Harga Rumah Melampau
It’s Friday desk clearing time for this blogger. “These days, it has become a trend among the young who enter working life to place priority on owning a car, instead of a home. Real Estate and Housing Developers’ Association’s (Rehda) immediate past president Datuk Ng Seing Liong said the trend should be reversed. ‘Buying a property, such as an affordable house, should be the main priority among youngsters and they should not wear out their salary in owning a car,’ he told Bernama. ‘Bear in mind that property prices will always goes up. Take this as an investment and in the meantime, commute via public transportation,’ advised Ng.”
“In 1978, when a Baby Boomer aged 60 would have been 25, the median house price in Brisbane was $29,500. Since then, the median house price has increased to $515,000. In 1978, the average annual wage was $10,869. In 2012, the average annual wage was $69,992. In 1978, the Baby Boomer couples were putting 22 per cent of their (usually just one) wage towards a mortgage. In 2012, Generation Y couples were parting with 56 per cent of their (usually two) incomes to service a mortgage.”
“Property analyst Michael Matusik said the comparison could not be made without looking at cost factors outside the property realm. ‘Today, people generally rely on two incomes to service a loan. Back in 1978, only full-time male earnings were considered. Also, you needed a 30 per cent deposit back in 1978. Today some banks are back to asking for just 5 per cent. ‘And contrary to popular belief, transport costs then were higher than today. Public transport was more expensive and cars were less fuel-efficient.’”
“However, Mr Matusik said property ‘affordability isn’t that much different.’”
“JML Property director Juliet Risdon told Business Daily in an interview that property prices would not fall much, as demand by would-be buyers would increase again and housing would remain in short supply. She said Macau needed to find ways to make homes affordable for the average resident, but warned against too much intervention in the market. Q: Is this a good time to buy property in Macau?”
“A: Maybe you’re looking at paying a little bit more than what you would want to, but down the line you’ll be very happy with your investment. It’s never going to go back, and probably what stops some people buying today is that they look at properties two, three, four, six years ago and, if you’re talking about a property that is 3 million patacas [US$375,554] now, it was probably 790,000 patacas then. Is it really going to go down? I think those days are history. They are a thing of the past.”
“In his latest video blog, San Diego-area real estate guru Jim Klinge, aka ‘Jim the Realtor,’ tours a 1,800-sq-.ft. home in Rancho Santa Fe that in March was bought for $745,000 but whose owners are now trying to sell it for $1.24 million — a 66% increase. The home next door sold for $875,000 last October.”
“That should be setting off huge alarm bells, he says: ‘Buyers are paying crazy prices. We have become detached from the comps — logic, reasoning, all the ways we used to spend a lot of brain power on figuring out the right price, it just doesn’t do you any good. In fact, it’s a detriment to be too smart and try to be a buyer in this market — it’s the least informed buyers making the market, just paying whatever it takes. I know it’s always been like that, but it’s a lot worse than it’s ever been.’”
“In Daytona Beach, Fla., more than 90 percent of the more than 1,000 homes flipped last year were flipped by sellers who only flipped one home, according to RealtyTrac data. Even if housing slows substantially in the next year or so, it’s unlikely that today’s flippers will tank the real estate market. Unlike the go-go days of the last real-estate bubble, it’s still pretty tough to get financing, which means today’s investors are either paying all cash for properties or they have significant skin in the game. That makes it far less likely for them to walk away from a property, even if they have to take a loss.”
“‘Banks just aren’t going to let people get in over their head now,’ says Rich Cosner, president of Prudential California Realty.”
“The California Housing Finance Agency, a self-supported state agency, is making a new, fixed-rate mortgage program available, with zero-interest down payment loans for first-time homebuyers. For a family who takes out a $200,000 mortgage, for instance, one could receive up to $7,000 in down payment assistance. Candidates have the option of paying the interest or the loan off during the life of the mortgage or allow it to sit as a silent-second. Claudia Cappio, executive director of CalFHA, said the agency has focused on helping Californians become homeowners, strengthening communities and neighborhoods. ‘This new program is aimed at bridging that gap.’”
