Bubblesitters and Bitter Renters - is your rent going up or down in 2007?
I can tell you here in London, even though my flat supposedly "appreciated" 52% in the past year, the rent is staying the same.
In America, with millions of unsold and unneeded homes, no buyers, desperate sellers in need of cash flow, and record homeownership rate due to the last suckers getting in during the bubble, there has to be a glut of supply. We're also seeing that those once-hot "condo conversions" are now reverting back to apartments too.
If rents do rise, I'd guess it's mainly due to apartments that went condo and renters not smart enough to realise they could rent a house instead, vs. an apartment. Also, rising rents are what would factor into the government's stupid inflation report (not housing prices remember) so that would cause the inflation reading to soar. Catch-22 eh?
So give us your real numbers - what's your rent, how much would the monthly cost be to own the same property, and is the rent going down or up next year?
December 13, 2006
HousingPanic Stupid Question of the Day
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I quit my REIC job in September to retrain myself for a different career. I have a roommate and we split a 1100-sf condo in Scottsdale, AZ. My share of the rent is $425/mo. With food and gas, by basic living expenses are ~$700/mo.
One more thing, if my current FB condo-owning landlord raises the rent in July, I can move across the complex to a different FB's condo for very newrly the same rent. Many of the units here sit vacant for 90 days or more at any given time.
$1,600/mo, ,3bdrm 1 car garage 2.1 bath 2000 sq ft NW NJ location. Rent has not gone up but alot of other crap has.
Keith I notice you are using British spellings "realise" are you the new Madonna, have you picked up the accent? Or is it a byproduct of living and working in England?
We rent a brand new 2000 square foot condo for $1200/month. The cost of ownership is around $2500 a month for this unit. Owner costs are estimated to go up about $300/month somewhere between January and March due to insurance increases and increased condo association fees. My rent is staying the same because my landlord knows I can find an even better deal in my building.
For work, our apartment complexes are at 100% occupancy. I'm going to raise the rents across the board because we are at 100%. Do I think I can get a 4-5% increase on average? Probably not unless I want to drop my occupancy rates to below 95%.
Rents in my area have not risen at a rate of 4-5%/year since the apartment boom of the mid to late 1980's. If you take out new apartment communities that are just coming on line (thus don't have an increase), I think rents in NE Florida will stay flat this year.
37 Dollars a month for my year old, 2 bedroom apt. in Boston. My insurance and taxes stayed the same though. Oh wait, I don't pay insurance and property taxes. Ah ha ha ha hah.
Rent $720
Equivalent home mortgage (age, size, etc.) in admittedly low cost area: About $640 a month, BUT add landscaping help (huge yards are the standard around here) and taxes and...oops...in the hole already to the tune of at least $200 a month.
Plus, this house needs a new roof. I'd guesstimate $8,000 to $10,000 which will luckily not be my problem.
I rent a condo, from an owner who bought before the bubble in 2002 for $65,000. My rent is $750 a month, and would go up to $800 if I renew my lease in June 2007. This was a two year lease I took on in June 2005, so a $50 increase is acceptable to me.
The FB upstairs just bought the same size unit for $144,000, which was listed for $152,500. Factor in a $289 a month HOA fee, and I'd guess my rent is less than half the cost of ownership.
In 2002, when these units were about $65,000, rents were going for $650-$700 a month, so we've done a complete 180 as far as rent vs. buy here in Florida.
-Dragasoni-
Rent is $250/mo. Staying the same. This is a deal due to a special situation though. It would cost me a whopping $500 or so to rent elsewhere, with a lot more space. This is what some folks claim to be a non-bubble area, but to buy something costs 1.5 to 2 times the rent cost.
A woman in my office is currently renting a 40 year old home in the northern VA suburbs. She came in the other week almost in tears b/c the owners, who recently moved to Florida! HAHA!, wanted to raise her rent from $2500 to $3500 because...guess what?...their ARM was resetting Jan. 1! I told her that was ridiculous and showed her some brand new flipper homes on craigslist that she could be living in for $2500 a month. She couldnt beleive it. Needless to say she didnt want to move around the holidays but sent the links to her landlord. She now is living there rent free for 6 months and is month to month after that. I just hope the house doesnt foreclose before then...Renters not just buyers now have the buying power too.
