued: "The National Anthem should be 'swapped' for something less parochial and less bellicose. I like the song 'I'd Like To Teach the World To Sing'. If that were our anthem, then, I might salute it. In my opinion, we should consider reinventing our National Anthem as well as 'redesign' our Flag to better offer our enemies hope and love. It's my intention, if elected, to disarm America to the level of acceptance to our Middle East Brethren. If we, as a Nation of warring people, conduct ourselves like the nations of Islam, where peace prevails - - - perhaps a state or period of mutual accord could exist between our governments ...." When I become President, I will seek a pact of agreement to end hostilities between those who have been at war or in a state of enmity, and a freedom from disquieting oppressive thoughts. We as a Nation, have placed upon the nations of Islam, an unfair injustice which is WHY my wife disrespects the Flag and she and I have attended several flag burning ceremonies in the past".   "Of course now, I have found myself about to become the President of the United States and I have put my hatred aside. I will use my power to bring CHANGE to this Nation, and offer the people a new path..My wife and I look forward to becoming our Country's First black Family. Indeed, CHANGE is about to overwhelm the United States of America "   WHAAAAAAAT, the Hell is that???   Yes, you read it right.   I, for one, am speechless!!!
Dale Lindsborg , Washington Post
Fri, 10/28/2011 - 11:40 | 1821011 BillyTheBlade
BillyTheBlade's picture

while there is no doubt in my mind that this is indeed the way that they actually feel and think, this never actually happened.

Fri, 10/28/2011 - 14:13 | 1821761 Milestones
Milestones's picture

Explanation please!       Milestones

Fri, 10/28/2011 - 16:55 | 1822583 Lord Koos
Lord Koos's picture

What a bunch of bullshit, on every level.

Fri, 10/28/2011 - 11:26 | 1820945 Catullus
Catullus's picture

What sucks about owning is that some politician views you as a tax farm. Like you're the source from which they're going to harvest tax dollars. And not just politicians, but unions, firefighters, police, teachers... They all complain about how you don't pay enough for their "services".

But in the end, a house is still an asset. And the move toward renting is the beginning of the end of the market collapse in housing. It probably has further to go give how much one would need to discount to account for the tax-eaters. When the asset price begins to mimmic the discounted future cash flow of the rental income, house buying and renting will normalize and this might actually be a buy again. Still about 4 years off though.

Fri, 10/28/2011 - 12:00 | 1821111 SoCalBusted
SoCalBusted's picture

Please refrain from using divisive words like "tax farm".  Instead, use the newly approved term "government revenue producer".

Fri, 10/28/2011 - 14:05 | 1821704 lemonobrien
lemonobrien's picture

parcel tax baby.

Fri, 10/28/2011 - 11:27 | 1820950 BillyTheBlade
BillyTheBlade's picture

I've only ever rented.  I thought I would buy eventually, but thats when I thought a house was an appretiating asset.  This crash has really opened my eyes.  Now, I think my goal is to get a nice chunk of land and park a double-wide on it. 

Fri, 10/28/2011 - 14:16 | 1821780 Milestones
Milestones's picture

If you park and take off the wheels and axels you will be taxed as a home in most states.      MIlestones

Fri, 10/28/2011 - 11:31 | 1820963 Mark123
Mark123's picture

Tough call...if and when times get tough local govt is going to come after equity through property taxes....this will also hit rental properties which will be passed along to renters.

Maybe that trailer idea is not so bad!  I'll check with my wife - I am confident she will support that idea.

Fri, 10/28/2011 - 13:37 | 1821550 toady
toady's picture

Its already happening. The states where I have my rental homes have 'owner occupied' and 'non-owner occupied' tax rates. Guess which one is more? And you are correct, my renters generally see a $50 increase on the second year lease to cover the cost increase.

Fri, 10/28/2011 - 11:43 | 1821023 Huntly
Huntly's picture

Welcome back to a Rentier world, not that it ever really went away.

