I got an email today from Chicago realtor and I’m now starting to see deeper price cuts: 70k off 770k, 35k off 550k, 25k off 350k. The returns still dont work based on rental rates but at least it’s moving in the right direction. Let’s hope the Fed jacks up rates again to really hammer these prices down so I can finally pick some rentals up!
Christoball
1 year ago
What can’t be paid won’t be paid. That is the nature of people living within their means, otherwise called recessions.
Casual_Observer2020
1 year ago
The underlying problem is we don’t live in an economy where costs stay fixed. Everyone is trying to “make more money” on everything. There are so many middlemen in real estate and ownership of real estate, that the price goes up to the end consumer (in this case the renter).
Bingo! that’s the structure of capitalism. It needs *growth* to survive or the whole thing collapses. And before anyone accuses me of endorsing socialism or communism, I’m not – those systems fail repeatedly too. All three systems create imbalances and eventually collapse. Actually, any system that creates imbalance collapses, that is the mathematical nature of imbalances.
I think the capitalistic system can be perfected if there is a better link between cost and prices going in both directions at all times. I think some Scandinavian countries have perfected this in some sectors. I agree with you regarding all forms of systems, but I think capitalism works best provided the right regulations to keep pricing transparent. This is non-intuitive. Also, I think non-profit businesses have better survivability over time because they better regulate the accounting of businesses.
“but I think capitalism works best provided the right regulations to keep pricing transparent.”
What you are describing isn’t capitalism. Pure capitalism has no regulations at all and that doesn’t seem to work either otherwise Somalia would be an economic paradise.
Looking at the animal kingdom for success strategies.
Ants and bees have a ‘command and control system’ akin to I guess what China attempts to do.
Birds tend to flock together for protection and growth – Akin to EU and quasi socialist Scandinavian countries.
Lion / Lamb hunter/prey model, only the strongest survive – Akin to what the US was originally, not sure what it is now as all three seem to exist here. This is the original capitalism model.
Your response makes me think you don’t understand capitalism beyond a basic ‘survival of the fittest’ philosophy. Capitalism embodies a number of factors, among them a price system for allocation and exchange of resources. The more transparent the price system, the more efficient and effective the transfer/use of resources. For example, medical costs would be far lower if people could easily compare prices, shop around, etc. The resulting increased competition will also lower prices, and generate innovation.
Capitalism actually requires strong laws especially with regards to property rights etc. Without those laws you just have Anarchy, not Capitalism. This is why Somalia is such a mess. The reason the US succeeded so well in the 1700s and 1800s is because of those laws (ie the Constitution, Bill of Rights and so on) and the fact they were enforced.
Ants and Bees have a Monarchy model where you are born to your station (queen, worker, soldier etc) and you can never leave it. It’s better than Anarchy (and it worked in the Human world for thousands of years) but its not as successful as a Republic or Democracy.
There is nothing in the structure of capitalism (as an economic system) that requires growth to survive. The imbalance comes from politicians who spend beyond their means, and enforce their values on other people.
RonJ
1 year ago
“If $40 of $46 billion of an eviction prevention pot is now used up, what will Biden do for an encore?”
He will have congress create more funds. He keeps congress coming up with more and more funds for Ukraine.
I hope Biden keeps funneling money and weapons to Ukraine.
I wonder why Putin didn’t invade Ukraine when Trump was in office? Trump would have not raised any complaints as Putin rolled over the country. Trump is a real danger for Ukraine if he runs again and he almost has to run again as becoming president again will be the only thing that might keep him out of jail.
You have NO IDEA what Trump would’ve done, and neither do I; however, I suspect Putin would not try to invade in the first place. Trump was not predictable, in the way that Biden is predictable. The retreat from Afghanistan changed everything. Next up, is Taiwan.
How about you provide three examples where Trump “smooched Pooty Poot’s posterior” in lieu of making farfetched unsupported claims? (some would say moronic assertions)
I can give numerous examples where Trump took positive steps on the world stage.
For example,
1: Trump’s requiring NATO countries to pay their way is a clear example of of requiring real commitment of allies, something Putin would respect even though NATO forces are arrayed against him.