No increase in St. Louis. After living in my four family building for a little more than two years, I am the "old man" of the building. All the original people that were there when I moved in have "churned". The landlord has never had the building fully occupied in the 2 plus years that I've lived there and there is a vacancy there now for the past several months. This is a one bedroom with a garage and basement storage/wash area near a three parks with lakes in a reasonably safe area of town 7 miles from downtown and a rental payment of $500.
I own a house in charlotte NC. typically my neighbors who have been renting their houses out - (and I know which ones cos I am El presidente of the HOA ... booya ... watch me toss the defaulters on the trseet for stiffing us $20 ... booya again ... lets hear it for tyranny ... Anyway ... ) - have been right about braking even with their payments especially if they bought straight mortgages around the 02-04 time frame. I would be looking at 1500 rent for mine and my payments are just under that - and I have a 15 year at 5 fixed. Property taxes sky rocketed and so did HOA dues (hey we need to find the people responsible for that and lynch them ... oh wait a min ... never mind) but I would still right about break even. But I bought pre bubble and charlotte never had a bubble really. same houses are cranked out at right about 20% more right now. 3 1/2 years and 20% - not a bubble is it ???
Cool.
Cow_tipping.
Renting a 2 bedroom 2 bathroom apartment in Northern NJ for $1900/mo. A mortgage for this kind of money buys us a 2 bedroom, 1 bathroom shack with copper heating from the 1930s. Seeing as we live in a luxury high rise, we figured we'd hold off on roughing it for a few more years. Rent has not gone up for 2 years. No notice on if it will this time around.
My rent is £332 a month for a 1200sq/ft 4bed/2bath house.
The interest alone on a mortgage @~6% would be £750 a month.
I've been in the house 7 years from new, and the rent has gone up like a £1 a week every year.
I had a call from some company asking if I'd be interested in buying the house (I have a right to buy it if I wish). I wasn't interested, so told them I don't work and have no form of income, just to get rid of them.
They didn't see that as being a problem, and would I like to see what they could come up with as I was under no obligation to buy.
So curiosity getting the better of me I said "Well if there's no obligation?" He took a few details about the house, and about a month later I got a letter telling me I'd been approved a loan of £150k and that a woman would be coming round for me to sign a few papers!!
I don't know the details of what the loan entailed, as when the woman rang to confirm the appointment, I said I'd changed my mind.
Last year they built a few houses about 300yds up the road, and to sell them they were giving incentives of £500 per month for a year towards the mortgage.
My guess is that the year is now up, as 2 of these houses have come on the market in as many weeks.
Despite evidence to the contrary, there's no housing bubble here in UK non whatsoever, and there's only one way house prices are going and thats up!!
I've also got the contract for demolition of and salvage rights to the tower bridge, Windsor castle and the palace of westminster (big ben clock included).
If anyone has a piece of dirt in Arizona, and would be interested in buying (each piece of masonary will numbered and construction plans will be provided) I can do a deal and accept payment in gold, bearer bonds, certified bankers draughts and paypal!!
Rent hasn't changed in 1.5 years. I live in Ft Lauderdale 1/2 mile from beach in a gated community in a 2/2 for $1050.00 rent a month. The last sucker a year ago (10/05)paid $450,000 what a fool (I laughed during the Hurricane by the bq since we had no Elec and told everydody there these places are worth $70K to $100K not a dime more...now they have fallen)....she is paying out the door monthly for taxes $881.25 + $350.00 Association + insurance $50 + Mortgage $2697=$3,978 a month. There was a $3,000 assesment because of the hurrican in 2005 plus monthly association went up. ON TOP OF ALL THAT SHE WAS THE TOP SALES PRICE in the complex...Now they are selling for $200K to $280K. She lost a $250,000 in one year. LOL. Let us use 3rd grade math. Which is smarter $1050.00 (no repairs...didn't have to pay for the new Refridge after hurricane or hotwater tank) or be an owner and pay $3,978.00...let us see I save $2,928 a month by renting and I DO NOT have $250,000 in negative equity. Anybody with 3rd grade math can add this up. LOL
This has been very hard to rent since I love home ownership. But me and my wife sold 3 properties the last 12/05 (at top tick..LOL..they are now trying to sell it..after just one year...I'll bet because they can't afford the PI/Taxes/Ins...good luck) but when renting becomes 1/4 to 1/5 the cost of ownership and the downside risk was huge, why would anybody own. We are in cash. We just saw a ocean side neighborhood in Vero Beach, FL 18 months ago you couldn't buy there for under $1,200,000 ...after 10 months starting at $849,000 we went to an open house he is at $640,000 TODAY!!! I told him I'll buy your place for $300,000 to $400,000 and the blood left his face. People told me by the ocean will never fall. I told them I don't care where it is. If the math doesn't add up...it is falling. I use 10 times fair market annual rent as the HIGHEST price I would consider paying.