“Sluggish sales and the discounting of prices in the new-home market at the weekend have prompted sellers in the secondary market to cut their asking prices, according to agents. In nearby Yuen Long, new flats hit the market at discounts of up to 10 per cent on Saturday. Midland Realty director Sammy Po Siu-ming said prices in the secondary market had begun falling in anticipation of growing competition for buyers. ‘Owners will come under growing pressure to adjust their asking prices downward if they want to get buyers interested,’ he said.”
“While builders under pressure have started offering discounts, an even better opportunity is emerging in the secondary-resale market where over-leveraged investors who had picked up properties over the last few years are willing to offload their inventory at discounts as high as 30%. The advantage for a home buyer is that several of these apartments that investors are selling in cities like Gurgaon, Noida, Mumbai, Bangalore and others, will be delivered in 2013, so the wait for your dream home could become much shorter.”
“‘Several investors who have stretched themselves too thin are in exit mode and discounts in such cases could range anywhere between 20% and 30%. As the desperation level of the seller increases, so does the discount,’ says Atul Marwaha, principal consultant at Prime Options, a Gurgaon-based real estate brokerage firm.”
“Costs and prices for new housing units have risen so high in Oslo that sales of new units on the drawing board have plummeted and some developers aren’t breaking ground on new projects. One problem is that developers have paid too much for land on which they planned to build. ‘It’s just become too expensive, and prices have topped,’ Kjell Senneset, an economist at consulting firm Prognosesenteret told DN. Developers who paid high prices for their lots ‘can’t rationalize the costs,’ Senneset said. ‘The prices get too high. The banks are also putting the brakes on homebuyers.’ New state regulations call for higher down payments, and the banks also face new capital requirements.”
“Several flats in Oslo that didn’t sell before the summer holidays are now being advertised at lower prices, with some high-end properties asking as much as a million kroner less now than in June. One example was a flat in Oslo’s fashionable Gimle district that’s now being advertised for NOK 9.9 million (USD 1.6 million), down from an initial asking price of NOK 10.9 million. ‘I didn’t think the price was so high, but the market did,’ broker Espen Hordnes told DN.”
“‘Harga Rumah Melampau’ – that’s the desperate cry of the rakyat against skyrocketing house prices as headlined by one of the widely-read Bahasa Malaysia newspapers. In English, it translates to ‘House prices are ridiculous.’”
“The National House Buyers Association (HBA) has consistently called for government intervention to prevent a ‘homeless generation of young adult Malaysians’ from emerging, especially in urban and sub-urban areas, who, if not for wild speculation, would be able to buy their own houses. In time, Malaysia will face a ’social crisis’ with serious political implications if the majority of the lower and middle-income groups do not have affordable houses.”
“In the Government’s drive to home ownership, low stamp duties have been imposed to encourage first-time house buyers to own a house. But speculators have taken advantage of this to accumulate multiple properties and manipulate property prices with conniving cash-strapped housing developers. This is a ‘ticking time bomb’ and immediate government measures are needed. The government needs to take proactive measures to stop the steep rise in property prices due to false demand and excessive speculation fuelled by easy mortgages and the low Real Property Gains Tax.”
“The situation has been getting worse with the self-glorified ‘Investors Club’ mushrooming in the housing market. Seminars like ‘How to become a billionaire’ and ‘Invest in properties without deposits’ will trigger young adults into thinking of shortcuts toward great riches.”
“Urban Well Being, Housing and Local Government Minister Datuk Abdul Rahman Dahlan recently reiterated: ‘Of greater concern is the fact that income growth has not been keeping in tandem with the increase in house prices.’”
Another consideration: Property taxes were affordable in 1978.
Today they have exploded. In may places property taxes/year is more than the the mortgage payment/year.
“In 1978, when a Baby Boomer aged 60 would have been 25, the median house price in Brisbane was $29,500. Since then, the median house price has increased to $515,000. In 1978, the average annual wage was $10,869. In 2012, the average annual wage was $69,992. In 1978, the Baby Boomer couples were putting 22 per cent of their (usually just one) wage towards a mortgage. In 2012, Generation Y couples were parting with 56 per cent of their (usually two) incomes to service a mortgage.”
