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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

#111

Post by rokhayakebe »

toomuchtodo wrote: post #95
seivan wrote: post #89

Earlier quoted context omitted.

How does it work with having a companion. It might be easier to find someone with the same outlook. But if you're already in a relationship it's going to be an uphill battle.

I might be able to answer that. My wife and I are early 30s. I spent my 20s in the rat race, working 60-80 hour weeks for material possesions (nice vehicle, luxury townhouse, etc). At some point, I got tired of it and said, "Can we try something different?" I switched to a fully remote job. We disposed of the townhouse (no equity in it). We downsized our lives (1 car! I ride a bicycle everywhere! You would not imagin…

What a wife you have. One in a million, indeed.

Re: The Rise of Renting in the U.S

#112

Post by meddlepal »

nugget wrote: post #109
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…

Bernie Sanders, a proud socialist and outspoken advocate of wealth redistribution, just pulled even with Hillary Clinton for the Democratic nomination for President. In the Iowa and New Hampshire primaries, voters under the age of 30 broke for Sanders by 70% (compared to 57% for Obama in 2008). Meanwhile Donald Trump, who has the most liberal social record of all the GOP candidates, and who continually insults the GO…

Wait and see on Bernie. NH democrats might as well be from Vermont and I don't think there is any doubt Bernie will eat VT's primary when it comes up.

Re: The Rise of Renting in the U.S

#114

Post by phkahler »

mathattack wrote: post #96
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…

The flip side though is low rates make it easier to afford the home payments too. Your mortgage payments on a 30yr loan at 4% on a 300K house are approximately the same as 8% on a 200K house. (Not strictly proportional due to principal payments) One other thing to consider - it's real rates than matter, not nominal rates. 4% interest rate in a no-inflation environment is the same as 8% with 4% inflation.

>> The flip side though is low rates make it easier to afford the home payments too.

Nope. When first time buyers go to the bank to get approved for a loan it goes like this:

1) Look at your income and expenses

2) Figure out what monthly payment you can afford

3) Work backward from #2 and the interest rate to determine how much you can borrow.

From there every player (agents, sellers, bank) all want you to spend the full amount from #3 on your house. Since there is real crap at the bottom of the market, every $10k gets you a notable improvement. 2nd time buyers also fall for this, and it doesn't matter if you're smarter (like I was) and don't spend the full amount. Enough people let their loan approval amount influence them that the following holds:

Your monthly payment is mostly based on your income. It's the price of housing that varies (inversely) with interest rates.

By lowering rates over 30 years, they stimulated the economy until 2006-7. Then they jacked up the rates which initially lowered housing prices, which put people in trouble while also slowing the economy a bit and it all fell apart. They subsequently lowered rates and did QE1-3 to get things moving while also reinflating the housing bubble. They now have to raise rates ever so slowly to avoid part II, but they must raise them in order to restore the ability to regulate inflation with them.

https://en.wikipedia.org/wiki/Federal_funds_rate#/media/File...

Re: The Rise of Renting in the U.S

#115

Post by api »

dragonwriter wrote: post #26
api wrote: post #16

As a side effect of historically cheap money, house prices have risen so high that entire younger generations are locked out of home ownership in quite a few areas. There are a few outliers but in general it's good jobs, affordable housing, pick one.

> As a side effect of historically cheap money, house prices have risen so high that entire younger generations are locked out of home ownership in quite a few areas. If it is a side effect of cheap money, how is it pricing people out of the market? The rising sticker price of the property should be offset by the lower price of money which is driving it, so that the actual total real cost of the purchase (including t…

Everything is rising but wages, due mostly to overseas wage arbitrage.

Re: The Rise of Renting in the U.S

#116

Post by Gratsby »

A decade ago, I lived in an area where people lost houses left and right. One neighborhood had a 50% foreclosure rate. Those people all lost whatever equity they had and home prices have gone up significantly since.

