FLASH: MarketWatch - "Housing bust holds down core inflation in April"

Gotta love it - housing crashes, and the market celebrates that the crash (and a glut of homes for rent keepin rents down) is keeping inflation down as consumers begin to curl up in the fetal position and the housing atm shuts down.

Yippee!!!!

Uh, someone wanna ask Japan what they think about housing crashes, a slowing economy death spiral, and asset and price deflation before putting on the party hats?

The REALLY funny thing of course about the government inflation data is the use of rents, even though home"ownership" rates near 70%. Bubblesitters and Bitter Renters you rule the roost when it comes to US inflation reporting! Keep paying less than you did the year before and we can move the US to deflation. Watch for rents to keep dropping as this massive glut of inventory is rented out, the vacancy rate soars, the illegals go home, and the economy cools.

Also, nice to see the MSM using terms like "housing bust" as fact now. Guess someone didn't read their NAR talking points.

WASHINGTON (MarketWatch) -- A growing glut of housing on the market helped moderate U.S. consumer price increases in April, raising hopes that the Federal Reserve can declare victory over inflation.

The consumer price index increased a smaller-than-expected 0.4% in April, boosted by higher prices for energy and groceries, the Labor Department reported Tuesday.

Excluding food and energy, however, the core consumer price index rose 0.2% as expected, knocking the annual gain in the core down to a one-year low of 2.3%.

Rents and owners' equivalent rents, the biggest factors in the CPI, increased at the slowest pace in more than a year, reflecting a flood of vacant units in the rental market.

The benign figures impressed some of the most skeptical analysts.

The moderation in housing costs "is one of the most significant developments on the inflation front in a long while," wrote Stephen Stanley, chief economist for RBS Greenwich Capital Markets. If the good news persists, "then core inflation will probably turn out better than we have projected" and the Fed will have "more room to ease in the event that we are wrong" about the economy bouncing back.

And then there was this bonus headline too:

Housing market, investments wreck Home Depot profit - Expect more of the same, CEO warns

The traditional 100x to 120x rent to purchase price equation is now laughable, wouldn't you say?

I've always known that real estate investors (real ones, not the fake ones these past few years) use a 100x or 120x rule of thumb when evaluating potential rental properties to purchase, so that a 10% to 12% ROI before expenses could be achieved. Even a trained monkey wouldn't buy a property with a negative ROI after expenses, unless he was a gambling monkey, vs. an investor monkey.

So, are you laughing yet? Or crying? Because we all know that rule of thumb not only got thrown out the window, the thumb got chopped off too. Places are going for 300x and 400x rental income now.

Take my old loft in Arizona. I tried to rent it (before I woke up and sold) for $1000 a month and had no takers, figured $800 would be right.

$800 x 120 = $96,000. Yet the place sold for over $300,000.

See the problem? Plus then you've got the stupid always-rising condo association fees, taxes, maintenance and not being able to rent the unit out. "Investors" were just gamblers betting on future appreciation, and now they've lost. Big time.

So do the math with your place - give us real examples. And we'll laugh and laugh and laugh and laugh, because we all know one day the 100x to 120x rule will apply again, we know rents ain't gonna be going up, so you know what that means... Watch out below!

It would be fun to go look at condos or houses with a real estate clerk, ask how much the place would rent for, then offer 100x. Oh, man, would that be fun. Especially when the place is being offered at 400x.

Look to achieve 12 per cent rental return "Some landlords are happy to receive eight, nine, or ten per cent rental return however I feel that a 12 per cent return is achievable and that is my benchmark," Mr Ahuja explained.

"I use the simple 'rule of 12' when deciding if a property is worth investing in; take the purchase price, divide by 100 thus giving the monthly rental figure that needs to be charged to obtain a 12 per cent gross yield. "For example if a property is priced at £100,000, divide by 100 giving £1,000. If the monthly rental figure (£1,000) can be achieved in the area then go for it."