A Cascading Effect Down
A topic on apartments, starting with the Real Deal on Florida. “For the third time in six years, Fort Lauderdale’s Harbour Pointe apartment building has traded hands between investors for a growing price tag. The luxury waterfront apartments were just sold to a joint venture from New York and California for $11 million. With 34 units, this latest sale breaks down to about $323,529 per apartment. The apartments were built in 1976 and were renovated in 2010 when a company led by Richard Walters, the previous owner, modernized the building’s pool, common areas, units and elevators.”
“After finishing up its facelift in 2010, according to county records, Walters sold the apartments for $7.65 million — a cool $2.13 million more than what he paid four years earlier. The most recent owners came into the picture three years ago when they paid $9.2 million for the property. And now, the trio have sold the Harbour Pointe apartments again for a tidy $1.8 million profit over what they paid in 2013.”
“The sale was announced by Marcus & Millichap’s Joseph Thomas, Adam Duncan and Derek Soven, who represented the sellers. ‘In addition to continued stable cash flow and predictable future rent growth, the property offers a significant value-add opportunity through stabilizing rents, implementing utility reimbursements and adding additional income sources like tenant storage lockers,’ Duncan said.”
The Charlotte Observer in North Carolina. “It’s the question about Charlotte’s apartment boom that I get most often from readers: ‘When will the bubble burst?’ That was the title of a forum hosted by the Greater Charlotte Apartment Association. Jay Parsons, a Dallas-based specialist who tracks apartment data for MPF Research, said that question is being asked in other booming markets throughout the U.S. as well. ‘We’re building a lot of apartments across the country, but they remain full,’ said Parsons.”
“Charlotte ranks fifth nationally in the percentage of new apartment units added to the market (behind Austin, San Antonio, Salt Lake City and Nashville), with 3.3 percent annual growth through the second quarter this year, Parsons said. ‘That’s not a crazy number,’ he said. ‘But where it’s going to get crazier is what’s coming.’”
“Based on upcoming projects, Parsons said that growth rate will increase to 7.6 percent – a supply increase he politely called ‘aggressive.’ ‘The next wave is about to hit,’ said Parsons. A quick drive around certain Charlotte neighborhoods makes it apparent that the apartment boom isn’t evenly spread. The most dramatic increase has been in the uptown/South End submarket, which has seen a 108 percent increase in the number of apartments since 2012. That translates to nearly 9,000 new units, and means that uptown and South End are the fastest-growing submarket in the entire U.S. – yup, the whole nation – out of 1,000 tracked by MPF Research.”
“Traditionally, Parsons explained, landlords who needed to fill high-end apartments during a slowdown could offer a month or two free rent and entice people to move up from a Class B to a Class A building. But that was when rents at Class A buildings were 25 to 30 percent higher than Class B buildings. That premium has now widened to about 50 percent. ‘If there is an issue, that’s going to be a real challenge across the country, including here in the uptown/South End area,’ Parsons said. One market where that’s already being felt is Houston, caught in an energy sector crash. There, Parsons said, high-end apartments are having to offer three months free rent to draw tenants, a costly proposition for developers.”
“‘That’s a lot of concessions,’ he said.”
From CNBC. “Rents are soaring and demand for apartments is historically high, but some developers and landlords are overestimating the strength of the U.S. apartment market — and paying for it in quarterly earnings. Others are warning that the second half of this year will be even tougher. Most of the product is in pricey markets and pricier neighborhoods, not in areas where demand is highest. That is because the costs of land and construction rose.”
“‘Any time the numbers will work, developers will build. That’s what happened in San Francisco and New York. Land prices and construction costs went up so much, the only thing you could build was high-end apartments,’ said Alexander Goldfarb, senior REIT analyst with Sandler O’Neill, which currently has a hold rating on all the apartment REITs it covers.”
“That is precisely why Equity Residential missed expectations so badly in its second-quarter earnings and revised its outlook lower yet again. ‘Clearly 2016 will not turn out to be the year we had originally expected due to deteriorating market conditions in San Francisco and New York City, which combined made up 50 percent of our initial growth forecast for the year,’ Equity Residential CEO David Neithercut said on a quarterly earnings call this week. ‘These markets have turned to become quite volatile.’”
“Oversupply is part of the problem, but jobs, especially high-paying jobs, are weighing on all the apartment developers. Concessions are now the rule more than the exception. AvalonBay gave renters four times the monetary concessions in the second quarter of this year compared with those of a year ago. If you start offering two months free, a $3,500 a month apartment is now $2,900, Goldfarb said. ‘There is a cascading effect down,’ he said.”
The Denver Post in Colorado. “Three out of five apartments built in metro Denver since 2014 came with rents at the top one-third of the market, while only one in 15 came with rents in the bottom third of the market, according to an analysis from Zillow. In metro Denver, 60 percent of new apartments fell in the top rent tier, where rents averaged $2,060 a month. Only 6.6 percent had rents that would fit in the bottom third, where the average was a much more affordable $1,164 a month.”
“Denver wasn’t the most extreme city when it came to a concentration on new luxury apartments. Tampa, for example, had 93.1 percent of new apartments with rents in the top tier, while in Chicago it was 79.2 percent. But Denver was among the metros, along with Charlotte, N.C. and Seattle, that did the worst job of supplying new units in the bottom tier of rents.”
“The lopsided nature of apartment construction is creating some anomalies. Zillow estimates apartment rents in metro Denver on the whole are rising at an 6.5 percent annual rate, but the bottom third of the market at 8.6 percent rate as tenants battle it out for a limited supply. Where things get really distorted is in the top tier, which is measuring a 13.9 percent annual increase in rents. Zillow chief economist Svenja Gudell said that isn’t demand driven, as on the bottom end, but rather because the new units are pushing the market higher.”