Of course more people are renting. If they have managed to save the down payment required, they have to question whether they could really afford that property again. Most haven't because rents are higher than their mortgages used to be. Who can save $100K+ in that situation? And if they could, where is that $500K house that you can buy with 20% down? Probably not in the same area where you have a job that allows you to save $100k.

The government is propping up the banks which are propping up the housing market. We'll see a little pop in the next 24 months, but it will be a quick one because it will release some of the hold backs that are in place today.

Re: The Rise of Renting in the U.S

#117

Post by Animats »

Cheerleading for higher house prices used to be widespread, and was a big part of the problem. It's inflation, people. It's still the same house, for more money.

The median house historically costs about 2.2x the median income. That number hit 4x nationally in 2007, and 10x in California. It's not that high this time, but it's still very high by historical standards.[1] San Francisco hit 10.5x in 2007, and now it's around 9x.

In the 1950s, rent in NYC was typically 10% of income.

It may be time to look at applying antitrust laws to rental real estate. Where there are a small number of large landlords, that's likely to push rents up. This is more of a small-city problem than a big-city one; the biggest commercial landlord in NYC has 5% of the rentable commercial space.[2] There are medium-sized cities with one or two big landlords.

[1] http://www.economist.com/blogs/graphicdetail/2015/11/daily-c... [2] https://commercialobserver.com/2015/04/nycs-top-10-biggest-l...

Re: The Rise of Renting in the U.S

#118

Post by js2 »

toomuchtodo wrote: post #95
seivan wrote: post #89

Earlier quoted context omitted.

How does it work with having a companion. It might be easier to find someone with the same outlook. But if you're already in a relationship it's going to be an uphill battle.

I might be able to answer that. My wife and I are early 30s. I spent my 20s in the rat race, working 60-80 hour weeks for material possesions (nice vehicle, luxury townhouse, etc). At some point, I got tired of it and said, "Can we try something different?" I switched to a fully remote job. We disposed of the townhouse (no equity in it). We downsized our lives (1 car! I ride a bicycle everywhere! You would not imagin…

Re: sailing around the world. I'm sure a lot of things have changed since this was written, but you might be interested in this ebook - http://arachnoid.com/lutusp/sailbook.html

Re: The Rise of Renting in the U.S

#119

Post by esja »

dragonwriter wrote: post #86
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…

> I'm a little surprised that there hasn't been a populist rebellion over interest rates. Low interest rates are in immediate terms good for net debtors and bad for net creditors. In broad strokes, this makes them good for the poor and bad for the rich (they are usually responses to conditions for which the reverse is true -- or, at least, which are more bad for the poor than the rich, but I'm just considering the in…

Populist anger is justified… low rates are a key driver of wealth inequality.

1. As interest rates approach zero, asset prices approach infinity (via "Discounted Cash Flow" valuation). The wealthy own most assets.

2. The wealthy tend to have a lot of debt (by choice). Low rates make this cheaper to deal with, and cheaper to obtain for speculation, lifestyle upgrades, etc. Point 1 above provides lots of equity to borrow against.

This is the "wealth effect” which the Federal Reserve and other central banks have been deliberately pursuing. They thought reflating assets would make people feel better and spend more. Unfortunately the wealthy don't need ten haircuts a month or twenty meals a day.

It also turns out that when normal people see houses becoming more expensive, they decide to save more. So the net effect has been negative.

All very predictable but central banking is pre-scientific.

Re: The Rise of Renting in the U.S

#120

Post by [deleted] »

js2 wrote: post #118
toomuchtodo wrote: post #95

Earlier quoted context omitted.

I might be able to answer that. My wife and I are early 30s. I spent my 20s in the rat race, working 60-80 hour weeks for material possesions (nice vehicle, luxury townhouse, etc). At some point, I got tired of it and said, "Can we try something different?" I switched to a fully remote job. We disposed of the townhouse (no equity in it). We downsized our lives (1 car! I ride a bicycle everywhere! You would not imagin…

Re: sailing around the world. I'm sure a lot of things have changed since this was written, but you might be interested in this ebook - http://arachnoid.com/lutusp/sailbook.html

[deleted]
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