We rent a 3/3 1800 sq. ft. home outside of Denver (Superior, CO) for $1250/month. The rent has not gone up in 2 years and won't next year either. This house would sell for around $325K right now but the whole neighborhood is for sale. Maybe I'll ask for a reduction in rent next year : )
Naples, FL-
We rent a 3 bed/3 bath 1,700 sq ft townhome condo for $1,395/mo. I estimate that if I bought my unit I would be shelling out close to $3,000 a month (even with 20% down) for PITI and HOA.
Oh and my rent actually went down by $100 with our new lease.
Melbourne, FL (Central Florida).
Brand new 3/2 townhouse, 1200sqft, with garage. Rent is 1k, which includes garbage and landscaping.
Owner paid 160k for the place, and I thin HOA is $80/month.
There was a big boom in this town, but now things are getting desperate.
Someone I know offered to rent me their 270k house for $1000. I couldn't because I had already signed a lease for the townhouse.
There are "FOR SALE" signs changing into "FOR RENT" signs all over.
Here in Central Florida I rent a 900 sqft 2BDR/2Ba unit in a triplex for $ 600/month.
I live right across the street from a lake on the Winter Haven Chain of lakes...essentially a lakeview apt.
Their is a $ 700,000 home two places down from me.
I can't believe what people are paying for houses down here. If I bought the small apt that I live in now my mortgage payment would pencil out to around $ 1200 a month.
After the inevitable sh!tstorm hits in 2007-08 I will be in a good position to pick up the pieces and buy a home or condo. But not until the runup in housing settles back down to pre-2002 prices + 2% per year appreciation.
Let these asshat flippers down here eat their mortgages until then.....
Two bdrm apts rent for $540/month around here. There are a ton of houses for sale in the $200k-$500k range. I don't know who will buy them all. Not me. I plan to sell my modest house in '08 and rent for awhile. Maybe they'll come off their high (priced) horses after that.
You all are comparing apples to oranges. No kidding renting an apartment - and having a roomate - is cheaper than owning a home.
In 2003 I paid $1050 for a 2 bedroom, 2 bathroom 1100 sqt ft apt in Las Vegas. I bought my home and my total cost including HOA, taxes, isurance was/is ~$1700. Take out the tax deduction and it's ~$1450.
So could I have stayed in my apt and saved $400 a month? Sure but I'd still be living in an apartment instead of a 3000 sq ft home with a pool in the backyard and in a better neighborhhod too.
And assuming 100% of my appreciation goes away, I've paid off about $15K of mortgage so far. Had I stayed in the apartment I would have saved $14,400 in the difference on rent vs. mortgage.
Is $600 over 3 years worth it to me to live in my own home, no neighbors below, above and beside me? Uhhmmm hmmm lemme think about that and get back to you.
According to Union Tribune, San Diego rents have increased 6%.
Its funny because the article I read said rentals are getting tighter. But the truth is many rentals were converted for sale. Thus, rentals got tighter.
Sure Keith, property taxes are up, price inflation for food & medical care is over 10%, but rents are magically exempt? You renters are living in dreamland if you think this can go on forever.
http://tinyurl.com/wqmua
I looked up on rent.net any my $1050 in '03 apartment now goes for $1170, so about a 3% increase a year increase.
The last apartment I rented in Boston before moving to LV started at $1600 a month in 1999 and in 2002 was up to $1825 a month or a 4.5% yearly increase.
I just don't see how it's possible for anyone to think that long term, rents are not going to increase. Sure you may get a year here and there where the landlord will not raise it for whatever reason, but anyone expecting to pay today's rent in 5 years is simply being irrational.
$2250 for a 2 bedroom, 1 + 1/2 bathroom with pool in burbank, CA. Bubble price to live in this neighborhood would be $670-750,000 range.