“The rent increases, however, don’t include the concessions that developers are offering, such as a month or two rent, to win tenants to new projects. As more units hit the market targeting a limited segment of the population that doesn’t have to rent, developers could be leaving themselves exposed, Gudell warned.”
The Stranger in Washington. “According to information gathered by Zillow, the Seattle-based online real-estate data company, and recounted in a Seattle Times post, the ‘typical monthly rent in the Seattle metro area surpassed $2,000′ and is up an astonishing ‘9.7 percent in the past year.’ As a consequence, Seattle is number one in rent growth in the US.”
“But what is causing this sharp increase? Seattle Times gets this answer from Zillow’s chief economist, Svenja Gudell, who sounds just like someone who has received a solid education in the nonsense of neoclassical economics: supply and demand. (Gudell also mentions that the market is building a lot, but only for those with a lot of money.) There is, however, no mention of the financial sector or speculation. None. The fiction turns out to be the absence of fictitious capital.”
“What is missing from the picture is, of course, reality, which is always defined or shaped by historical developments. What is absent from much neoclassical thinking is precisely history, and so its frame of reality tends to be empty, contentless. This is why when the housing crash of 2008 occurred, the neoclassical school of economics, which is still the dominate mode of economic thinking, called it a ‘black swan.’ It was not supposed to happen. It was not in their mathematical models. It came from nowhere.”
“This nowhere only existed in the absence of a history that contained events like the 1998 collapse of Long-Term Capital Management, the savings and loan crisis of the 1980s, and much, much more. These instructive events were not at all dissimilar to the crash of 2008, which was caused by financial markets that are pressed, as always, to find high-grade investments with high yields and burdened by private debt.”
“Property is also what the British call a placement, meaning, to use the words of Joan Robinson (the greatest heterodox economist of the 20th century), a ’store of purchasing power for its owner.’ This means, if a property market is open (or weakly regulated), its value as use becomes subordinate to its value as storage and value as exchange.”
“And it is here the politics of absence makes its appearance. We are still talking about the housing supply in the terms of use value, when in fact the housing supply has become, democratically speaking, about useless values. To exclude finance from the economics of Seattle’s red-hot real estate market is pure madness. We are in the process of making yet another one of those black swans.”
‘For the third time in six years, Fort Lauderdale’s Harbour Pointe apartment building has traded hands between investors for a growing price tag’
Millions more, each time, financed. This is 34 units which is pretty small, and they are popping millions out of it every two years.
‘the property offers a significant value-add opportunity’
Gotta have something for the lender to hang his hat on.
‘Zillow found median rent for the least expensive multifamily rental home is rising faster than median rent overall. And only a small portion of all new apartments are at the low-end. “We have certainly seen higher rental grow over the last 3 years,” said Gudell. “But this is extreme if you think about normal rental rates should grow around 3 to 4 percent. So when you see a rate of 14 percent for the bottom end of the market – it’s roughly three to four times as much.”
‘only a small portion of all new apartments are at the low-end’
This isn’t the real story about the low end rent increases. It’s the boom in buying older apartments, slapping some paint on it and jacking up rents. And it’s being backed by the federal government. Look at this chart:
You know, I thought the government was supposed to help poor people, not help rich people gouge them in rents.
Runway Foam.
What happens when the negative cash flow “investors” slash rates to get some tenants in all these empty shacks?
There is a floor to rents, Section 8.
Good point. More government market interference and establishing price controls.
The fact half the country wants even more government is mind boggling.
It appears that Uncle Sam’s Affordable Housing initiative is an abject failure. And note that this policy has gone on for decades, under both Republican and Democrat administrations.
But it really gained traction in the past few years. Note the spike in 2014; it’s gotten much worse since then. These are the poorest of the poor and their housing is being gobbled up by Mel Watt’s raiders by the hundreds of billion$.
Agreed on Mel Watt. Perhaps his status as a black Democrat provides good political cover for adopting policies that shaft the poorest renters in favor of wealthy investors?
Nah, they only talk about helping the poor while doing exactly the opposite. Trickle-down economics = trickle-up poverty.
“Let them eat cake.”
Why wouldn’t Democrat politicians follow such policies? More impoverished voters who are dependent on Democrat policies = more Democrat votes.
By that logic, Republicans should support unions.
You know, I thought the government was supposed to help poor people, not help rich people gouge them in rents.
Seriously, Ben? Since 2008 it’s been crystal clear that gub’mint’s job is to further enrich the superwealthy at the expense of everyone else.
I find the chart misleading at best, and possibly flat out wrong. It seems to suggest that if you are lucky enough to score a mortgage, then you can easily keep your mortgage payments below 20% of income, regardless of position on the income ladder, and that this remained true throughout the bubble years.
Renting always looks worse in all income brackets, increasingly so towards the end of the period (that last part seems correct).
Possibly the data includes owners who have no mortgage payments.
Right.
And owners with no mortgage payments shouldn’t be included in a chart whose legend includes “Upper third mortgage,” “Middle third mortgage” and “Lower third mortgage.”
Lower third
That was the name of David Bowie’s (not commercially successful) band in 1965-1966, when he was still Davy Jones.
‘Traditionally, Parsons explained, landlords who needed to fill high-end apartments during a slowdown could offer a month or two free rent and entice people to move up from a Class B to a Class A building. But that was when rents at Class A buildings were 25 to 30 percent higher than Class B buildings. That premium has now widened to about 50 percent.’
‘If there is an issue, that’s going to be a real challenge across the country, including here in the uptown/South End area,’ Parsons said.’
