5 ms·

If rents continue to rise home prices won’t fall substantially. https://fred.stlouisfed.org/series/CUUR0000SEHA https://fred.stlouisfed.org/series/CUUR0000SEHA

gedy 4y ago
I honestly feel like rents are at the breaking point, it's ridiculous in California at least and people I know who rent are leaving the state because of this.
- bredren 4y ago
  In 2021, Portland, Oregon saw it’s population decline for the first time since 2010. This has been attributed to the high cost of housing. [1] The secretary of HUD was here a month ago taking a tour, talking about affordable housing. We started a family last year and despite needing to move out of a duplex, we would not seriously consider a purchase. Prices and terms of sale have been outrageous. Deciding our best bet was to rent, we found the rental market for single family homes a disaster. The only way we found something was because we know a postal worker who saw a for rent sign while walking their route. The place never hit the internet. The house needs a ton of work and the only way it can be priced the way it is is because the market is so totally busted. My wife tracked pricing and made a spreadsheet of comparable rentals when we signed the lease. I’d guess our rent was at least $400 under market. I grew up in Portland. I went to a portland public school and college in Oregon. I had wanted to live here. However, we need housing to show clear indications it will turn, an unexpected windfall, or we will move away from family here and toward other family in the mid-west. Regular people are desperate here, valley folks are coming in doing the same thing we would do to wherever we could land in the Midwest. Housing is broken. [1] https://www.wweek.com/news/city/2022/05/27/new-census-numbers-show-portlands-population-dropped-by-over-11000-people-from-2020-to-2021/ https://www.wweek.com/news/city/2022/05/27/new-census-number...
  - zbrozek 4y ago
    We need supply side solutions. The market would totally take care of demand if property rights were strong enough to allow folks to build housing. We need to get a federal level right to build housing on your land. We also need to overturn Euclid v Ambler.
    - trashtester 4y ago
      This year could possibly the worst time in a lifetime to start bulding a new home.
      - zbrozek 4y ago
        Until next year! It doesn't get better.
        trashtester 4y ago
        Well, consider that if you start building now, you're likely not done until next year, or maybe the year after....
        zbrozek 4y ago
        I'm more than 2 years in and no physical progress has been made. "Local control" is a huge problem and it needs to go away.
- jjeaff 4y ago
  The real question is how quickly is someone else renting their place after they leave. I have also known quite a few people have recently left California. And not a single one of them left a vacant house behind.
  - deleted 4y ago
    [deleted]
rcpt 4y ago
There's no reason for rents to rise and I'd argue that even current rents are overpriced. Urban offices aren't filling up and essential workers have less money than ever.
- deleted 4y ago
  [deleted]
- topkai22 4y ago
  Rising interest rates drive up the mortgage rates. The vast majority of US home buyers have to finance their purchases, so an increase in mortgage rates is effectively an increase in the total cost of buying a house. The total cost of homeownership is correlated to rental markets, as we are talking about different ways of consuming the same good. Interest rates have gone from 2.75 to 5.4%, meaning monthly payments on purchases have gone up almost 40%. Not all that will transfer to the rental market, but I be surprised if rents don’t continue to go up; barring a general collapse in house prices.
  - qqqwerty 4y ago
    That is not how rent prices work. It is pretty much supply and demand. No one cares how much your financing costs. If people start losing their jobs because the FED induces a recession, that means less money for rent. Younger folks move back in with their parents. People take on an extra roommate or two. Demand for rental units goes down. Prices go down. If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it.
    - w14 4y ago
      > If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it. Purely anecdotally, a large proportion of the housing available for sale in Plymouth (UK) seems to be rental property. Tenants are being thrown out while landlords sell up. I have been wondering if the drive to cash out at a time when holding cash isn't necessarily such a great idea is exactly what you suggest - that those with buy-to-let mortgages are looking at the potential of interest rates rising faster than rents.
adam_arthur 4y ago
Rents expanded quickly due to massive increase in disposable income from government programs leading to expansion of number of households. Now that real incomes have been falling rapidly for months, we can expect household contraction and rent stagnation or decline.