Fri, 10/28/2011 - 11:50 | 1821049 Marco
Marco's picture

Renting makes financial sense at the moment, but in the long run it's not good for society ... good for society is a large middle class outright owning their home and being able to spend their income on consumption, not funding the rentseeking of the financier class (mortgage ponzi) or of the land owning class (feudalism).


If Morgan Stanley likes it you know it's bad for the common man ...

Fri, 10/28/2011 - 12:13 | 1821183 Piranhanoia
Piranhanoia's picture

Folks;  You own your homes,  the banks do not. Stop paying them,  they will go away.  

Fri, 10/28/2011 - 12:19 | 1821206 RationalPrepper
RationalPrepper's picture

Sold my mortgate trap yesterday, bitchez.  Plan on renting for less than my mortgage, not to mention taxes, insurance, and maintenance.  Bought some wooded land.  Plan to build eventually.  Trying to figure out how to move their w/o a mortgage (metal shed with living quarters, temporarily?)  Feels good.

Fri, 10/28/2011 - 14:12 | 1821749 cranky-old-geezer
cranky-old-geezer's picture



A friend bought acreage, put a travel trailer on it, ran power & water to it, put in septic tank, lived in it with wife & kids while building a shop for his business, paid it off, then built a house.  Banks begged for his loan business, giving great terms with such low LTV.  He ended up with a tiny mortgage paid off quickly. 

Fri, 10/28/2011 - 13:01 | 1821305 cranky-old-geezer
cranky-old-geezer's picture



Increasing rented homes in neighborhoods will cause further drop in home values as renters and landlords typically don't maintain a home as well as an owner-occupant.

Later we'll see banks start renting foreclosed homes to keep them occupied, keep some cash coming in, avoid selling them and booking the loss.  This will increase supply of rental homes keeping rents capped or falling.

With rents capped or falling landlords won't be able to pass on property tax increases, paying them out of their own pocket, effectively shielding renters from property tax increases.

Banks' stubborn refusal to drop home prices in line with economic conditions, sell them, book the losses, is destroying the housing market.  Everybody loses, owner-occupants, landlords, city governments, all losing so banks can maintain their insanely high book values of RE paper they hold.

Mon, 10/31/2011 - 11:07 | 1828532 dark pools of soros
dark pools of soros's picture

but how many other markets do the same with protecting price?  how about food? even tech and appliances..  they fall under that 'no dumpng' rule in the free trade act or whatever


Fri, 10/28/2011 - 12:48 | 1821312 dark pools of soros
dark pools of soros's picture

right.. terrible to own , must rent..   then what about the people who own the houses that are being rented??  are those chosen people just doing God's Work??

Fri, 10/28/2011 - 12:57 | 1821355 prodigious_idea
prodigious_idea's picture

I love clicking the ad on ZH's site and generating revenue(?) for same.

Fri, 10/28/2011 - 12:58 | 1821358 prodigious_idea
prodigious_idea's picture

And Schwab, and . . .

Fri, 10/28/2011 - 16:12 | 1822415 privatebanker55
privatebanker55's picture

Lots of ideas shared on the benefits of owning vs. renting......I deal with many HWN individuals and probably could be considered one myself...the thinking on owning right now is to keep it to very select opportunities. Stick to prime real estate, waterfront and other properties that could always generate a cash flow if need be. Stay away from drywall dream homes in the suburbs.....entire communities will get plowed under when the critical mass of people move away. Otherwise, rent. I just spent a week in Florida...the Treasure coast could get a fantastic condo on the water for less than 200k.....or you could stay in the best hotels in the area for a hundred bucks a night. You do the math....why own it and insure and pay tax and maintenance when there are hundreds if not thousands of places available short term. When you go, no headaches follow you.

Fri, 10/28/2011 - 16:30 | 1822481 carbonmutant
carbonmutant's picture

Anybody have any other links to the Morgan Stanley Report?

What was the title of the report?

Fri, 10/28/2011 - 16:57 | 1822593 Lord Koos
Lord Koos's picture

Suburban rental slums, America's future.

Do NOT follow this link or you will be banned from the site!