If there’s an issue? That’s an interesting way to describe the ginormous ass-pounding trap you guys have set yourselves up for Jay. This is what happens when you are building stuff for a little story you made up instead of serving a market need. Sorta like the luxury condos, safe deposit box in the sky, no one lives in story.
‘‘Any time the numbers will work, developers will build. That’s what happened in San Francisco and New York. Land prices and construction costs went up so much, the only thing you could build was high-end apartments,’ said Alexander Goldfarb’
‘That is precisely why Equity Residential missed expectations so badly in its second-quarter earnings and revised its outlook lower yet again. ‘Clearly 2016 will not turn out to be the year we had originally expected due to deteriorating market conditions in San Francisco and New York City, which combined made up 50 percent of our initial growth forecast for the year,’ Equity Residential CEO David Neithercut said on a quarterly earnings call this week. ‘These markets have turned to become quite volatile.’
‘Oversupply is part of the problem, but jobs, especially high-paying jobs, are weighing on all the apartment developers. Concessions are now the rule more than the exception.’
As in the jobs aren’t there and neither are the tenants? Boy you guys really got high on your own supply, didn’t you?
‘A glut of high-end apartment construction has hit San Francisco and New York City real estate investment trusts hard, Bloomberg reports, as landlord scramble to get tenants into high-cost markets where they have tons of supply from which to choose. Equity Residential, the largest publicly traded U.S. multifamily owner, said Tuesday that it would cut its revenue forecast down to 3.5 to 4 percent — its third cut this year, trimmed from 5 percent in April. Shares of Equity Residential have already fallen 14 percent this year. “After five consecutive years of exceptional fundamentals, elevated levels of new supply and slowing…”
The boom:
‘After five consecutive years of exceptional fundamentals’
The bust:
‘elevated levels of new supply…its third cut this year’
And you know what they said the quarter before they first cut? To the moon!
“And you know what they said the quarter before they first cut? To the moon!”
Moon crater maybe.
This is the biggest landlord in the nation. And they got it completely wrong. The media is at a loss to explain it. “We can’t have been peddling nonsense all these years about shortages and bottomless oceans of cashed up renters crawling out of their parents basements?”
The mainstream media has turned into a laughingstock.
Laughingstock - you got that right.
‘what is causing this sharp increase? Seattle Times gets this answer from Zillow’s chief economist, Svenja Gudell, who sounds just like someone who has received a solid education in the nonsense of neoclassical economics: supply and demand. (Gudell also mentions that the market is building a lot, but only for those with a lot of money.) There is, however, no mention of the financial sector or speculation.’
The writer is dead on, IMO. Like the 46 year old apartment in Florida being flipped 3 times in 6 years for millions. Just throw in a “value-add” strategy and the money is wired into your account.
‘Gudell also mentions that the market is building a lot, but only for those with a lot of money’
So where is the supply/demand equation in this? It’s not to be found, except in new paradigm fairy tales of rich millennials and that dog-eared crap about urban living. There are vast amounts of money changing hands based on the speculation that this made up story is real.
The Massive Prop Barely Holding up the US Economy Cracks
by Wolf Richter • July 29, 2016
http://wolfstreet.com/2016/07/29/autonation-ford-sales-decline-auto-loan-bubble-us-gdp-growth/
Nowhere is the massive subprime auto loan bubble more apparent than in used cars and trucks. It used to be 100k miles was the cutoff for a loan. Now, the underlying value of the asset matters little. Upside down? No problem, just roll that into a new loan on a different vehicle, sucka.
Jenga economy. How long can the scum keep it from collapsing?
I think that anyone who is working to prevent economic collapse is a good guy. Those who wish for collapse and work for it are the scum.
‘Those who wish for collapse and work for it are the scum’
Did Greenspan contribute to the housing bust? Wishing means nothing. I don’t want a collapse. I’ve seen it in Texas years ago. But I couldn’t affect it one way or the other, then or now. Greenspan however, had a role in the past via his easy money policies. So do Bernanke and Yellen now. If there’s a collapse, will you condemn these easy money policies? Or will you continue to support more and bigger government intervention yet again?
If there’s a collapse, will you condemn these easy money policies?
I would if there is evidence that easy money is to blame.
Financial stability
Minsky’s moment
The second article in our series on seminal economic ideas looks at Hyman Minsky’s hypothesis that booms sow the seeds of busts
Jul 30th 2016 | From the print edition
Timekeeper
…
Minsky distinguished between three kinds of financing. The first, which he called “hedge financing”, is the safest: firms rely on their future cashflow to repay all their borrowings. For this to work, they need to have very limited borrowings and healthy profits. The second, speculative financing, is a bit riskier: firms rely on their cashflow to repay the interest on their borrowings but must roll over their debt to repay the principal. This should be manageable as long as the economy functions smoothly, but a downturn could cause distress. The third, Ponzi financing, is the most dangerous. Cashflow covers neither principal nor interest; firms are betting only that the underlying asset will appreciate by enough to cover their liabilities. If that fails to happen, they will be left exposed.
Economies dominated by hedge financing—that is, those with strong cashflows and low debt levels—are the most stable. When speculative and, especially, Ponzi financing come to the fore, financial systems are more vulnerable. If asset values start to fall, either because of monetary tightening or some external shock, the most overstretched firms will be forced to sell their positions. This further undermines asset values, causing pain for even more firms. They could avoid this trouble by restricting themselves to hedge financing. But over time, particularly when the economy is in fine fettle, the temptation to take on debt is irresistible. When growth looks assured, why not borrow more? Banks add to the dynamic, lowering their credit standards the longer booms last. If defaults are minimal, why not lend more? Minsky’s conclusion was unsettling. Economic stability breeds instability. Periods of prosperity give way to financial fragility.
