Rent Surges on Single-Family Homes With Landlords Testing Market
By - Mighty_L_LORT
From all the bickering in this thread, looks like both of us are alone in this.
Testing housing demand or in other words “how much is not being homeless really worth to you?”
Single family? Single bedroom apartments are becoming air bnbs. I told my aunt and uncle how much I was paying for rent and they told me it was mor than their 4 bedroom house mortgage
My entire adult life I've had a higher rent than my parents 1991 mortgage payment in a similar area. Always.
Now my mortgage is more than twice theirs for a small house in a cheaper state. So it goes.
I mean yeah, if you lock down a home value from 30 years ago your mortgage payments are going to be much lower than rent 30 years later.
This comment means nothing without locations. I’m paying half for my 4br house’s mortgage compared to what my brother is for his 1br apartment too, but I’m in a DC suburb and he’s in TriBeCa with a view of the Hudson.
The same could be said with year of purchase. A 30y mortgage that your relatives got into in 1995 is going to be cheaper (especially if they refied at all when rates dropped) than a lease you signed last year.
Don’t you mean “more”?
If all these tax credits manage to pass congress, just watch rent, housing price seeing biggest YoY gains in US history.
Could you elaborate please?
I imagine that what the OP is trying to say is that in addition to all the stimulus and aid congress has passed and states have passed, if congress passes even more credits / deductions / stimulus / aid -- however you slice it, that's supposed to put more money in the pockets of most people, in addition to money already sent.
Unlike, say, mustard and gold-plated spoons, housing has fairly inelastic demand. If mustard doubles in price, you buy a lot less; if housing doubles in price, you don't really want to be homeless so you prioritize it regardless.
Anyone who rents out property will see that their tenants have more money / there are other potential tenants in the area who have more money, and they'll raise their rent prices to capture more of that money. Given that housing prices have shot up too, there's not a lot of alternatives people have other than to pay, when prices are up across the board.
Add to that the fact that evictions were difficult for the past year (read: many landlords made a lot less money than they expected, or lost money), they want to make up for a bad year.
Add to that that landlords always look at return on, among other things, the current value of their property, which has likely gone up moderately-to-a-lot due to the surge in prices for houses the past year, so they'll want to charge more rent to keep the same rent-to-value ratio.
The prices of houses have gone up a lot in the past year, but with more money in people's pockets AND with interest rates lower, anyone looking to sell will be able to sell for even _more_ than before.
Based on that analysis, rental prices + home sale prices are likely to both increase significantly YoY.
The rapid increase in prices might make landlords look at selling their rental properties.
Not a chance. They see it is as an opportunity to make more money. Heck half of what is driving the increase in prices is all the landlords refinancing their portfolios while rates are low and using the cash out to buy more RE. Source: I am a mortgage underwriter.
No way man. I might sell when I really need the cash or the markets trend down. But real estate has been on fire for more than 20 years where I'm at.
Yeah, no one is selling land. It is a proven investment and the only threat to that market is government regulation aiming for housing to be more affordable.
There is zero threat there at all. The government is all in on making sure real estate values never go down. To attempt otherwise is political suicide.
Should it be though? The majority of people don't own property.
The answer to you question is 'it is' because property owners have the majority of the money. Money runs the world. No point in getting into 'should it be?'.
And climate change
Of course. Anyone who owns SFRs who doesn't re-run the numbers, without good reason, is probably doing it wrong.
Among many many other factors, a sharp decrease in interest rates will generally push the price of houses upwards significantly over what they might otherwise have been. (Huge caveat is that a sharp decrease in interest rates usually coincides with a significant negative event that will often, but obviously not always, depress house prices.) However, a sharp decrease in interest rates doesn't really _directly_ do shit for rent, though of course second-order effects (like, literally, the price of houses going up giving landlords another reason to raise rent) do exist.
If I was getting a middling return on investment and the price of the house jumped 20% but I was pretty sure that rent could only go up (eg) 6%, strongly considering selling would very much be on the table. Especially if I thought the jump in value might be temporary and there might be a pull-back.
Most landlords I know know one thing-- land will always increase in value. It is truly limited. Just owning the land that increases year over year, while collecting rent, is easily the most profitable outcome long-term.