Huntington Beach, CA 1 bd, pretty basic unit for $1180, rent went up from $1100 last year. Lots of renters so rents will probably go up next year and they are performing maintenance upgrades. Comparable 1bd sell for about $350 - $450k in the area. Are there lots of IT or teaching jobs in St. Louis? I'd like to move.
but one good thing I live about 1 mile from the beach and PCH boardwalk....
Oh tell us about the PCH boardwalk!!!
cold and dark in London today
Am married and have a $1003/mo mortgage that will be paid off in 3 years.
However, before that, I lived for 7 years in NoVa in a 3br/3ba house (admittedly, it was run down - a perfect bachelor pad) whose rent was $1200/mo.
The thing had been built in the late 50's (one of the old Sears pre-fab houses w/a second floor added on afterwards), and had been paid off for decades. We lived there from '97 to '04, and our landlord didn't raise the rent once. We had a tacit agreement: we didn't pester her with finicky repair requests (when the furnace went out in December, we _did_ call, however) and always paid on time (or early), and she didn't raise the rent.
It worked out well for us, and I assume her as well, as she was within her rights to raise the rent at anytime after the first year.
I'd bet that many landlords with tenants like we were would rather forgo the rent raise (as long as they're not hemmorraging cash), rather than go through the effort of 1) finding new tenants; 2) screening them; and 3) even after that, running the risk of having to "chase" their rent and having the place trashed.
The Colorado River Cities in Western AZ have overbuilt and continue to do so. There are so many homes! It will take a decade to clear the inventory. The cost of renting here reflects the true value of homes, however homes are overpriced by 45%. Rent is reasonable, more likely to decrease due to excess in inventory.
NYC here... and I pay $2300/month for a 400sf studio. As a coop, I would say the unit would be worth in the $375 - $400K range plus $500/month maintenance. Taxes are included in the maintenance. Assuming 20% down and a 30-year fixed at 5.875%, the monthly mortgage/maintenance comes out to $2630. After tax deduction, this comes in at approximately $2000.
My rent goes up $200 in May.
As much as I hate to admit it, in some instances it's cheaper to buy in NYC (with 20% down) than to rent. That is how ape$hit the rental market is in Manhattan these days.
Great minds think alike:
http://exurbannation.blogspot.com
I just a few minutes ago put up a nearby house that is both for sale and rent.
I live in a 1700 sq feet 3/2 high rise in Arlington, VA. Our rent with utilities, parking, cable included comes to about $3100 per month. Similar sized unit condos are on the markets for $750k to $910k (depending on floor or Potomac river view). I am willing to tolerate a 3% increase for the comming year, but I don't think they will increase my rent. More people are moving out of my complex than moving in.
I live in a 1700 sq feet 3/2 high rise in Arlington, VA. Our rent with utilities, parking, cable included comes to about $3100 per month. Similar sized unit condos are on the markets for $750k to $910k (depending on floor or Potomac river view). I am willing to tolerate a 3% increase for the comming year, but I don't think they will increase my rent. More people are moving out of my complex than moving in.
No rent increase in Sunnyvale, CA either and it seems there are better deals to be had on CL these days. Not that things are trending cheaper, but if you look there is more available. I'd like to see what the extra money not paid in buying will do at 6% for the next 30 years!
Just buy a dam house and quit over analyzeing the situation. Step up to the plate and support our economy like me. God bless you all.
Casey serin
P.S. I cannot pay the bills this month and I need some traffic at my blog, please help me.
My rent in the last four years (since we cashed out) has only gone up 1% in Del Mar, CA. If they raise it, I will rent in one of the thousands of nearby vacant new condos and townhomes that are sitting vacant and not selling : )
I pay $2K in beach area of OC. 3 beds 2 ba w/loft apt. $1M homes across the street. (Some are actually selling.) Family monthly expenses went from $5K to $3K when we sold (40% drop). I am in school for now, and stuck here while kids finish their school as well. Rent just went up 10% (new landlord), but should be safe for another year. Plenty of rentals in beach areas, if I do decide to move.
I just negotiated my rent down 10% on my place in Santa Fe, NM. I just offered to pay the full year up front (thank you home sale equity).
CASEY, I HAVE A JOB CLEANING TOILETS AT MY WIFE'S BUSINESS IF YOU WANT IT. SEEMS LIKE THAT'S ABOUT ALL YOUR QUALIFIED TO DO, BESIDES BITCH AND WHINE.