With overleveraged banks and no-money-down mortgages still fresh in the mind after the global financial crisis, Minsky’s insight might sound obvious. Of course, debt and finance matter. But for decades the study of economics paid little heed to the former and relegated the latter to a sub-discipline, not an essential element in broader theories. Minsky was a maverick. He challenged both the Keynesian backbone of macroeconomics and a prevailing belief in efficient markets.
…
In a centrally planned economy why would they let asset prices go down?
Why did it take so long to respond to the 2008 crisis ?
lol@az_donk
Great question. Too bad AlbuquerqueDan isn’t around to answer it.
Across The Border
Ren Wei
Even after crashing 42pc from last year’s peak, are Chinese markets still too frothy?
One of the most commonly used descriptions for current sentiment is ‘wait and see’, but analysts are already warning the bears are coming
Daniel Ren
PUBLISHED : Friday, 29 July, 2016, 4:34pm
UPDATED : Friday, 29 July, 2016, 10:10pm
July 2015, and an investor can’t bear to look, as China’s Shanghai Composite Index tumbles again.
Photo: AP
There is a lingering question hanging over the mainland stock market: are A-shares, following a more than 40 per cent plunge from its high in 2015, still expensive?
The benchmark Shanghai Composite Index has been swinging in a relatively narrow range since March, ending at 2.994.3 on Thursday.
That’s 42 per cent shy of the close on June 12, 2015 when a stock market rout started, leaving millions of retail investors to carry the can.
…
Just in case Dan is still lurking, how about them oil prices?
The Glut Strikes Back as Oil Returns to Brink of Bear Market
Grant Smith
July 28, 2016 — 4:01 PM PDT
Updated on July 29, 2016 — 5:01 AM PDT
Oil Producers Suffers as Prices, Refining Sink Profits
Surplus is harder to kill than Saudis and Goldman predicted
Brimming inventories and returning supply prolong downturn
The bullish spirit that gripped oil traders as industry giants from Saudi Arabia to Goldman Sachs Group Inc. declared the supply glut over is rapidly ebbing away.
Oil is poised for a drop of 20 percent since early June, meeting the definition of a bear market. While excess crude production is abating, inventories around the world are brimming, especially for gasoline, and a revival in U.S. drilling threatens to swell supplies further. As the output disruptions that cleared some of the surplus earlier this year begin to be resolved, crude could again slump toward $30 a barrel, Morgan Stanley predicts.
“The tables are turning on the bulls, who were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “It’s probably going to take a little longer than they expected.”
…
‘the bulls…were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal’
The third false rally since the summer of 2014. It was always a futures rally only. The glut never went away.
Who knows what the equilibrium will settle at? But this is another example of the dry cleaner effect, in this case with easy money keeping oil companies drilling when they otherwise would have closed shop.
Money talks, bullshit walks.
Oil Price Retreat Slams Producers
By Bradley Olson and Selina Williams
The world’s biggest oil companies posted losses or steep declines in profit for the second quarter, and now face a daunting remainder of the year as crude prices retreat to about $41 a barrel.
Exxon Mobil Corp. on Friday reported its quarterly profit fell 60% to the lowest level since 1999, while Chevron Corp. disclosed its biggest quarterly loss since 2001. The results capped a bad week for big Western oil companies: BP PLC and Royal Dutch Shell PLC earlier posted earnings that disappointed investors.
“The second-quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world,” said Chevron Chairman and Chief Executive John Watson.
Oil is flirting with bear-market territory once again, as U.S. prices have fallen nearly 20% since hitting a 52- week high of $51.23 on June 8. U.S. oil ended up 1.1% on Friday at $41.60 a barrel.
The average oil price for the second quarter was down from a year earlier, though the slide in producers’ performance was even worse. One of the main reasons is that margins have fallen precipitously in the refining business, which had been propping up the companies’ bottom lines as most lost money producing oil and gas.
Fears of oversupply have gripped the market as a glut of gasoline has pushed crude prices lower just as the summer driving season ends. That threatens to upend oil executives’ expectations that the market — and profits — would begin to stabilize over the second half of the year.
…
The biggest crude oil glut in the history of the world doesn’t end just because some lucky sperm club sheik declares it over. Sit down, punk.
You can hide oil in giant storage tanks on land, or on dirty tanker ships at sea, but you can’t just wave a magic wand and make the worst oil glut in history disappear against a backdrop of collapsed demand.
The other hard reality is that the only way for an epic glut to shrink is for prices to re-equilibrate at a level where new production wanes (think major depression in the oil industry) and where the quantity of oil demanded is sufficient to absorb the glut.
This is basic neoclassical economics, which I guess the oil bulls must not have studied in college.
“We are still talking about the housing supply in the terms of use value, when in fact the housing supply has become, democratically speaking, about useless values.”
And there it is. Useless empty excess housing units. Millions of them.
Yes, and that has been my question: why do the banks continue to hold on to these homes? In the beginning of the last crash they were dumping them in huge numbers. Now there are thousands and thousands of homes in Palm Beach County that the banks won’t sell (or at least sell at a fair price). Does that make sense when we are going into a recession and the financial industry is in such poor shape?
I read a really interesting little vignette one time about a cop who came across a guy who had been stabbed in the head. The knife was in deep and the handle was sticking right out of the top of his head. The guy was acting normal and lucid and everything as the cop drove him to the hospital.
At the hospital a doctor told the cop that as soon as they pull that knife out the guy was dead.
The banks don’t own them. The banks put the loans into mortgage backed securities that were rated AAA by Moody’s/Fitch/S&P and then sold.
