[Tarara Boomdea]

The Daily Reckoning, 04/05/13

Housing Market Update: The Low-Hanging Fruit is Gone

Purchasing single-family residences to rent out used to be a simple mom and pop business. Investors could count on rents and prices marching in tandem at a steady 3% annual pace.

Home sales rebounded last year in a number of beaten-down markets, and institutional investors are the reason...

Prices increased accordingly...Las Vegas prices popped 12.9%...

These investor-driven price spikes have turned the rental economics equation upside down just as renters are harder to find and keep.

Las Vegas broker Tina Africk, who manages 60 single-family home rentals, told Bloomberg that houses that were formerly rented in 30 days can now take 60-90 days to fill. At the same time, rents have fallen about $100 a month from a year ago.

Article also address market manipulation, "squatters" propping up the local economy, advice for smaller investors, danger of institutional investors bailing.

But the legislation in Nevada that has kept foreclosures off the market will be amended. The 50,000 vacant homes and homes occupied by delinquent homeowners will be become available inventory. The flood of inventory will depress rents. Then, as (Steve) Hawks explains, “The funds will find the homes are not generating the cash flow they had told their investors they would. The next step will be to sell off quickly and cash in on the higher price and 40% capital appreciation. Nobody wants to be holding the last bag when the sell button is hit.”

[von949]

My neighbors think they will get $1550 a month for their home. They are downsizing. Just put a "for rent" sign up.

I doubt they can command that much. This past weekend they said they had showings all day while renovating.

My neighborhood is my personal market gauge. Two years ago around $1200 was the rent for two homes, then one owner tried to rent for $1350 the following year but only got $1300, now we will see if this $1550 will go through.


Motorola DynaTAC 8000x

[Tarara Boomdea]

Rents for Single-Family Home Flatten as Investors Saturate the Rental Market - Forbes

In some markets where investors are especially active in buying and renting out single-family homes, rents are actually falling year-over-year, including in Los Angeles, Orange County, and Las Vegas.

[Raiderman]

Originally Posted by von949

My neighbors think they will get $1550 a month for their home. They are downsizing. Just put a "for rent" sign up.

I doubt they can command that much. This past weekend they said they had showings all day while renovating.

My neighborhood is my personal market gauge. Two years ago around $1200 was the rent for two homes, then one owner tried to rent for $1350 the following year but only got $1300, now we will see if this $1550 will go through.


Motorola DynaTAC 8000x

I wonder if that's the one I contacted our realtor about today.. Henderson?

[von949]

North near the pig farm.


Motorola DynaTAC 8000x

[Caltovegas]

One question I always have is how are people going to afford the mortages or rents? At some point the market will have to adjust to what people can pay..

[von949]

Originally Posted by Caltovegas

One question I always have is how are people going to afford the mortages or rents? At some point the market will have to adjust to what people can pay..

Roommates, S8 vouchers and/or extended family for rents.

Mortgages, on the other hand, are very affordable right now. My mortgage will be less than half of the home renting for $1550 in my neighborhood.($700)

And my home used to be a temporary model home with most of all the upgrades. You just can't beat that. Yet, there is no way in hell I would pay $1550 to rent my own home currently. How mixed up is that?

[Tarara Boomdea]

Discusses home builder stock and rental glut. Quotes regarding rentals begin 3/4 down in the article.

Home Builder Stocks Soar as Housing Battles Back

Meanwhile, previously surging single family rents are flattening. Nearly 4 million more single-family homes have been added to the rental market since 2005, according to Trulia.com. Supply has finally caught up with demand, with single family rents up just 0.1 percent in March from a year ago. That has housing bears roaring again.

"In Phoenix—like Las Vegas, Florida, the Inland Empire, Central Valley et al—we now have a rental supply glut," said Mark Hanson, a California-based housing and mortgage analyst.

"Wherever the institutional money has gone in and ravaged is high risk for housing investment or building. These regions have become highly volatile speculative regions in which prices can rise 20 percent one year and fall 15 percent the next. The insti's have turned these markets into something I have never seen before...more like high-beta, speculative, volatile tech stock markets than housing markets."

If investors hold and rent the homes, recovery will continue apace, but if sentiment shifts, and investors see bigger returns in sales than rents, the game could turn quickly.

[von949]

Las Vegas one of best places to buy a home to rent out - VEGAS INC

Las Vegas is the fifth-best market for buying single-family rentals, according to a new report from RealtyTrac. The median sales price of a three-bedroom home in Las Vegas is $115,000, but the average monthly rent is $1,575.
This produces a monthly cash flow — rental income minus the mortgage payment, property taxes, repairs and other costs — of $506.

[NoMoreRJ]

A $115K home isn't going to rent for $1575. Maybe 900+ up to $1200 depending on the area but most likely on the lower range.