If you look at real estate forums, it's always about return in equity, cash return on cash invested, expenses, etc. Land value does not always go up - many places in the country have land value that's stayed fairly depressed for quite a while, where SFR prices have hardly moved. Some real estate investors look for appreciation and of those some get the appreciation they look for, but consider that while home appreciation _might_ approach and rarer exceed standard index fund levels over the mid-long term, to get those gains you pay significant costs compared to holding stock. For these reasons among others, rent is generally seen as a significantly more reliable source of return (even if often less than index funds over the mid-long term) and appreciation is a cherry on top.
I know for example many people bought SFRs in areas that had huge price drops in 2008, but were seen as strong economically (like las vegas), who sold their houses when prices shot back up and reallocated capital to more attractive return-on-equity investments. They locked in the gains from appreciation and used those gains to invest in stabler rental income. Of course they were happy about the appreciation, but they bet they'd see better returns from more rent than hoping for yet more appreciation.
While ultimately I find using SFRs as essentially a spreadsheet-investment to leave an off taste in my mouth, those who do see it as just money will indeed often reallocate capital and lock in gains, rather than trying to own an SFR forever.
As a relatively silly little comparison, a normal house in Mountain View is approaching - if it has not surpassed - 1.5million USD. If you hope for the 7-8% appreciation seen for the past 30-odd years, that's definitely possible, but it comes in spurts. On the other hand, that much money can buy, like, a 20-plex in middle america, which will generally cash flow from some 18-ish occupied units per month. A very different sort of business to be in than hoping that MV doesn't pass laws loosening residential house building restrictions.
The population of the US is increasing by about 3 million a year. This is a far higher increase than a lot of developed nations. Must have to build like crazy…
Pretty much this. Living in PNW I've more than doubled rent in 10 years. I might feel bad about it if no one applied to rent them but everytime a tenant leaves there are 100s that want in.
I lock in rates for longer terms but a few others are not quite as generous which is likely why our local rates have skyrocketed so much.
This is helpful thank you!
If the argument against raising the minimum wage is that landlords will engage in rent-seeking then immense downward pressure on property/development prices is needed, even if this results in bankruptcy for landlords.
The poorest 40% of society shouldn't be taken advantage of so that a group that is literally siphoning value out of the economy can prosper.
Do you want a nicer house? What if you could suddenly afford it. You'll go for that nice house now...
And of course the guy who currently rents that place is going to realize he still wants it and he'll offer more to make it too expensive for you.
This will drive up rents everywhere. Maybe YOU don't want to do this, but there are others who will, and they will force YOU to do the above.
Housing is a huge sponge for any available cash people have.
Real estate-wise, the forecast was the largest cohort of millennials entering prime home-buying age (early 30’s), *pre-COVID*. Then the pandemic, including the shutdowns, put that on steroids. Couldn’t imagine being cooped up with kids not allowed to use the park, etc.. in the big cities. This as the elderly hung on to their homes they were thinking of selling due to nursing homes, etc.. getting hit.
*OTOH*, now that the US elderly are mostly vaccinated, more are looking at communal living as being safer. The pandemic forced many to confront their age (all the conversations I’ve had) and realize many cannot keep up with the housework, yard maintenance, etc..
Other younger populations may also look at communal living anew too (urban to rural). That said, think families are still looking at the burbs if not already there..
*Add* there’s also location, location, location and geography as the Southwest, especially Phoenix, continues to attract all age groups. There’s a 300,000 unit community west of Phoenix (“Buckeye”) that’ll likely be approved on the Douglas ranch and it’s not the only one. If incorporated that future city may drawf Phoenix itself (already one of the largest cities) in the future. Of course those millions of households have to come from somewhere else (Ohio?) and there may be challenges…
Everyone buy a house now no matter how expensive because the inflation gonna make the rent go up forever
Immigration is down. Baby boomers are starting to die or downsize. Our population is not growing. What is driving the shortage? Foreign investors?
Foreign and domestic. Every middle class schmo is trying to be a real estate investor, while the upper class is trying to kill to dream of home ownership for everyone below $100k/ year income
The real culprit is over supply of money in the market. The Fed / US govt have created an obscene amount of money & therefore it’s driving up asset prices.