The incentives of those who own the loans are much different than a bank’s would be.
They’re holding to melting ice cubes while the losses to depreciation rack up no different than anyone else.
Wanna have some fun? Go back and read how little many here knew a year ago and how some flat out called it.
http://thehousingbubbleblog.com/?p=9240
Comment by Blue Skye
2015-09-15 07:36:19
Don’t forget the whiskey.
Comment by Professor Bear
2015-09-15 05:36:49
Politico
Wall Street’s new panic: Trump could win
By Ben White
09/15/15, 08:00 AM EDT
WALL STREET’S LATEST PANIC: TRUMP COULD WIN — POLITICO’s Ben White: “Wall Street is growing increasingly terrified that Donald Trump — once viewed as an amusing summertime distraction — could actually win the Republican nomination for president. The real estate billionaire, who took another populist shot on Sunday by ripping into lavish executive pay, continues to rise in the polls. Would-be Wall Street saviors like Jeb Bush are languishing in single digits. The belief that Trump’s candidacy would quickly fade is now evaporating in a wave of fear.
…
I see a whole lot of enragement there. Corralled DebtDonkeys.
Palm Beach County
When did you sell your house or condo in Palm Beach County?
I sold my home in May. That brings up the question of why everyone on this board is holding and not selling?
They serve a purpose - Fraud economy like ours needs bag-holders.
What are your losses?
“What are your losses?”
Sir/Madam, would you be willing to swear an oath to tell the truth?
Yes.
Please stand and raise your right hand.
Do you swear that the testimony you will provide in these proceedings will be the truth, the whole truth, and nothing but the truth?
Yes.
You may be seated.
Please state your full and true name for the record.
Where do you currently live?
What are your losses?
Agreed. The losses are never acknowledged.
I sold my place in Palm Beach County in October of 2005, rented till 2011, came to believe TPTB were not going to let prices drop to where they should and bought a place in Jupiter that was about as close to what I wanted as I was going to get.
Your posts remind me of how I felt in 2006 through 2009 while I was renting, reading this blog daily and waiting for the big collapse.
As for the question of why everyone on this board is holding and not selling, if you are talking about housing i believe most are renting.
I live in my home with wife and kids. My home is 7 minutes away from my work, and in a school district with fantastic schools. To rent a similar home, my monthly cost would go up, and I wouldn’t be able to rent the home more than a year at a time (most such rentals are from people who are leaving the area temporarily).
I don’t consider my house an investment…I consider is something that I’m consuming.
When I’m done with it in 20+ years or so…then I’ll sell it. Otherwise, selling it just adds unneeded complexity and cost to my life.
But where do you end up when all the expenses, including depreciation are accounted for?
Regular maintenance mitigates depreciation.
It sure does….. And that $5k/yr ‘maintenance’ racks up in a hurry.
Interest and taxes paid are approximately 75% of what a friend gets in rent for their older house, which is meaningfully smaller than mine in the same city. The remaining 25% is way more than I’m paying in maintenance.
I’d have insurance even as a renter.
Of course, that doesn’t include the opportunity cost of the equity I have in the house, which shouldn’t be ignored. However with interest rates at close to zero, that opportunity cost probably isn’t that much.
Numbers, no backpedaling.
“I don’t consider my house an investment…I consider is something that I’m consuming.”
Nobody is going to hold a gun to your head and force you to understand the difference between investment and consumption.
Same here, 1.5 miles from my office. If I sold I’d end up paying more for a similar rental if I could even find a house nearby.
I’m sure one of these 25,000 sellers in Dallas would discuss things with you.
http://www.realtor.com/realestateandhomes-search/Dallas_TX/radius-10
Dude, Dallas + 10 mile radius is the geographic equivalent of Connecticut or something, no thanks, I like my 7 minute commute. Besides, those are for sale listings, not rentals.
Plus, my Georgia bell peach tree is going off, white peaches,….dem some good peaches!
I’m sure there’s more than a hand full of them within 7 minute commute. And even more with option to rent. Give it a shot.
Very doubtful. You are assuming you will not downsize but instead hold onto your accumulated trash.
I am the king of downsizing.
First done in 1996. Went from a three bedroom, two bathroom, two car garage 1500 square foot stucco box to an apartment. I had one bedroom and shared a living room and kitchen. Monthly payment dropped from about $950 to $300. More than a 60% drop.
It was liberating,
Here I have one third the monthly costs of the stucco boxes in my neighborhood.
With all the money I have left over after renting I spend time on health and fitness.
Is it possible this is only the beginning of a much larger housing bubble that dwarfs the run up to 2008? If the Fed responds–sometime after the election–to the currently emerging election with negative interest rates, wouldn’t that only fuel the mortgage fire more? Could housing costs (both home prices and rents) then increase so much that it most people find it unaffordable to either buy or rent, much like CA today?
With housing demand already at 20 year lows, just how far down will demand go in that case?
It’s possible. Watch housing start numbers. If we start to exceed 1.5MM or 1.6MM homes per year, and home price increases DO NOT begin to moderate, then I think the bubble concern is well founded. If we start building more, and price increases slow, then I think we are in for a typical housing cycle.
With 35 million houses just starting to empty as 70 million boomers die of, I’m not sure why anyone would build more housing.
s/b “currently emerging RECESSION” 0.8%!? and almost no media coverage?
With labor force participation rate falling for years, when did the economy actually recover?
Same global credit bubble, same recession, same cratering home ownership rate.
Will any body parts wash up during the live beach volleyball competition?
Rio’s horror week: Body parts wash up near Olympics beach volleyball site
By Tiffany Ap, CNN
Updated 4:19 PM ET, Thu June 30, 2016
(CNN)With just 36 days to go before the Rio Olympics kick off, the situation in the host city just went from bad to worse.