Besides that, I live in Pasadena, CA and rent a 2/1, 1200 sqft. place for $1250. My $1250 inludes hot water. Rent due to go up $50 early next year so it has only gone up $100 in 4 years or about 2%.
Not bad when you consider that similarly sized houses are going for $600-$700k. And this ain't in the nice area of Pasadena. We're talking the east side of Pasadena which is kinda dumpy and the median household income can't be over $50k.
read'em and weep:
http://www.prisonplanet.com/articles/december2006/131206amero.htm
gold is heavily guarded in Fort Knox as an illusion to wealth my dear friends. the fort is empty. no gold no value no backing of the dollar.
trafiiconte the politico withthe funny hair peice said in congressional record before being jailed something along the lines that we are bankrupt annd all our 'resources" (national parks, socoal security numbers) have been pledged as the new "backing".
The market for b grade multifamily apartment complexes has become a landlord's market after years of being a renter's market. We have been able to increase rents across the board over the last 10 months or so while getting rid of all move in incentives.
NoVa
rent: 2br/2.5ba 1500/mo
owner bought early 04: 245k, i'd assume 10% down from this crappy new landlord, and he was crying our rent would barely cover his mort, whaaa, so with a 30yr fixed, 1250/mo plus 300 condo fee
prices now are 380k coming out to about 2350/mo
Disclaimer: Apologies to the regulars who keep seeing these posts about my rental house. I promise this is the last I will say about it for at least one month. But this is an appropriate thread to post the following on:
The rent that I charge on my rental house has not changed for the past 5 years. The local market just will not support much of a rent increase, and this is in the Seattle area, which is definitely a bubble housing market.
Yes I could probably charge more, but these are good tenants who have lived there 5 years so it is worthwhile keeping them happy. Anyone who has been a landlord knows that high-quality tenants are keepers.
Paid $126K for the house back in ’97. Now Zillows for $287K.
The $1,080 + $40 out of my pocket each month pays the mortgage. Definitely a good deal, as this is building more than $40 equity each month! (Taxes & insurance eat $300/mo.)
Now, if a FB purchased this house today, prudently putting down 20%, the monthly payment would be $1,680/mo. That’s $500 more than rent.
But if said FB purchased with just a minimal 3% down, the monthly payment would be $1,970/mo. That’s $900 more than rent.
Conclusion: This is definitely not the right time to buy - renters are better off.
-Mammoth
I live in NYC. Rent is $1695 for a 750sq/ft one bedroom, in a "luxury" building (consierge, gym, other useless crap).
Management wanted to raise the rent to $1800 for a 2 year lease, $1760 for a one year lease.
I got offended, and instead found a 1,200sq/ft one bedroom apartment without the consierge for $1550 in Forest Hills, Queens (nice upper middle class neighborhood). I will be moving after christmas.
It's still waaay cheaper than the monthly mortgage, interest, and fees for an an equivalent condo or house. Probably half as much.
Here's my monthly payments since 1994.
Aug 1994: $158
May 1998: $205
Sep 2000: $215
Jul 2003: $230
Sep 2004: $244
My monthly payment includes water, sewage, garbage, maintenance. All I pay is elec and nat gas which averages $85 per month.
Needless to say I've saved a sh*tload of cash over my homedebtor counterparts.
CGG
Our rent is $2,400 per month for a 3br townhouse.
To buy, with 20% down, would cost $3,200 per month (including RE tax).
That is close to the break-even point, if you include the write-off for taxes.
But, there are many expenses we don't need to pay, while renting.
http://www.prisonplanet.com/articles/december2006/131206amero.htm
http://www.prisonplanet.com/
articles/december2006/131206amero.htm
Analysts: Dollar collapse would result in 'amero'
Think deep recession likely regardless of Fed's actions
Jerome R. Corsi
Prisonplanet.com
Wednesday, December 13, 2006
Two analysts who have reconstructed money supply data after the Fed stopped publishing it argue a coming dollar collapse will set the stage for creating the amero as a North American currency to replace the dollar.
The reconstructed M3 data – the broadest measure of money – published on econometrician Gary Kuever's website, NowAndFutures.com, shows M3 increased at a rate of 11 percent in May, compared to 9 percent when the Federal Reserve quit publishing M3 data earlier this year.