This is a select market, not indicative of the national average.
They say a house used to be 3x income, and now it is 7.35.
2013, NATIONALLY, median sales prices is $210K with median income of 25-45 year olds is 65K. Just over 3x.
Sure, if you cherry pick an area with a median house price that is 2.5x the national median, it will look bad.
I could cherry pick a market and make everything look fine:
Phoenix median home price is $180K. Median household income for Gen Y is $55K.
With 30% down ($55K), financing $125K for 30 years, at 4.5% is $635PI. Add $250 for TI in AZ = $885 = 17% of monthly gross on housing.
See, cherry picking data and pretending that has national relevance, will badly skew the extrapolation.
Wrong Darryl. Once again, your phony data fails the smell test.
Housing has always been 2.2x annual income, not 3.
Household income is $50k/yr, not $65k.
And you knowingly and deliberately reduced the total debt burden with a 30% down payment.
You are a fraud Darryl. A bonafide fraud.
Also very confused, about almost everything. He has no clue what country Brisbane is in. I remember the sight of scruffy men on the sidewalks of NYC from when I was a kid, yelling at the top of their lungs incessantly, saying nothing intelligible.
Brisbane, CA is in San Mateo County just south of San Francisco.
The Brisbane in the linked article is down under.
The Land of Oz as they say there…
“Brisbane, CA is in San Mateo County just south of San Francisco.”
I assumed that’s what it was w/o reading the article, as Brisbane, Ca is also in full-on bubble mode. It lies right between San Francisco proper and the airport, which is 12 miles south of the city. Many nice hillside homes w/a view of the bay. Steep hills, at that. I don’t know if they have to buy earthquake insurance.
Funny how facts bring out the worse in you. People who name call do so because they have little ammunition to respond. Grow up, stop the insults, and bring us facts and logic!
PS Mr. Housing Analyst> You never explain what you analyze or from what sources.
Who in their right minds rather rent or lease anything then own something outright in life?
“Who in their right minds rather rent or lease anything then own something outright in life?”
There is an old saying……” If it flies, floats or f#cks, rent it.
(but seriously, it depends on the cost to buy vs the cost to rent)
Do you mean “own something” or “owe on something”? Not many people have a spare $300-400k sitting around to actually “buy” a house at current prices. Unless you have the cash at today’s prices, you don’t “own” anything. Just ask the foreclosed how much of their homes that their years of payments actually “bought” them.
Those are important factors Dale, but another is deciding between spending within your ready means or borrowing long. One means doing with less possibly at first and having twice as much later, with more freedom and flexibility along the way. The other is having more immediately but ending up with half as much later, after spending the prime of life slaving to pay the bank at interest.
People who pay actual money for things are the enemy of the banks, weeds in the garden so to speak.
There is an old saying……” If it flies, floats or f#cks, rent it.
Haven’t you heard from our local experts? It turns out boats are cheap and easy to maintain, despite all those sayings to the contrary.
See, if a house floats on water, it turns out that results in less maintenance. Somehow. Despite generations of people attesting otherwise.
…. speaking of frauds.
I remember that you read a book about a guy that lived on a boat. That must be how you became so knowledgeable. Tell us what you think is a reasonable maintenance allowance for my boat per year? Please do consider that the material of construction doesn’t rust or rot in any way.
Please do consider that the material of construction doesn’t rust or rot in any way.
Fiberglass? You’ve still gotta scrub algae off of it regularly, even in fresh water (since we tamed acid rain).
The sun and the constant moisture will rot/rust everything on the deck over time (it all “depreciates’, don’tchaknow?), unless you have some new wonder materials that you’d like to share with the world. Everything we have today needs to be wiped down, polished, repainted and/or revarnished, with some regularity.
Everything below deck needs to be cleaned regularly due to the constant mildew and mold threat that comes from living literally on top of water. Unless you’re sealed up in your yacht with the AC going constantly.
Then, there are all the same maintenance issues that you’d have on land: hvac, plumbing, electrical, appliance repair, exterior upkeep. No lawn to mow, admittedly, but otherwise pretty much everything you’d have with a house.