A beach goer Wednesday discovered human body parts that had washed up on the shore, right in front of the Olympic Beach Volleyball Arena on Rio’s famed Copacabana beach.
A dismembered foot and another body part still unidentified was found, according to Andre Luiz, an officer of the Military Police. Police believe the victim was a woman or young adult.
Although the circumstances surrounding the person’s death are unknown, it is another embarrassing blow to the host country — already reeling from financial problems, a mishap-prone Olympic torch and an outbreak of the mosquito-borne Zika virus.
“She Won’t Stay Throwed”
She rose again the third day according to the scriptures found in the deleted emails.
“Land prices and construction costs went up so much, the only thing you could build was high-end apartments,…”
In how many cities around the developed and developing economy countries does exactly the same statement apply?
Now that the shine is off luxury apartments, watch apartment land values fall.
Land values are a result of developers focusing on luxury housing, not the cause of it.
“This is why when the housing crash of 2008 occurred, the neoclassical school of economics, which is still the dominate mode of economic thinking, called it a ‘black swan.’”
I am pretty sure the writer of this takedown of neoclassical economics never took a college economics course.
Not to suggest he doesn’t have a point about the practitioners of neoclassical economics who overlook the Housing Bubble…
I read Nicholas Nassim Taleb’s book, “The Black Swan”, a few years back, and had a brief email exchange with him. He is an outside-the-box thinker who doesn’t fit the mold of a garden variety neoclassical economist by any stretch of the imagination.
‘never took a college economics course’
I don’t know. Sometimes a new viewpoint sees the obvious. If this is supply and demand, why isn’t the supply being directed at the demand? Why are they constructing theories on new types of demand when we all know where people live and work, what they earn, etc.
The bubble’s in the land. It’s doubled or tripled, depending on where, in the past few years. Let me ask, what if there wasn’t financing for all these luxury apartments? Oh, but there is, lots of pensions and the like chasing yield. And government guarantees too! The momentum is overwhelming; money chasing returns, fail-safe loans, new paradigm stories, go! Problem is it’s not based on reality.
It can all be deconstructed by asking, why isn’t the supply being built for the demand?
Like this:
‘An application by Elan Homes to build 56 homes on land at Kinnerton Lane in Higher Kinnerton was refused by Flintshire Council’s planning committee. Cllr Phil Lightfoot, who represents Higher Kinnerton ward, welcomed the refusal, saying: “It’s certainly good news that it was refused, but the developer will obviously appeal [to the Welsh Government’s Planning Inspectorate].’
‘Cllr Lightfoot added: “The thing that these figures hide is the type of housing concerned. “I fear that if these speculative applications are allowed to go on unchecked we will end up with a vast oversupply of unaffordable four-bedroomed detached houses which will skew the statistics to appear satisfactory while failing to address the very real shortage of smaller, genuinely affordable homes.”
“The feeling that we are being bulldozed into something that is neither wanted nor justified is inescapable.”
It’s always the obvious that gets obscured or is never allowed to surface and it’s deliberate.
“If this is supply and demand, why isn’t the supply being directed at the demand?”
The central bankers’ liquidity tsunami certainly does tend to undermine the operation of markets in ways that call into question the applicability of traditional models of economic behavior.
For instance, before 1997 or so, how much U.S. housing market activity was driven by speculators banking on a quick sale a few years later for a massive capital gain? I am guessing a lot smaller share of purchases reflected this motive then than now.
Nonetheless, there is nothing of the speculative greed in today’s market that doesn’t fit the neoclassical economic paradigm.
California is the most impoverished state in the country, and it is on fire:
https://www.yahoo.com/news/crews-battle-quell-california-wildfire-near-big-sur-030539163.html
Yeah tell us how you hate Yosemite, Santa Monica, Coronado, Big Sur, Tahoe, Sausalito, etc.
The Collectivist Comrades of the DNC have a total stranglehold on CA, thanks to their importation of millions of Democrat-on-Arrival illegals. Collectivist kleptocracies tend not to flourish. Soon will we all be California. Forward!
Why should an anarchist in California care what the collectivists rule? Only dweebs follow unjust laws.
It never ceases to amaze me how you statists think you must follow the unjust rules of your enemies.
http://www.badquaker.com/archives/3310
Part of the zero aggression principle is to make government spend as much money as possible. It’s not the spending that is evil. It is the robbing. You may think is is illogical from an individualist point of view. But it helps starve government.
I will certainly line up to collect my social security to help crowd out funding for permanent war.
Bankrupt the government, folks.
Open borders is a statist concept.
Open borders, therefore, is amoral and highly unethical.
The notion of putting borders around property you do not own is a collectivist notion. Bet you did not regard yourself as a communist, but collectivism is communism.
“Whoever wishes for peace among peoples must fight statism.” - Ludwig Von Mises (and Macbeth, Vin Mises was certainly no nationalist)
Not in today’s political and economic climate.
Open borders today is a collectivist notion. It’s all about who and what can be brought where to expand political and economic power.
Without any consideration of the citizenry.
Our world is awash in domestic imperialism. Governments everywhere are deciding what’s best for the citizenry. And that includes the United States.
The free movement of people across unprepared borders is a key instrument of domestic imperialism.
Unchecked movement yields disaster. History is loaded with examples.
History is loaded with examples of walls coinciding with brutal regimes, Mr. Stalin.
‘With almost 17,000 apartment units under construction, the Austin metro area is growing its supply of new apartments by 7.7 percent — the second-fastest expansion pace nationally after Nashville, according MPF Research-Real Page, which tracks the apartment market in major metro areas across the country.’