Funny you should bring this up. Article posted on CNN today says:
http://money.cnn.com/2006/12/12/news/economy/rental_costs/index.htm?postversion=2006121212
Rents are increasing faster than paychecks.
here in phoenix(mesa), rents have gone up in the nicer apartment complexes due to condo conversion. i live in mesa, in a complex that is now 90% mexicans, it was 80% 2-3 years ago. anyhow, rents have only gone up from $530 to now $570. but, this is the cheap end now. rents have mainly gone up due to condo conversions, you see them everywhere now. but to buy those apartments converted to condo for 150k to 200k is sheer stupity. its an apartment after all. you buy your neighbors as well and phoenix apartments of the 80's have very thin walls.
my townhouse rental in monterey california goes up 5.6% starting jan 07.
Bullshit. Unless you live in mommy's basement you are lying.
Aug 1994: $158
May 1998: $205
Sep 2000: $215
Jul 2003: $230
Sep 2004: $244
My monthly payment includes water, sewage, garbage, maintenance. All I pay is elec and nat gas which averages $85 per month.
Needless to say I've saved a sh*tload of cash over my homedebtor counterparts.
CGG
Wedn
Yogsoggoth, I read that CNN article too. They have a funny way of reporting the data but they are effectively saying that the amount that you need to earn to afford the rent 'and utilities' of an average 1 bedroom apartment has risen 3.35% in the last year.
A) 3.35% is not much
B) the fact that the utilities are included may account for a portion of the difference.
Bottom line, rents aren't going up much, if all. And as the posters here have shown, if you are willing to negotiate or move (and if you're not willing to move then you're not really negotiating) then there is no reason for you to pay more rent.
It's possible that rents would decline a bit but I expect them to remain relatively stable. Any decline in rents would mean that home prices have that much further to fall.
Rent waterfont condo in FL mid-Atlantic coast: $ 1175
Buy same condo on 15-year fixed @ 6 1/8 %, taxes, dues, etc.: $ 2,500 with $ 40,000 down.
SF. I manage a 2 bedroom plus office and 1.5 baths in a good area. Nice unit, was rented for $3,025 last year. Tennants moved out and now renting it for $3,500. Thats about 15% increase. SF does have rent control so you can only increase rents to market when someone moves out. Still cheaper than buying....but getting closer.
lease renews Feb 1, no rent increase, $500 incentive to sign 12-mo lease (I declined, still trying to decide if I'm staying) in Boston metro (not IN Boston but just north).
My rent in SoCal went up 30%.
2 bdr/2 bath/2 garage = $2200 per month!
I hate this state!
To the Boston area folks here:
Rents have been flat in the metro west and north for the past three years. My rent was at its peak in 2002 and then I moved, shaving $150/month, for an equivalent place and so far, no increases in 2-3 years. I suspect that the overall loss of bay state jobs along with the housing bubble has decimated the region's non-university rental markets. From my pov, this is unbelievable because condos were ~$290K in '02 but then soared to ~$450K by '05 with practically no changes in the rental rates overall.
Chauncy said...
You all are comparing apples to oranges. No kidding renting an apartment - and having a roomate - is cheaper than owning a home.
In 2003 I paid $1050 for a 2 bedroom, 2 bathroom 1100 sqt ft apt in Las Vegas. I bought my home and my total cost including HOA, taxes, isurance was/is ~$1700. Take out the tax deduction and it's ~$1450.
So could I have stayed in my apt and saved $400 a month? Sure but I'd still be living in an apartment instead of a 3000 sq ft home with a pool in the backyard and in a better neighborhhod too.
EXCELLENT POST>
This is one of the problems with most of the discussions here, no true comparisons. I could say, Oh, I only pay $1 for a Big Mac and you pay $6.50? But then you find out one guy is in China and the other guy in Switzerland.
I'm sure there are some markets, like coastal California, Florida, NY City, Inner Boston, etc where renting a condo or house is less than owning, but in a lot of areas you can rent for less if you can live with less, i.e. a small 1 or 2 bedroom cracker box apartmetn with paper thin walls and a parking pad or like this poster live in a nice single family home three to four times the size, and if he/she is single can rent out two rooms and then really pay less than an apartment (would you rather share 3000 sq ft or 1000?).
It really does come down to cost per sq ft and how many sq ft you want. If you pay $1.10 to rent a small 1000 sq ft place or $0.75 to rent 2,000 sq ft who pays more?