2: Trump’s investigating the Biden family’s corrupt activities in Ukraine would also influence Putin’s opinion. Trump followed through when public servants cringed and blundered. You want an example? The pissant ambassador who was upset by Trump’s texts.
3: The US has an illegal immigrant problem. He insisted on a wall, rules to hold migrants at the border, etc. A strong leader does such things. weak leaders open the borders.
The RMBS market is also a problem. When you have investors who have to be paid, the price is more likely to be higher because those investors want a handsome profit.
Non-citizens should be prohibited from buying houses directly or through a proxy. Similarly, investment companies should be prohibited from purchasing individual housing, other than a small number for their own corporate business use.
Interest deductions and capital gains exclusions for individuals selling appreciated housing should be removed. Housing should no longer be allowed to be viewed as an “investment”. It’s a roof over your head, first and foremost.
None of this will happen though because of the money real estate and banking lobbyists pay Congress. So individuals will continue to be priced out of owning a home in an ever growing portion of the country.
When Republicans take control of the White House and Congress, one of the things they will do is cut/gut social security and medicare. I can think of no better poetic justice of cutting boomers off at the knees just as they all get ready to ride the social services train. That will be one way to fix the labor shortage.
There is an old expression, “you reap what you sow….” and “revenge is a dish best served cold…”
Why did GOP wait 50 years to get abortion banned? Perhaps having a GOP supreme court to cancel off any challenges? GOP will gut SS/Med, lawsuits will be filed, SCOTUS will bless GOP cut. Rinse and repeat with any policy they don’t like (LGBT, wokeism, etc). And like abortion, it will hit people like a ton of bricks but by then it will be too late. Doesn’t bother me, I wasn’t planning on SS and I won’t be here anyway so don’t need medicare when I retire.
Democraps waited 50 years without passing legislation to permanently legalize abortion. Why is that? Why don’t they do it now? Because it was unconstitutional at the time, being a states’ rights matter.
It does make sense to reduce the SS/Med to something the country can afford, or cut back on other programs accordingly.
Cutting social security and medicare is the 3rd rail of politics. Old people consistently vote. Cutting or gutting will instantly lead you to be kicked out of office.
That’s why there has been no reform for decades even though these problems have been well known since the 90s.
WB : those people in my houses aren’t nice. They fight each other, get divorce, break the house. They mess it up for spite. Rent
premium is high as insurance to the hurricane they leave behind. Landlords know that portion of their tenants are evil.
Billy
1 year ago
No such thing as rent gouging. People charge what the market will bear. This is just another excuse to grow the government and control the free market.
I agree with the first half. Second half i would say voters complained and politicians have to do something. Which grows government and leads to control.
Should be a law prohibiting landlords from holding a gun to prospective tenant’s head. /s
8dots
1 year ago
Starting in 2000, rent is linear, c/s is vertical. If c/s form few dots at the top, the big whale will not be in the game. They will wait
on the sideline for an explosive change. C/S might popup in crazier Pareto chart, or gap down for adjustment, in a change of character.
C/S might drop far below the top and stay there for decades, badly injuring RE in real terms
Webej
1 year ago
Pressing the emergency STOP switch on the economy is proving to be quite the ‘pig in the python’.
Just think how beneficial it is when you have unelected (public health) officials at the helm.
Cocoa
1 year ago
After trashing rental owners and allowing for free rent during the miracle virus pandemic, adding these regulations is the next step in the illegalization of private property except by government, corporate entities and the super rich. Restrictions like this will take the buildings off the market, maybe sold and then Blackstone and Black rock can come in with their free money and snap it up. This takes more rentals off market and the new owners like Black rock will gouge the hell out of people. They already want vacancy laws and soon it’s going to be your empty room in your own home.
It’s all illegal including rent control.
Taking the profit out of rentals mean-less rentals!
Bam_Man
1 year ago
How many rental units do Larry Fink (Blackstone) and Uncle Warren (Berkshire Hathaway) own?
I’m sure they would never gouge tenants.
They will “do the right thing”, always.