“We continue to set record highs (for rents) and have for the last two or three years,” said Charles Heimsath, president of Capitol Market Research. “New units are leasing up as rapidly as they are being delivered.”
‘Heimsath said about 9,400 new apartment units are expected to be added to the market this year. Last year, 8,669 new units came online, and in 2014, developers delivered a record 10,371 units, he said.’
‘Heimsath notes that Austin had a market downturn at the end of 2014, when only about 4,300 of those 10,000-plus units leased up and the occupancy rate dropped to 94 percent from 97 percent. And while rents increased, they did so at a slower pace compared to previous years, he said. Now, Heimsath said, the market is “beginning a new cycle of continued expansion with rent growth and new construction.”
‘Despite the new construction, “there are more people coming in than there are builders building,” said Kari Ingle, a real estate agent and chief financial officer with Ingle Realty in Austin. “We tell clients, “If you like it, you better sign right away or it’s going to be gone.’”
‘Another market analyst, Stephanie McCleskey, vice president of research for Axiometrics, has a more cautious outlook. With more new supply on the way in the second half of this year than in the first half, “it may take some time for the new supply to be absorbed,” McCleskey said. “This is especially true in (central Austin), where oversupply worries sent rent growth down in late 2014 and the first part of 2015,” she said. “Oversupply isn’t an issue now, but the accelerating pace of completions could mean apartments stay on the market a little longer.”
‘Usually I have no problem finding a tenant to bemoan rents in the local market. This time, though, I found a happy camper. Jesse Fonseca said he and his roommate, Alex Velasquez, found their “dream apartment” within two hours.’
‘If you haven’t apartment hunted in Manteca since 2008, brace yourself for sticker shock. Eight years ago a one bedroom, one bathroom apartment in Manteca’s four newest at-market complexes averaged $820 a month. Today it’s $1,310. That’s a 61 percent jump.’
‘And if you’re in the market for a three bedroom, two bathroom unit at Paseo Villas — Manteca’s most prestigious and expensive rental address on Atherton Drive — prepare to fork out $1,920 a month.’
‘Apartment rents, however, haven’t kept up with the resurging sale prices of previously owned homes. They have gone from a $178,000 average in 2008 at the depth of the housing collapse to $330,000 today or a gain of 85 percent in average sales price.’
‘Perhaps the most startling trend for apartment prices has been over the past six months. In the past six months: Two bedrooms and one bathroom apartments in the Bulletin survey have gone up 11 percent from $1,335 to $1,500.’
‘Two bedrooms and one bathroom apartments are up 4 percent going from $1,346 to $1,393. Laurel Glenn is again the priciest at $1,685 of the apartment surveyed consistently over the years. However Paseo offers a 1,217-square-foot two bedrooms and two bathrooms floor plan for $1,910.’
‘Three bedroom and two bathroom apartments in the survey are up 17 percent having gone from $1,615 to $1,735. The most expensive is Paseo at $1,920. The Paseo floor plan dubbed the Villa De la Palmas has 1,294 square feet. It is the most expensive apartment in a Manteca, Ripon, or Lathrop complex. It also has seen the biggest jump since January rising $220 per month.’
‘Based on annual price hikes since 2012, the Paseo floorplan may become the first apartment to fetch $2,000 a month by 2017.’
‘But if you think that Manteca apartment rents are outrageous, consider statistics provided by Rent Jungle. In Tracy one bedroom rents average $1,645 (compared to $1,310 in Manteca) and two bedrooms average $1,836 (compared to $1,335 in Manteca). Rents in Tracy have gone up 10.5 percent during the last six months.’
‘In Pleasanton one bedroom rents average $2,200 (compared to $1,310 in Manteca) and two bedrooms average $2,679 (compared to $1,335 in Manteca). Rents in Pleasanton have gone up 7.35 percent during the last six months. In Livermore one bedroom rents average $2,548 (compared to $1,310 in Manteca) and two bedrooms average $3,267 (compared to $1,335 in Manteca). Rents in San Jose have gone up 5.9 percent during the last six months.’
‘Heading up or down the Northern San Joaquin Valley does offer some relief from Manteca apartment rents. In Modesto one bedroom rents average $868 (compared to $1,310 in Manteca) and two bedrooms average $1,025 (compared to $1,335 in Manteca). Rents in Modesto have gone up 5.8 percent during the last six months.’
‘In Stockton one bedroom rents average $830 (compared to $1,310 in Manteca) and two bedrooms average $1,023 (compared to $1,335 in Manteca). Rents in Stockton have gone up 5.5 percent during the last six months.’
‘There’s no doubt that Philadelphia is in the middle of a building boom, with more than 20 high-rises currently under construction. But a new report confirms what many have pointed out before: High-end apartment construction isn’t meeting the demands for affordable rental options in Philly.’
‘According to a recent report released by real estate website Zillow, 68.9 percent of new construction in Philly since 2014 has been on the high-end, with these apartments averaging about $1,795 per month.’
‘Now, overall, median rent in Philadelphia grew 3 percent in the last year. That doesn’t sound too terrible, but Zillow went further and broke it down between high-end and low-end apartment rates. The researchers found that the median rent for low-end apartments has risen pretty dramatically in the past year by 17.9 percent. That’s more than double the increase of high-end apartment rates: 6.7 percent.’
‘This trend isn’t just a Philly phenomenon, though. The report found similar results in all 15 major metro markets that they analyzed.’