Then, all the issues that come with a large recreational vehicle: oil, battery, engine, lights, exhaust, fuel system, etc etc.
I remember that you read a book about a guy that lived on a boat.
Yes! The Travis McGee series by John D. MacDonald, a great writer, well know for the fastidious and extensive background research he did on his novel subjects.
He (or Travis McGee) said living on a boat required about one hour of maintenance a day. You could put it off, and make it worse, or you could pay someone else to do it, but you couldn’t avoid it.
MacDonald was a big-time boater, and the hero of his best-selling series was a guy who lived on a boat. Why would he lie about such a detail as the maintenance requirements?
BTW- John MacDonald also wrote probably the best novel ever on a housing bubble and bust: Condominium.
And I learned about boating maintenance the old-fashioned way: cleaning my friends’ boats when we got back to the dock, and watching the boats we weren’t made to clean up molder away.
Hey Blue,
What do you use for internet on the boat, and how about a power supply?
Ben,
I use a Verizon MiFi card. Browsing and work emails no problem. Watching movies has to be restrained. Latest plan is 16 Gig for about $60. In Canada I use a Rogers device, not so wonderful. The house bank holds about 400 amp hours. Inverter to convert 12V battery power to 110. Will last many days without recharge. If I run the genny or the engines cruising to another spot for a couple of hours it is all topped up and the freezer is deep cold. I anchor out 80%, when paying for a dock everything gets fully charged. When tied up at a canal lock, charging up is free. All for $75 a year.
I have a Verizon Mifi too. It’s a 3G. I haven’t upgraded because this thing has been so great. Plus, earlier 4G Mifis couldn’t operate while charging, but I think they’ve fixed that now. I’m looking into chargeable batteries that would let me run the notebook for hours while I’m at these foreclosed houses that have no power. Currently I can charge while driving using a Belkin inverter through the cig lighter.
“new wonder materials…”
Yes, not fiberglass. That stuff does rot and it is really heavy, costs more to cruise a tub of that. There might be some algae on the bottom, but they don’t thrive on the toxic bottom paint. whatever there isn’t enough to cause drag and it dies when the boat comes out for storage in the winter. Not worth a powerwash.
Mold does happen if winter shrink wrap isn’t ventilated, but it is. In season this is absolutely not a problem, unless I leave a loaf of bread around for a month. Yes I have to house clean, but would have to do that if I lived in a tent.
If I don’t clean the boat exterior once in a while stuff will start to grow of course, but it cannot rot. It is not wood and it is not steel and it is not fiberglass.
Sure the engines are a maintenance item. I average 1000 miles a year. What does it cost to maintain just the engine on your vehicle per 1000 miles?
So, what do you think it costs me to maintain this floating house per year?
An hour a day, that will keep the windows spotless and allow for some laundry.
My MiFi operates while charging. It is several years old. I have it set on 3G so that it is not constantly searching. My laptop runs for 6-8 hours on battery and I have a spare battery. The spare batteries are not that expensive, but neither is a small inverter.
“Latest plan is 16 Gig for about $60.”
WOW. That is a bargain.
An hour a day, that will keep the windows spotless and allow for some laundry.
So, everything you’d do in a house, plus more, since houses don’t have engines and hulls and the like, and generally aren’t so close to the water (and therefore moist).
Just like I (and everyone who has owned a boat) said. Higher maintenance than a similarly-sized house.
It is not wood and it is not steel and it is not fiberglass.
That leaves… aluminum?
That leaves… aluminum?
Unpainted aluminum. Like on a jon boat or canoe. Very, very rarely seen on ‘yachts’.
the median house price in Brisbane
Brisbane is in Australia.
I found a link with down under tax rates, including property tax.
http://www.globalpropertyguide.com/Pacific/Australia/Taxes-and-Costs
I do find it interesting that a country with thousands of miles of coastline and a population that is about half of California’s would have such high real estate prices. I can dig that no one wants to live in their equivalent of “flyover” but they have huge amounts of coastline.
