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The Rise of Renting in the U.S

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Re: The Rise of Renting in the U.S

#71

Post by Ocerge »

blhack wrote: post #37
rayiner wrote: post #6

I don't think I'd have any interest in every buying a house if it weren't for the insane tax deductions for mortgage interest. Why be stuck in one house when your living situation changes over time (new kids, kids get bigger, kids move away, job changes).

I'm about to get basically kicked out of a house I've been renting for 5 years. My lease expires in April, and I haven't been able to get a response back from the owners about renewing it. I understand, though... My neighborhood basically grew up around me, and my house is by far the cheapest rent in the neighborhood. The owners want to kick me out, remodel/demolish/rebuild the place where I live, and rent it for twi…

It's a bummer they won't even respond. Do you have legal grounds to get an answer on renewing a lease within a reasonable amount of time before you get kicked out (1-2 months)?

Re: The Rise of Renting in the U.S

#72

Post by cryoshon »

Just one more symptom of runaway economic inequality...

The consumer has less and less real ownership/power. In good areas, the landlords have realized that year over year rent increases won't prevent units from being rented... and so, people are drained further unless they want to move away from where the jobs are.

Re: The Rise of Renting in the U.S

#73

Post by jpmattia »

I'm a little surprised that there hasn't been a populist rebellion over interest rates. Low rates have inflated pretty much every asset class. This is especially so in housing: The Fed needed to reinflate housing prices in order to make many systemically important players (banks, AIG) solvent again.

I have to wonder though: In re-inflating house prices, have we just off-loaded the bad investment to non-systemic institutions? ie, avg people?

Re: The Rise of Renting in the U.S

#74

Post by nawitus »

kylec wrote: post #7
ck2 wrote: post #2

Think of renting as "housing as a service". Ha. Except for one problem, landlords. Most are not good people. Would rather be my own landlord.

I don't own, but if I did I'd love a "landlord as a service" where I could just call or email someone about a problem and have them fix it.

I can do that in Finland. If I have a problem I just open the website of the house management company (not sure what the official term is) and create a ticket, and someone comes in an fixes the issue.

In fact, interaction with the "landlord" is rare, and often the apartment is owned by a company, not an individual.

Re: The Rise of Renting in the U.S

#75

Post by heywiseguy »

irishcoffee wrote: post #57
turar wrote: post #42

Earlier quoted context omitted.

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

I read this counter-point a lot. Its never clear to me how you invest the mortgage payment and also pay rent to live somewhere. Am I missing something? Sincere question.

people who say this are talking about markets where the spread between renting and the finance cost of a similar bought property are huge. San Francisco, New York, LA...

Let's say you're a couple years out of school and you work at Snapchat. Somehow you have a lot of money saved up and you can buy a little house near your office in Venice. A small house in Venice runs about $2m. So let's say you borrow 1.8m to pay for it, your monthly payment is about $8,500 on a 30 year fixed and thats before maintenance and insurance.

That same house in Venice probably rents for somewhere between $3k and $4k/mo net of everything.

So what those people are saying is to live in a rental and invest _the saved money_ in the market.

Remember, in both cases you are renting: in one, you are renting real estate. In the other, you are renting money. But they have different tax treatments, and renting money allows you to lever yourself into eventually owning an asset who's value you might expect to rise.

Re: The Rise of Renting in the U.S

#76

Post by floppydisk »

irishcoffee wrote: post #57
turar wrote: post #42

Earlier quoted context omitted.

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

I read this counter-point a lot. Its never clear to me how you invest the mortgage payment and also pay rent to live somewhere. Am I missing something? Sincere question.

The basic premise behind that idea is rents are (historically were) cheaper than a mortgage so you could take the mortgage-rent delta, invest that, and generate a return greater than the interest rate on the mortgage and end up ahead. A lot of the mortgage calculators have a 3-5yr inflection point where renting, traditionally, was always cheaper if you planned on staying somewhere for 3-5yrs and moving.

The problem is, the equation has flipped. Mortgage payments are now, in many cases, cheaper than rent and there's such a high demand for rental units in some metro areas that landlords have no problems keeping tenants increasing rent 3-10% year over year. Ideally, you could do the same arbitrage buying a house (ideally an asset that nets 0 when you sell it worst case and you get your money back) and invest the rent-mortgage delta into other assets. The problem is "unlocking" the house option. If you don't have exemplary credit, and a certain pile of cash available, banks are leery to touch you and make financing available. Ergo, you get forced into the rental market and there's a huge incentive to turn properties into rentals.

Tack on the millennial generation's hesitancy to settle down in one location and you get a set of economic conditions that encourage renting and regular rent increases.

Re: The Rise of Renting in the U.S

#77

Post by randomgyatwork »

dragonwriter wrote: post #60
randomgyatwork wrote: post #51

Earlier quoted context omitted.

I live in Toronto, 10 years ago a house in the suburbs may have been affordable for someone like me, now they are hugely over priced. I could make a 5% downpayment and have a mortgage till the day I die, but that doesn't seem reasonable to me. Maybe rational buyers have been priced out of the market?

I'm not saying that people aren't priced out of the market, I'm saying that decreases to the general price of money cannot explain people being priced out of the market. > I could make a 5% downpayment and have a mortgage till the day I die, but that doesn't seem reasonable to me. Right, but if the only price increase was attributable to the lower price of money, you'd have a mortgage just as long and with just as mu…

I agree that there is something more beyond the cheap money, however it is possible that the cheap money, combined with a few bad actors has driven up the prices.

Say one or two houses sell way over market value, that drives up the price of all the houses in the neighbourhood. If that happens a few times you have massive price increases fueled by easy access to money.

Re: The Rise of Renting in the U.S

#78

Post by mwsherman »

jpmattia wrote: post #73

I'm a little surprised that there hasn't been a populist rebellion over interest rates. Low rates have inflated pretty much every asset class. This is especially so in housing: The Fed needed to reinflate housing prices in order to make many systemically important players (banks, AIG) solvent again. I have to wonder though: In re-inflating house prices, have we just off-loaded the bad investment to non-systemic insti…

Yes. It’s opposite of what one would do to make housing affordable. Unaffordable housing, especially in cities, is a huge and regressive drag on the economy.

Re: The Rise of Renting in the U.S

#79

Post by acchow »

kilbuz wrote: post #24

The statistic that went most against my intuition is that San Francisco has the one of the lowest 'rent burdens' in the US. That is, rent as a percentage of income is on the low end and equivalent with many Midwestern cities. I'm guessing that the typical SF renter paying 25% of income on rent may be dealing with a lot less space (and more roommates) compared to someone in Pittsburgh or Minneapolis.

Incomes in SF are much higher.

Re: The Rise of Renting in the U.S

#80

Post by dagw »

nawitus wrote: post #74
kylec wrote: post #7

Earlier quoted context omitted.

I don't own, but if I did I'd love a "landlord as a service" where I could just call or email someone about a problem and have them fix it.

I can do that in Finland. If I have a problem I just open the website of the house management company (not sure what the official term is) and create a ticket, and someone comes in an fixes the issue. In fact, interaction with the "landlord" is rare, and often the apartment is owned by a company, not an individual.

If Finland's rental market is anything like Sweden then you are almost always renting for a larger company that owns hundreds of apartments all around town and have pretty good economies of scale when it comes things like maintenance. It seems that in the US it much more common with individual landlords and tiny rental companies that perhaps only own that one house you happen live in.
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