Apartment Investment and Management Co (NYSE:AIV)
Q2 2016 Earnings Conference Call July 29, 2016
‘Terry Considine - CEO: We hear lot of questions about the direction of apartment markets. Our markets accelerating based on demographic demand or are they decelerating under the pressure of new supply. We believe that both questions can be answered with a yes. On the one hand, demographic demand is historically strong, predictably so and will be strengthened for many years to come by baby boomers, increasing their preference for rental housing.’
‘On the other hand, all markets will be overbuilt at some point, meaning that competitive new supply will limit or even reverse rent growth. But not all markets will be overbuilt at the same time and where there is oversupply, it will have its greatest impact on properties with the highest rents.’
Irvine, CA Housing Prices Plunge 16% YOY As Speculators Flood Market With New Inventory
http://www.zillow.com/irvine-ca-92620/home-values/
Hmm…looks like it says there is missing data in three places,
You are thinking wishfully.
The data is what it is my friend.
“Realtor, Fake Mortgage Broker Arrested In Fraud Raid”
http://www.mpamag.com/news/realtor-fake-mortgage-broker-arrested-in-fraud-raid-35496.aspx
It is time for another round of QE so some stimulus checks can be sent out before xmas!
Yellen the Felon and her gang of counterfeiters and racketeers at the Fed will pull out all the stops to ensure a Hillary victory. QE4 and NIRP before the elections are baked in the cake.
So Trump has no chance. That’s an interesting prediction to make at this point.
Funny, just a couple of weeks ago we were given Clinton landslide predictions more than once. I wonder what has changed?
According to Raymond, nothing has changed. It’s all sewn up for Hillary.
“It’s all sewn up for Hillary.”
They better keep it sewn up because if it ever gets out she’ll be doing 3 consecutive life sentences
2 bedrooms and two bathrooms and garage houses for rent in my area are about $2500. Two bedroom apartments in my complex supposedly have w/d’s and come with detached garage. $2,000. I think the owners here are jacking up rents on new leases still. These are really low end in the term of prices. Irvine has only top tier apartments being built like crazy. Greater fools are willing to pay $500 more for rent than to live in an area like I do. There is superb biking in Irvine and dining too. But dining out is what uber is for. And I am within a mile from a dedicated biking trail in my area.
I figure my average annual gains on my stocks and stock funds outside my retirement plans are paying my rent right now.
apartments r depressing.
For u they are. I have so much money left over after paying rent that I have to buy Bitcoin, gold, and stocks.
some are some not, you rent cheap depressing apartments when you just need a crash pad. to me it’s always been worth it to pay more if you really live or work out of your apartment. I’ve never been luxury for luxuries sake.
The German sheeple voted for the globalist-oligarch puppet Merkel. Now that they’re getting exactly what they voted for, they seem to be having buyer’s remorse.
http://www.dailymail.co.uk/news/article-3715877/Thousands-German-protesters-prepare-streets-Merkel-demonstration-against-Premier-s-immigration-policies-say-caused-terror-attacks.html
How’s that fundamental transformation working out for you, Fritz & Helga?
http://www.express.co.uk/news/world/694831/Police-hunt-Arabic-speaking-thugs-pelted-woman-schoolgirl-stones
Hedgies love Hillary, even though she’s “Fighting for Us.”
http://www.breitbart.com/big-government/2016/07/29/hedge-fund-donations-123-million-to-hillary-clinton-19-thousand-to-donald-trump/
we need to create more demand for chinese imports so they buy some more treasuries and push down rates so people can get a loan rate on their home loan!
Housing
Economist Karl Case, Who Studied Housing Bubbles, Dies at 69
Devised a new method for measuring home prices; the ‘Case-Shiller’ index
By Nick Timiraos
Jul 18, 2016 5:24 pm ET
At a Principles of Macroeconomics class in 2009, students in Pendleton Hall at Wellesley College listen to Karl Case, a national housing expert and co-founder of the S&P Case-Shiller Home Price Indices.
At a Principles of Macroeconomics class in 2009, students in Pendleton Hall at Wellesley College listen to Karl Case, a national housing expert and co-founder of the S&P Case-Shiller Home Price Indices.
Photo: Boston Globe/Getty Images
Karl “Chip” Case, who died on Friday, devised a way to measure local home prices–just in time for a series of U.S. housing bubbles.
Mr. Case, a professor emeritus of economics at Wellesley College, teamed up in the 1980s with Yale economist Robert Shiller to construct a home-price index that bears their names. He taught at Wellesley for 34 years and retired from the classroom in 2010.
When his collaboration with Mr. Shiller began in 1987, New England was in the middle of a housing bubble. At the time, Mr. Case was writing about local home-price dynamics while Mr. Shiller was studying speculative stock-market bubbles.
“There was at that time a widespread belief in market efficiency supported by apparent efficiency in the stock market, and there was a general willingness to extend that conclusion to the housing market,” said Mr. Shiller. “That’s what got us going.”
Messrs. Case and Shiller used real-estate transaction data from four cities to construct an index measuring price changes on the repeat sales of single-family homes, devising a more reliable way to measure changes in local home prices. In 1991, they formed a company with Allan Weiss, called Case Shiller Weiss, that produced the index. They sold it to information-management company Fiserv in 2002.
The index, which eventually expanded to include 20 major U.S. cities as well as a national composite index, was widely cited during and after the U.S. housing boom in the 2000s.
…
What if they had the Olympics and nobody went?
Reading about more people begging off for this or that reason. I don’t blame them.
Palm Beach Gardens, FL Housing Prices Crater 8% YoY
http://www.zillow.com/palm-beach-gardens-fl/home-values/
Isn’t this the kind of stuff we see when markets start topping out:
http://www.financialsamurai.com/realtyshares-review-real-estate-investing/
This is like a Prosper or Lending Club set-up for real estate investing.