Also, I wonder if high prices are only “near downtown” and that if you live in the burbs it gets a lot cheaper.
Water.
i>In 1978, when a Baby Boomer aged 60 would have been 25,
Idiot queston: Why would “baby booms” in Australia or Europe or Asia line up chronologically with the American baby boom? Did they have the same post-war prosperity?
No, but they had the same global banking clan brainwashing them into believing that housing is supposed to be unaffordable.
Oxy, the Australians fought in WWII also and when the young men who survived came home they got married and had kids. The prospect for the future was as bright as it could be for them as well as for us.
From the California article:
“it’s the least informed buyers making the market,”
This is all you need to know folks. Exit now. Exit quickly. We know this massively inflated rebubble is ready to burst. Beware.
Spot on. And this is why we own three cars and no houses. The least informed buyers have outbid our willingness to pay for pride of home ownership.
“it’s the least informed buyers making the market,”
+1 aka “Fresh Fish” a la Andersonville prison camp.
“‘Jim the Realtor,’ tours a 1,800-sq-.ft. home in Rancho Santa Fe that in March was bought for $745,000 but whose owners are now trying to sell it for $1.24 million — a 66% increase. The home next door sold for $875,000 last October.”
“That should be setting off huge alarm bells, he says: ‘Buyers are paying crazy prices.”
I’m missing the concern here. Sellers generally can list whatever price they want. Just because a wannabe seller is hoping a greater fool will come along to pay a 66% increase over last year’s sale price doesn’t mean it is likely to happen.
Now if the home in question eventually sold above asking price in a bidding war, that would be worrisome.
“Just because a wannabe seller is hoping a greater fool will come along to pay a 66% increase over last year’s sale price doesn’t mean it is likely to happen.”
Precisely.
I can put a $40k price tag on my 10 year old Honda Civic but where is the buyer at that price?
This is why housing demand is at 14 year lows and falling.
You may have seen some posts I have made from time to time on high end San Diego home sale experience since 2008. In short, in the wake of the Fall 2008 crash, many wealthy owners who listed their homes at the prices they believed them to be worth ended up keeping them on the market for upwards of five years without a sale.
I wonder whether Famous Realtor® Jim has ever made a post like this on his blog? If so, please furnish a link.
I believe he has, but it was waaaaay back during either the end stages of the bubble or the beginning of the crash. I enjoyed his youtube vids showing exactly what sort of crap was being marketed around that time.
“housing demand is at 14 year lows and falling.”
What happened to 17? If nothing else, consistency has been your MO.
This is the house being flipped from $745K to $1.24 million:
http://www.zillow.com/homedetails/16211-Via-Pacifica-Rancho-Santa-Fe-CA-92091/16766938_zpid/
Looks ok, but for that money, it simply has no oomph except that it backs to a golf course. I think they are following the pricing strategy of the house next door, and it will fail just as much.
———
And this is the house next door that sold for $875K last October:
http://www.zillow.com/homedetails/16205-Via-Pacifica-Rancho-Santa-Fe-CA-92091/16766915_zpid/
Not too impressive either, but that’s CA. The final price wasn’t a bidding war; it chased the market down:
Nov 2004: Sold $765K
)
Feb 2006: Sold $975K
Feb 2007: $1.15 million (bubble peak)
Apr 2009: Sold $670K (42% craaaater)
Dec 2011: List 1.24 million (more than bubble peak
…chase market down…
Oct 2012: Sold $875K (more than 2004 price)
“Nov 2004: Sold $765K
…
Oct 2012: Sold $875K (more than 2004 price)”
You forgot to adjust for inflation.
CPI
Nov 2004 191.0
Oct 2012 231.317
Oct 2012 price discounted to Nov 2004:
$875K*(191.0/231.317) = $722K (A LOSS IN REAL VALUE TERMS)
Data source:
U.S. Department Of Labor
Consumer Price Index
All Urban Consumers - (CPI-U)
U.S. city average
All items
1982-84=100
Real value doesn’t much matter here. The point is that in absolute terms, Homeowner 2004 — if he rode out the bubble in the house and didn’t stupidly cash-out refi — would NOT be underwater. Even if Homeowner had put no money down and accumulated no equity in 8 years, he could still sell that house and make at least $30K profit. That’s why housing is an inflation hedge.