This is part of the problem with this bubble, many people pay less (in PITI) but owe more in principal. A lot of people may think (like I) that I'd rather owe $100,000 at 8.5% than $250,000 at 5.5% but most people only want the bottom line, how much is my payment and will worry about other issues two, three, five, seven years down the road if they want to move.
I've asked and posted many times this question about rent and costs per sq ft. In Phoenix I rented a 1400 sq ft townhouse for $1750 in Central Phoenix and the payment on my house I sold there was $100 less PITI and more than twice as large and if you took the tax advantage I was saving more than $100 a month and had total privacy, a yard, a pool, two garages, theater room, etc.
When that house was being built in 2002 we lived in an APARTMENT, 1000 sq ft, 2/2, and the rent was $1200 a month but they gave you one month free so really $1100 a month and that was in 2002!
And for those who say their rents haven't gone up, great! Your landlord obviously can afford not to raise the rent. A manufacturer can't continue to sell a product for less than cost for long without going broke, neither can a landlord.
Friends in Phoenix who have a rental (their first house bought in 1982) haven't raised the rent on it either in five years but the mortgage, PITI, is only $630 a month and they have five years left before it is paid off so the rent pays the mortgage plus they have a $300 a month positive income after expenses.
In 1982 that house took 38% of their income to own. They went through a period in the late 80s where they owed more on it than they could sell it for, nor could they compete with new construction nearby. Today they are happy they held on to it as they will easily have $1,000 a month income once it is paid for and of course even if the real estate prices in Phoenix come down 60% the house will still be valued at over $100,000 and if it is paid for....who cares?
If they had just rented do you think they would have been further ahead? I agree if they lived in La Jolla and went out and paid $800,000 for a 800 sq ft shack...better to rent, but remember not every place is LA, NY, Miami, Boston.
Renting a house in OC California for $2475/mo.
First of all, the house is valued around $700,000, so I'd need to deeds of trust, only one of which could be a 30 year fixed loan.
So suffice it to say, I'm going to rent for the duration of my stay or until home prices fall 50% in orange county, which ever comes first. And I'm not banking on the latter ever happening.
Hey Foxwood, I'm the "buy a $130K home in Buffalo NY for retirement but rent in DC-to-LA" anon and the problem is that not all places with jobs are like StLouis where a typical rent to mortgage payment are at par or within 20-25% on a per sq ft basis to justify the purchase.
In many of these bubble zones, residential construction is going on at a pace far above that of market fundamentals which will unleash a huge supply of rental units in the years to come as the investors (now 20-35+% of buyers in DC, LA, NY, Bos) will be forced to undercut one another on rent, just to stave off the carry costs on a depreciating asset until they can break even on their investments in a decade or so. Now, since these guys had a million or so dollars to waste on these RE deals, the pain of buy 'n hold isn't as great as it is for the regular Joe who has to actually spend half his income in buying a place to live in.
I rent a small studio in one of West L.A.'s better neighborhoods for $1450/mo incl utils. My rent has gone up $50/mo each of the past three years - and will again in February.
I'd like to move to a cheaper rent but everything else in an equally nice area is more expensive.
Top Rent in coastal Humboldt county Ca. is $1400. You are in a luxury ocean view house for $1500. Rents are falling here. A recent Craigs List 4/2 with custom kitchen, bamboo floors, and all the goodies went from $1575 to $1400. The 3/2 we are renting for $1350 was bought by "investors", A recently married couple who are both nurses. This house has a small (and very cool) inlaw house in back that they have moved into.
They are the quintessential FB's. When we met them and talked about continuing the lease they informed us they were going to raise the rent to $1550! They actually made the comment that "they had to raise the rent to be able to live here". I almost busted a gut trying to keep from laughing. We are looking at a new construction 2 story 3/2 with attached double garage in Arcata for $1450. I'm smiling all the way to the bank!
In reply to Wedn... I live in a housing co-op in the South Hills of Pittsburgh PA. 12x13 LR 12X12 kitchem, 12x6 utility room, 13x13 bedroom upstairs, on-street parking though. It's not much, but it's cheap as hell.
I'm not BS'ing you, but based on other's replies to this question I can understand your disbelief.
CGG
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Bullshit. Unless you live in mommy's basement you are lying.
Aug 1994: $158
May 1998: $205
Sep 2000: $215
Jul 2003: $230
Sep 2004: $244
My monthly payment includes water, sewage, garbage, maintenance. All I pay is elec and nat gas which averages $85 per month.
