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:


Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
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.

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