You’re not thinking this through.
How can he not be underwater when;
1) He overpaid by 300%+
2) There is no buyer at even a fraction of the price he paid
This is somewhat similar to your own situation so I look forward to your response.
WTF.
1. If you overpaid by 300%, but the guy who bought it from you overpaid by 400%, that’s a moneymaker. This is how they make money on Wall Street every day. Every microsecond, in fact.
2. How can there be no buyer if the house was SOLD?
“1. If you overpaid by 300%, but the guy who bought it from you overpaid by 400%, that’s a moneymaker.”
You don’t understand inflation.
Go take an undergraduate macroeconomics course and get back to us with what you learn.
You don’t understand inflation.
Have you calculated the imputed rent?
Yes. Divide by 2.
Have you?
“Have you calculated the imputed rent?”
I left that out of the discussion, because it seemed off-topic to Oxide’s point.
But since you brought it up, what about interest payments to the bank, property taxes, insurance, routine maintenance, maintenance of stuff they didn’t expect to have to replace but did, home owner’s association dues, Mello Roos, etc etc etc?
Don’t forget to subtract all of these ownership costs off your imputed rent!
It seemed off topic to a discussion of the cost of buying a house?
The reason the realtor is complaining about “too high a price” is that he wants his commission now.
When sales were going gangbusters and prices were rising during the peak of the last bubble, realtors could afford to wait. White hat buyers did show up. I know of a family that actually took their house to auction, didn’t get the reserve price, then just put it back on the market for their original asking price. After several months, they got it. Like 300K more than the auction reserve price.
So - this is indicative of how it’s going for that realtor.
“So - this is indicative of how it’s going for that realtor.
It’s indicative for all realtors. They’re all starving, falling out and seeking more honorable and ethical employment.
“I’m missing the concern here.”
The realtor would love an inflated commission, but he is worried that a sale might not happen. Could this anxiety cause a realtor to stare at the ceiling at night when he should be sleeping?
“‘Bear in mind that property prices will always goes up. Take this as an investment and in the meantime, commute via public transportation,’ advised Ng.”
There you have it, folks. Like California real estate, Malaysian real estate always goes up!
From the Norway article:
‘Consumer advocates want buyers to be able to spend more time evaluating properties and not be so pressured into submitting bids or making decisions. With most property showings only lasting an hour or two and brokers busy, many buyers find themselves using less time on a home purchase in Norway than they might on a paid or shoes.’
“When you for example buy a new stereo system, you plan it, shop around, consult friends, surf the net,”Thomas Bartholdsen of the Consumer Council (Forbrukerrådet) told newspaper Dagsavisen recently. “When you’re buying a home, everything is different. From the time of a showing and when the bidding closes, maybe only a day has gone by.”
That sounds like a bubble to me.
Waiving the inspection - which has been common in DC metro - seems like a bad way to take on such a large commitment.
“Just jump, the water is probably deep enough.”
But again, ABC - Always Be Closing. You got a buyer who’s wiling to waive the inspection, you’ve got yourself a dedicated buyer who wants to give you a commission.
average car loan term 64 months
At least the car gets paid off and since the average age is 11 years, they get another 6 years of “no payment” time.
Contrast that with the serial leasers. For them there is no break from the monthly nut. An leasers tend to drive fancier cars, so it’s probable that monthly nut is higher. The price to pay for driving a Lexus or a Beamer when you should be driving a Chevy or a Toyota.
When dealers first created the lease, I could tell it was a bad deal before I even looked at the details… How did I know? Because the dealers were pushing it sooooo hard.
They are not going to spend that much effort trying to make less money.
Then I had a friend that did a 3 year lease, and had to park the car for almost the entire 3rd year because they were up against their millage limit and the over limit fees made it cheaper to just go get another car.
I remember hearing kids (25 when I was 35) justifying the lease because “I’m always going to have a car payment, since I’ll be trading this one in on another new car before it is paid off.”