gedy 4y ago

I honestly feel like rents are at the breaking point, it's ridiculous in California at least and people I know who rent are leaving the state because of this.

bredren 4y ago
In 2021, Portland, Oregon saw it’s population decline for the first time since 2010. This has been attributed to the high cost of housing. [1] The secretary of HUD was here a month ago taking a tour, talking about affordable housing. We started a family last year and despite needing to move out of a duplex, we would not seriously consider a purchase. Prices and terms of sale have been outrageous. Deciding our best bet was to rent, we found the rental market for single family homes a disaster. The only way we found something was because we know a postal worker who saw a for rent sign while walking their route. The place never hit the internet. The house needs a ton of work and the only way it can be priced the way it is is because the market is so totally busted. My wife tracked pricing and made a spreadsheet of comparable rentals when we signed the lease. I’d guess our rent was at least $400 under market. I grew up in Portland. I went to a portland public school and college in Oregon. I had wanted to live here. However, we need housing to show clear indications it will turn, an unexpected windfall, or we will move away from family here and toward other family in the mid-west. Regular people are desperate here, valley folks are coming in doing the same thing we would do to wherever we could land in the Midwest. Housing is broken. [1] https://www.wweek.com/news/city/2022/05/27/new-census-numbers-show-portlands-population-dropped-by-over-11000-people-from-2020-to-2021/ https://www.wweek.com/news/city/2022/05/27/new-census-number...
- zbrozek 4y ago
  We need supply side solutions. The market would totally take care of demand if property rights were strong enough to allow folks to build housing. We need to get a federal level right to build housing on your land. We also need to overturn Euclid v Ambler.
  - trashtester 4y ago
    This year could possibly the worst time in a lifetime to start bulding a new home.
    - zbrozek 4y ago
      Until next year! It doesn't get better.
      - trashtester 4y ago
        Well, consider that if you start building now, you're likely not done until next year, or maybe the year after....
        zbrozek 4y ago
        I'm more than 2 years in and no physical progress has been made. "Local control" is a huge problem and it needs to go away.
jjeaff 4y ago
The real question is how quickly is someone else renting their place after they leave. I have also known quite a few people have recently left California. And not a single one of them left a vacant house behind.
- deleted 4y ago
  [deleted]

rcpt 4y ago

There's no reason for rents to rise and I'd argue that even current rents are overpriced. Urban offices aren't filling up and essential workers have less money than ever.

deleted 4y ago
[deleted]
topkai22 4y ago
Rising interest rates drive up the mortgage rates. The vast majority of US home buyers have to finance their purchases, so an increase in mortgage rates is effectively an increase in the total cost of buying a house. The total cost of homeownership is correlated to rental markets, as we are talking about different ways of consuming the same good. Interest rates have gone from 2.75 to 5.4%, meaning monthly payments on purchases have gone up almost 40%. Not all that will transfer to the rental market, but I be surprised if rents don’t continue to go up; barring a general collapse in house prices.
- qqqwerty 4y ago
  That is not how rent prices work. It is pretty much supply and demand. No one cares how much your financing costs. If people start losing their jobs because the FED induces a recession, that means less money for rent. Younger folks move back in with their parents. People take on an extra roommate or two. Demand for rental units goes down. Prices go down. If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it.
  - w14 4y ago
    > If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it. Purely anecdotally, a large proportion of the housing available for sale in Plymouth (UK) seems to be rental property. Tenants are being thrown out while landlords sell up. I have been wondering if the drive to cash out at a time when holding cash isn't necessarily such a great idea is exactly what you suggest - that those with buy-to-let mortgages are looking at the potential of interest rates rising faster than rents.

adam_arthur 4y ago

Rents expanded quickly due to massive increase in disposable income from government programs leading to expansion of number of households. Now that real incomes have been falling rapidly for months, we can expect household contraction and rent stagnation or decline.