The media / politicians love to frame it as a “housing shortage” but the proper explanation is a surplus of money. Imagine if the govt gave everyone $1M as their stimulus check, you know, to REALLY stimulate the economy. Then everyone would be out there buying Lamborghinis and Ferraris. Then, the media / politicians would be shouting “there’s a Lamborghini and Ferrari shortage. So much pent up demand from covid lockdowns”
That's what he's asking - if the problem is over supply of money and everyone had a home before, where are all the vacancies popping up? Or are these all 2nd homes?
Where I live it's an influx of new people and it's a legit shortage. However I'm trying to figure out who all the Californians that are moving here are selling their homes - who is buying those?
Landlord here. The market is fucking bonkers. My wife and I are building a portfolio of homes as our retirement plan and to pass on to our kids, we don't gouge our tenants and we keep our houses in tip-top condition.
In the last year I have been getting incessant calls from realtors asking me to sell. I recently had to get new tenants into one of our houses and got FIFTY applications in a day.
We've been cautiously looking to buy another property nearby and there simply isn't anything on the market. Realtors are doing pocket sales to investment groups, there's about half the housing stock on the market as compared to a normal year.
Yep. It turns out that making renting a SFH a huge headache during COVID caused a bunch of landlords to sell their homes. Now we have an extremely low supply of SFHs for rent, and everyone's blaming the landlords like they're somehow responsible for there being no SFHs.
People can’t buy a SFH if someone already owns it for the sole purpose of renting it out. Are their other issues with the housing supply? Of course, but hoarding homes as a retirement portfolio is absolutely a big part of the problem.
> building a portfolio of homes as our retirement plan
Read: hoarding valuable resources, effectively increasing their scarcity and running up the prices for those of us who would otherwise be buying the homes to own and actually live in.
Talk about how well-kept the homes are all you want, but it’s pure fucking greed.
Turns out working your ass off for two decades at a day job and using that capital to make investments with long term, reliable return AND providing a service in the process gets you shit on by reddit. Neat.
Sure, but this guy isn't single-handedly causing the problems. This is a population-level problem. He's responding to incentives.
You're not wrong. There should be priority for people who are just trying to put a roof over their own heads
I’m not disagreeing with your characterization of the market but where is the evidence the Fed will raise rates any time soon. Their mantra continues to be that they want let inflation run hot for an extended period.
The FED did this 100% to themselves. They walked themselves into this corner.
During a recession: "Can't raise rates because it will hurt a recovery."
During a bull market: "Can't raise rates because it will stop the party."
Over the last few decades, we have been trending down without ever a significant attempt at raising them.
It is hilarious, to be honest. They literally created this problem themselves.
Buyers and banks are much more well capitalized than the previous bubble
The easy solution to decreasing rent prices is to build more homes by deregulating zoning, excessive housing codes, and repealing tariffs on lumber
They see what the homes could sell at and think they are missing out. They then force that down onto the renter. Where these rents aren't regulated this would be really difficult for the renter, but a win win for the owner. If the renter doesn't stay the owner can sell at a premium right now.
Guys, do you really want to live in suburb architectures like in that picture? It looks so depressing. [This](https://youtu.be/JPbfdcvv0to) is a fantastic and short indtroduction video from StrongTowns, about the problems and macroeconomic desaster of suburban architecture and how we can change such cities for the better.
My favorite video in that series is when you realize that the inner city ALWAYS subsidizes the suburbs. All the utils running to the suburbs is insanely cost intensive both installation and maintenance
I would much rather live there than under a bridge
Love StrongTowns. Not sure how I ran into them but glad they exist. Americans desperately need to acquaint themselves with sensible urban planning, but I'm not too hopeful.
Handing out money like this can only result in higher prices. You all knew this was coming...
Why don’t we just increase in taxes on property value, not income, on all homes beyond the first one a person owned.
What if taxes increase to a point where renting becomes unprofitable?
Would you simply invest in the market, or try to start a different buisiness?
Do you think renters would be able to afford to own a home in this scenario? A significant portion already cant afford home ownership, now you want to raise the bar even higher?
When taxes get too high, people sell their homes.