Oh how I miss those fools getting a new car every 2-3 years eating the MASSIVE price drop, so I could buy a 2-3 year old car for half the cost of new, pay it off in 2 years, then drive it another 5 years with no payment.
My current pickup is 10 years old, and I expect to drive it another 10, unless it is in an accident or something.
I like my chevy 3/4 ton pickup with 68k miles
on it…….
I have friend that’s on a two year lease cycle. He refuses to ride in my 8 year old Toyota.
“He refuses to ride in my 8 year old Toyota.”
Back in the 70’s I was riding in the belly of an hh-19 helicopter at full speed skimming over the jungle. I moved forward to look out the gunner’s port when I saw the manufacturer’s placard, which indicated that it was made during the Korean conflict. These were really noisy too.
Leasing is, if you have the financial means to pay for the car, simply a matter of comparing interest rate to money factor. That’s it, no magic at all. If the interest rate is lower than the money factor, you should buy. In the reverse, you should lease. Money factors are very often (more often than interest rates on purchases) subsidized, which can make leasing a better deal.
The other thing is if you are buying a car that has a high probability of being very “out of style” for one reason or another at the end of the lease. Like, the company might go out of business. Or the car is highly styled and might look awful in 3 years.
When you lease a car, you are negotiating the purchase AND the sale at the same time. That makes it more complicated, but, if you understand it, leasing can be a great product. The last few cars I’ve leased, the dealer gave me a below market rate loan (and below purchase rate) AND a free “put” on the car to sell it back to him 3 years from now at a fixed price (or buy it).
Problem is, leases have been used as an “affordability product” for the last 15 years or so. That’s not what they really are; they are a financial instrument that protects the value of the car (the put option). Used wisely, it can be to your favor; but, make sure you go in “eyes wide open”.
‘American Homes 4 Rent (AMH), the second-largest buyer of single-family rental houses, plans to raise money by offering investors a chance to share in property-value appreciation as well as rental income. The company, which raised $811.8 million in a July initial public offering including an overallotment, plans to sell preferred shares that will increase in value as its rental homes appreciate in value, according to a filing made today with the U.S. Securities and Exchange Commission. American Homes proposes to raise $100 million, an amount that’s used to calculate fees and may change.’
‘The participating shares “have an initial liquidation preference of $25 per share, which may be increased by an additional Home Price Appreciation Amount” that takes into account prices in the company’s 20 largest markets, the Agoura Hills, California-based company said in the filing.’
http://www.bloomberg.com/news/2013-09-05/american-homes-4-rent-to-let-investors-share-in-values.html?cmpid=yhoo
Well well, an ‘initial liquidation preference.’ Rental Watch may have to review his outlook on these guys.
‘American Homes 4 Rent (AMH), the second-largest buyer of single-family rental houses, plans to raise money by offering investors a chance to share in property-value appreciation as well as rental income’
Let me guess, they now foresee losses ahead and would like to spread that pain around.
Pump and dump.
Raise billions of dollars. Buy 10s of thousands of houses. That demand creates price increases. Use those price increases to IPO to greater fools. Get out before the momentum turns negative.
Or darrell i as i keep saying they will sell it all to the Chinese….with ohbewannas blessing.
All of the SFH REITs are posting losses, but that is understandable given they are so new and are spending lots of money fixing houses up. The stock prices don’t suggest any enthusiasm about their rental model. Remember this particular outfit is even buying new houses to rent. I posted one article with a builder mocking them about that.
It’s telling that Blackstone and others have over-asking prices built into their plan. If I’m paying cash, I want a discount. But no! These guys are so smart they want to snap up houses before the peasants can get them. It’s just irrational, and I suspect they think they can create a boom, sell and walk away with a fortune. But all the while pretend they are landlords for the long haul.
It hasn’t even been a year and they are on the rocks.
These guys are so smart they want to snap up houses before the peasants can get them. It’s just irrational, and I suspect they think they can create a boom, sell and walk away with a fortune. But all the while pretend they are landlords for the long haul.
Great summary Ben. I see another game of musical chairs in the works. Who will be the first to pinpoint when appreciation income is gone leaving only unstable rental income, and unload while they can? And who will be stuck without a chair?
