I figured out the PE ratio of housing was all out of whack (here in Phoenix) when I couldn't rent out my loft for $1000 a month rent, yet someone bought it for $2,500 a month cost.
Now that appreciation is over, there is ABSOLUTELY no reason to buy a place. And either rents will need to skyrocket (which they will not) or prices will need to collapse (which they will).
Oh, man, if I owned investment real estate I'd be freaking out tonight at my stupidity.
Small fortunes have been made during the past few years by investing in rapidly rising real estate...buy, rent out, flip, repeat. But now stagnating home prices and a bad rental market threaten to end that -- and put the holdings of small landlords in jeopardy.
Signs of a slowdown in the housing market keep coming, with drops in housing starts, sales, and more than a few dire forecasts (see: House party is over.)
Rental markets have soured as well. Rents in most cities have been either flat or down in 2005.
In Boston, a net lost of about 180,000 jobs in the past few years drove rents down about 10 percent in 2005, according to the U.S. Department of Housing and Development (HUD).
Rent declined even more in San Francisco, about 13 percent. Chicago and Houston rents are down about 3 percent.
What's more, rental vacancy rates have soared -- to about 10 percent, according to the latest Census Bureau data, up from about 7.5 percent 10 years ago.
Jane Garvey, a small landlord in the Chicago area, says so much emphasis has been placed on home ownership that most everyone who could afford to buy a home already has. That has shrunk the pool of tenants and made it hard to find reliable, qualified renters in many locales. "You're looking for the 'cream of the crap,'" says Garvey.
December 09, 2005
It's the math stupid! Slowing housing prices and a stagnant rental market have landlords squeezed from both sides.
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8 comments:
I am not sure where you are getting your rent info, or vacancy info, but its flat wrong. I'm an analyst in the apartment industry, and if you're going to argue something at least use legit statistics.
huh?
thanks for visiting.
But if you have contrary data, then post. If not, go away.
Agreed. SHOW your data then.
Dear Anonymous,
In regarding your response that Keith needs to SHOW his data, I don't believe he just made his numbers up but instead got them directly from an article on the internet. You can click on the title and it links to the source of the information.
If you have a source of information (an article or other data), please reference it so we can learn from it too.
In the article, Jane Garvey says: "You're looking for the 'cream of the crap,'" in reference to renters. I don't like that considering that I am a renter and I do not consider myself crap. I think I am smart that I wasn't too stupid to pay over twice what a property is worth. I don't want to lose my hard earned down payment. I am also debt free so when prices do come down, I will be all the better off for not having blown my down payment on overpriced housing.
dude (please sign in by the way) - this is a blog - every posting is an article from the internet, led by my commentary
last anon - cream of the crap means homeowners/investors are having a tough time finding good renters - you're likely one they want (have a job, not bankrupt, don't use drugs, etc). I'm now one myself after selling my loft - and I can tell you, I have my pickings - there are sooooooooo many places here in phoenix for rent - and no renters to be found - thus desperation among investors/homeowners looking for renters
Dear Keith B.
I get your point about "cream of the crap". I know it must be getting pretty hard for those investment property owners.
We live in Elk Grove CA (South of Sacramento). In the past 4 years, contractors have built thousands of new homes and prices have at least doubled in what was a fairly small town. Many of the purchasers have been investors. A good tenant (a family with regular income)is nearly impossible to find and so you see many advertising that "Section 8 is OK). This way they are guarenteed to get most of their rent from the county or state. Many of these Section 8 tenants are extremely undesirable neighbors. We are hoping that if homes do not continue to increase in value or actully decrease, these investors will sell these houses to good families. Otherwise, you are likely to see what should be nice neighborhoods become unkept, unsightly places where only people on welfare want to live.
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