Needless to say I've saved a sh*tload of cash over my homedebtor counterparts.
CGG
Wedn
1,000/mo, 3bdrm, 2 bath, 2 car garage in high deseret of CA (Victorville). House sat on the market for 3 months at 330k before flippers decided to rent it out. On a 2 year lease.
Rents here in Portland (OR) bottomed out about 18 months ago and are on the way up. I'm paying $450 for a studio and have lived here for several years and am below market. (Many buy-and-hold landlords have actually seen costs go down due to refi at lower interest rates, as long as they didn't take cash out.)
Renters on average have become poorer in recent years due to "creaming" of higher-income renters who bought homes and thus left the renter pool. Median renter income is slightly above 40% of median homeowner income and falling. The inability of many renters to absorb substantial rent increases may restrain rents.
Anonymous said...
Hey Foxwood, I'm the "buy a $130K home in Buffalo NY for retirement but rent in DC-to-LA" anon and the problem is that not all places with jobs are like StLouis where a typical rent to mortgage payment are at par or within 20-25% on a per sq ft basis to justify the purchase.
ANONYMOUS, you sound like a smart guy. As you and I both well know every city, every person, is unique and can't be lumped into one basket. What works for one isn't necessarily right for another.
I really understand your point. Sometimes a job pays too well to pass up and if that area is too expensive (like California) rent and pocket the difference, live as cheap as you can and invest in your future elsewhere.
I've have told friends who thought they couldn't afford to buy to make a plan, figure out where they want to be five, ten years down the road, and go for it. If you want to live in Austin then buy some land and sit on it until you can afford to build and rent where you are at.
Doing that can make the sacrifice worth while. It is easier to rent a 1 or 2 bedroom or small house if the difference between owning there is going toward a future home where you eventually want to live.
Say you want to live in Mid-Coast Maine and you buy your dream lot, pay it off, save to build, maybe even build your dream house and rent it out until you can afford to move there. Smart.
Or maybe buying a rental that makes sense for a future income.
Sometimes it is smarter just to move upfront. I know when my best friend and family tried to get me to move to Monterey (and I seriously though about it, even got my license so I could work at Monterey Community Hospital) I crunched the numbers and figured it just wasn't worth it.
I could have earned $40-50,000 more but by the time you subracted California's 10% income tax, the higher Federal income tax, SSI etc, then rent on a 1 bedroom Apartment (at least $1600 a month) and all the other costs that were higher it would eat up all that extra income and I'd be a renter. Sometimes making less is more.
Charlatan -
NHLIC is using a measure of housing "affordability" which is commonly used - even "standard" - in the USA. The commonly used formula says no more than 30 percent of your income should be spent on housing, in order to have sufficient funds for other living expenses. Obviously, this is nonsense because as income rises, a lower proportion of your income is "necessary" for housing. The reality on this side of the pond is that many lower income renters pay considerably more than 30 percent of their income for housing. (For example, in my state, an estimated 20 percent of ALL renters pays at least half their income for housing.) But at low incomes, even 30 percent of your income for rent can be unaffordable, as many don't have enough money left over after rent to adequately get by.
We're renting for less than 1/2 of what it would cost to buy - a really new 12th floor view home in Seattle. The rent isn't going up in March.
Food and basic commodities seem to be rising though.. UP UP UP!
Time for the people of this as well as others to awaken. The housing boom has "died" and rental property owners think that there will be an abundance of renters dying to rent thier properties and they can again raise their rent based on supply and demand. BIG MISTAKE.
Based on supply and demand already there are far too many apartments and condos for rent, then even houses that are going unrented.
Take a drive around a 25 mile radius. You will find more and more FOR SALE signs and more and more FOR RENT signs. They are going up like popcorn.
TIME TO WAKE UP. I saw it coming 4 years ago and it is not even close to rock bottom yet. Wait until December and watch the housing market crash.
RENTAL PROPERTIES FOR TH 1ST TIME IN WHO KNOWS WHEN WILL DROP DRAMATICALLY AND THERE WILL BE "PRICE WARS". You heard it first here that 2008 will be the year that Rental Properties, Homes for Rent, Condos for Rent, Apartments for Rent, will all dive to rock bottom. Like in Texas decades ago California and other states will feel the affects. Los Angeles area, Orange County and Contra Costa County in Northern California will be among those most affected.
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