Perhaps it’s best that the peasants are shut out. The damage will be limited to these private equity firms and their stockholders. Unfortunately, the stockholders include public pensions and 401Ks.
As one of the peasants that was shut out I’d agree, I dropped out of the market last spring after wasting a year making bids that were ignored because I was competing w/ 100% cash….that got REAL old and the current price runup had begun so I bailed…on a happier note I retired and cashed out my pension last year for waaay more than I could have a few years ago thanks to QE and artificially low interest rates
False characterization.
Rational people are shut out. Fools and debt donkeys took the bait.
+1.
You know, I can understand an outfit like Blackstone treating houses like stocks or bonds or other financial paper, and fumbling because of it. But AMH was started by B. Wayne Hughes, founder of Public Storage. One would think that he understands more than anyone that housing is just a box for our stuff with a cover on it.
And as I note below, Public Storage issued round after round after round of preferred stock.
“housing is just a box for our stuff with a cover on it.”
For renters maybe yes. For mortgaged owners it’s more like a hole in the ground with a roof over it.
If you look at how PSA is structured financially (the first REIT Wayne Hughes founded), it is laden with round after round of preferred shares. It actually isn’t surprising that they are issuing preferred shares…what IS surprising however, is linking the return to home price appreciation…another way for the public to gamble on home price appreciation.
As I’ve said before, we won’t really know if these guys will last until they have ramped down the massive homebuying operation, and stop the related party fees. At that point, the cost structure of the company will be a lot lower…then we’ll see if the market prices them like apartment REITs (relatively low yields), or something else.
“then we’ll see if the market prices them like apartment REITs (relatively low yields), or something else.”
If you have that many rentals, you really don’t need that high of a return on each. That is, if they’re really thinking of playing this out long term. If they have to please shareholders short-term, maybe that’s a different game.
“American Homes 4 Rent (AMH), the second-largest…”
With this whole REO to Rent scheme, its difficult for me to effectively communicate enough sarcasm, but I’ll try: Brilliant. Killing it. Great plan. Sheer genius. Can’t miss. Fantastic idea. Sky is the limit. Etc…
This has become a global cancer.
It is amazing, and everywhere in the world people think it is because they are special.
Not to mention that it’s different there (wherever “there” happens to be).
According to CNN, Gen Y has the highest unemployment rate of all. They can’t find jobs, so they’re going to school, thinking that more education will qualify them for a job. They are piling up student debt. Unfortunately, the labor market doesn’t acually need that many highly eduated people. I’ve noticed a lot of Gen-Yers with advanced degrees in subjects that are simply not that advanced. This is the problem with offshoring. We can’t offshore our manufacturing, customer support, science, and engineering jobs, and still expect people to get jobs.
We can’t offshore our manufacturing, customer support, science, and engineering jobs
No worries, Asians can’t do science and engineering jobs, I’m told.
We’ll always have those.
“The National House Buyers Association (HBA) has consistently called for government intervention to prevent a ‘homeless generation of young adult Malaysians’ from emerging, especially in urban and sub-urban areas, who, if not for wild speculation, would be able to buy their own houses. In time, Malaysia will face a ’social crisis’ with serious political implications if the majority of the lower and middle-income groups do not have affordable houses.”
Don’t Malaysian homes have basements where the parents can house their kids?
“The California Housing Finance Agency, a self-supported state agency, is making a new, fixed-rate mortgage program available, with zero-interest down payment loans for first-time homebuyers. For a family who takes out a $200,000 mortgage, for instance, one could receive up to $7,000 in down payment assistance.”
Too bad the only domiciles in California that sell for $200,000 or less tend to be condos in high-crime areas.
‘a self-supported state agency’
WTF does that mean? Aren’t agencies normally self-supported (private) or state-supported (public) but not both?
The young people are better off buying cars and not houses, and sharing rent. They will have plenty of leftover money so they could fully fund a Roth IRA or even a Roth 401k. Broad market stock funds do far better than real estat. Moreover, you can move arround easily. You try that in a house, you pay broker fees every time you move.