Housing is now unaffordable for a record half of all U.S. renters (unemployment, premium)
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I haven’t read through all of the posts yet, but has anyone mentioned:
Investment companies buying up homes only to rent them out;
Builders focusing mostly on apartment communities with amenities and price points targeting upper-middle-class+ tenants, or;
The high cost of construction materials (and labor) as we continue this global economic recovery?
FYI, it is not only investment companies buying up homes. I live in a tourist area, and many individuals buy fairly modest homes to be used as short-term rentals (STRs). This has presented problems for nearby workers who would like to move here, but the supply and demand for more affordable homes has driven up the price for ALL homes here.
Also, the cost of construction IS a huge factor. I have read that construction costs have risen 40 percent since 2019. (I don't know if that is accurate or not, though.) I do know that our retirement home was built in 2020 and there was an increase in lumber while it was being built, which we were able to afford, but if we had waited to have our home built until after 2020 or 2021, I don't think we would have been able to afford it.
I haven’t read through all of the posts yet, but has anyone mentioned:
Investment companies buying up homes only to rent them out;
Builders focusing mostly on apartment communities with amenities and price points targeting upper-middle-class+ tenants, or;
The high cost of construction materials (and labor) as we continue this global economic recovery?
There is hidden information in your observations. I expected there to be big things coming when noticing how many multi-unit residential buildings were popping up like weeds everywhere over the past couple of years, and low and behold, we’ve watched interest rates increase dramatically over that timeframe.
And this is what happens when interest rates get too high … residential real estate sales come to a screeching halt, as the high rates push people out of the market, so they are forced to rent, rather than buy.
They knew what was coming before it happened, and real estate developers adjusted accordingly, switching to multi-unit rental property construction.
This creates an inventory shortage of homes for sale, with reduced new home construction, plus a shortage of pre-owned homes (nobody with a 2.5-3% mortgage is selling because a new mortgage is going to be around 7.5-9%.). This in turn keeps the market value stable (low supply) rather than seeing a downward adjustment in home prices which typically follows increases in mortgage interest rates.
So, high home prices and high interest rates make for the perfect storm for creating an unaffordable home market, but is a huge benefit to residential rental property owner/developers.
Gee, what exactly do you think will happen when you force landlords to provide free housing to deadbeats that refuse to pay their rent for 3 freekin' years? You think they just might charge more? Demand more than 1st and last month up front? Or sell outright and get out of the rental business? Add the highest lending rates in a few decades and it tends to drive up rent.
FYI, it is not only investment companies buying up homes. I live in a tourist area, and many individuals buy fairly modest homes to be used as short-term rentals (STRs). This has presented problems for nearby workers who would like to move here, but the supply and demand for more affordable homes has driven up the price for ALL homes here.
Also, the cost of construction IS a huge factor. I have read that construction costs have risen 40 percent since 2019. (I don't know if that is accurate or not, though.) I do know that our retirement home was built in 2020 and there was an increase in lumber while it was being built, which we were able to afford, but if we had waited to have our home built until after 2020 or 2021, I don't think we would have been able to afford it.
The majority are corporate investors with deep pockets who have plenty of cash. The average Joe real estate investors aren’t going to make it with 8-9% interest rates. That pushes the monthly mortgage amounts too high for them to realize a positive cash flow situation, which small investors need.
In the real world, with reasonable interest rates in the 3-4 % range, you can buy a property and rent it out, hoping to net a positive monthly, but when rates double, like they are now, that’s out the window. You now have, depending on the price of the property, a substantial increase in mortgage payments that obliterates that model.
Let’s say you buy a property to rent. Your 3.5% rate works out to be a gross $2200 payment. The market average in the area for rent is $2500 for a similar home. So you net $300 monthly. Same situation, only at 8%, pushes your payment to $3,000. Now, you’re negative $500 instead of plus $300. You can’t raise the rent high enough to make the numbers work.
The majority are corporate investors with deep pockets who have plenty of cash. The average Joe real estate investors aren’t going to make it with 8-9% interest rates. That pushes the monthly mortgage amounts too high for them to realize a positive cash flow situation, which small investors need.
In the real world, with reasonable interest rates in the 3-4 % range, you can buy a property and rent it out, hoping to net a positive monthly, but when rates double, like they are now, that’s out the window. You now have, depending on the price of the property, a substantial increase in mortgage payments that obliterates that model.
Let’s say you buy a property to rent. Your 3.5% rate works out to be a gross $2200 payment. The market average in the area for rent is $2500 for a similar home. So you net $300 monthly. Same situation, only at 8%, pushes your payment to $3,000. Now, you’re negative $500 instead of plus $300. You can’t raise the rent high enough to make the numbers work.
Gee, what exactly do you think will happen when you force landlords to provide free housing to deadbeats that refuse to pay their rent for 3 freekin' years? You think they just might charge more? Demand more than 1st and last month up front? Or sell outright and get out of the rental business? Add the highest lending rates in a few decades and it tends to drive up rent.
Another gem of an observation. I don’t know if you understand just how right you are? Major property investment groups with huge cash reserves aren’t as vulnerable to such events as the smaller entities. Sure, they take a hit like everyone else … but they won’t get knocked out. But they WILL be there to swoop in and scoop up those troubled investments at a substantial discount. Wink, wink, nudge, nudge.
It’s economic farming. There is a planting season, a growing season, and a harvesting season. We are in the season of harvest.
Get it? That’s how the game is played. Banks control these booms and busts. They make the money cheap, and watch the boom grow. It grows for a while, and once it peaks, its harvest time baby. The tomatoes are ripe. So, they raise interest rates … telling everyone that it’s the best way to combat the inflation they actually caused. And bust goes the balloon, and only the strong (wealthy elite) survive. They come in like saviors, scooping up troubled investments, and now they’ve consolidated their portfolios of wealth even more.
Last edited by GuyNTexas; 01-27-2024 at 04:32 PM..
Well, not really. You could say the same for the reason or desire to buy a home, if you think there is really such a high demand and desirability for homes 90 miles outside of town, in which case there may be some great deals to be had … but the high interest rates are totally independent of location. Those go everywhere.
Sorry buddy, you can’t look at this with narrow vision. The picture is much bigger.
I’ll grant you that some locations are more greatly impacted than others. That’s true of everything though … jobs, poverty, poop in the street … all depends on where you are.
Because of the law passed .... Under Proposition 13, property taxes are limited to one percent of the assessed value. Additional property taxes may be approved for schools or local projects, which can vary amongst communities and bring the tax rate higher than one percent.
Your state government in CA would love to reverse this rule/law.
Yes they would! But Prop 13 is a third rail in CA politics.
Gee, what exactly do you think will happen when you force landlords to provide free housing to deadbeats that refuse to pay their rent for 3 freekin' years? You think they just might charge more? Demand more than 1st and last month up front? Or sell outright and get out of the rental business? Add the highest lending rates in a few decades and it tends to drive up rent.
bingo, the covid freebies came at a high cost.
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