LOL……
Salmo Trutta
1 year ago
Economists don’t know a debit from a credit, a bank from a nonbank. The DIDMCA of March 31st, 1980, was supposed to prevent disintermediation, an outflow of funds or negative cash flow. Instead, it created the S&L crisis (a bust in residential real-estate). And the banks were unaffected. In the GFC, the nonbanks suffered the biggest outflow of funds ever (a bust in residential real-estate). And again, the banks were unaffected. But these busts created a housing shortage (the bankruptcy of half the home builders).
See:
Disintermediation: An Old Disorder With A New Remedy by R. ALTON GILBERT and JEAN
M. LOVAT
“In the past,
when market interest rates have risen above legal ceiling rates on time and
savings deposits by similar margins (for banks and nonbanks), the growth of
these deposits has slowed sharply. This is called disintermediation.”
Disintermediation for the DFIs can only exist in
a situation in which there is both a massive loss of faith in the credit of the
banks and an inability on the part of the Federal Reserve to prevent bank
credit contraction, as a consequence of its depositor’s withdrawals.
“Disintermediation is Made in Washington”.
In contrast to the thrifts, Reserve bank credit, commercial bank credit
and thus total bank deposits never contracted. I.e., the economy is being run in reverse.
TexasTim65
1 year ago
Two things the government should not do.
1) Attempt to set rent control on a national level
2) Give handouts to pay rent (the 46 billion nonsense)
The reason for #1 should be obvious. Controlling things at a national level should almost never be done (state and local level only please if we must have something regulated) because the 1 size fits all approach never works.
The reason for #2 is that as long as you hand money to landlords, rents will rise (see Student loans) since rents are being paid at the asking level. If people can’t pay, let them be evicted and someone else move in and they can move somewhere cheaper they can afford. Eventually if the ask is too high there will be no takers and the rent will have to be lowered if the landlord wants to fill the place.
Section 8 housing is not for the benefit of the poor, but for the benefit of landlords as it maintains an artificial floor on how low rent can go. Most rental markets cannot maintain their rent price levels without section 8 housing. Section 8 housing makes rents higher for the rung of renters just above what “Section Eighters” occupy. This price increase trickles up to every rung.
But meanwhile the streets of many cities are getting overrun with homeless people. Dirty, rundown RV’s take up multiple parking spaces everywhere, even in rich cities like Palo Alto, CA. SF is one big RV & homeless tent camp.
Attempting to deal with homelessness costs governments hundreds of millions to billions of $$ annually and the problem still can’t be solved. This is why government wants to do everything it can to mitigate homelessness.
And even if many of these people work or could work, they still don’t make enough to cover the rent.
Obviously the Government needs to establish specified levels of required RV washing.
dbannist
1 year ago
Mish, here’s a question you may be able to answer:
During the pandemic rents fell dramatically, especially in places like NYC. Now they are rising quickly. How much of this new rate increase is just undoing the fall in rents?
For example, if rents were 1200 pre-pandemic fell to 1000 during the pandemic and then rose to 1300 now, it looks like a 30% rate increase, but smoothed out for the pandemic, it’s only an 8% increase, which is actually less than that per year, since it’s been 3 years now, so just 3% a year.
This isn’t true, of course, for places that never saw rental prices fall, but it IS true for many places. I don’t have a way to find out.
Some of it definitely is that since it’s doing year over year comparisons. On the other hand rent must be falling in many smaller cities as people move back into the big metros so in theory it should be a net zero (rents rising due to pandemic in one place while falling in another).
Wolf Richter posts once a month about rent prices in the top 20 metros on his blog. It’s a good source to see year over year comparisons since his charts normally show the last 10-20 years worth on the chart. It’s always interesting to look at the NYC and Newark NJ chart since Newark takes off just as NYC falls, a clear case of pandemic influence and now NYC rising as Newark falling.
Maintenance and insurance costs plus tax bills likely driving up rents since those costs are rapidly rising and landlords are passing them on in the rent.
Here in NC property taxes are reassessed every 8 years, which is a long time. The last time they were assessed was in 2015, meaning that in 2023 they will reassess.
There’s going to be a lot of angry homeowners who will see property tax bills double.
And….this will also affect rents. Any properties that are barely making money will now be underwater and the landlord will increase rent to compensate. My property is fine, since I’m clearing more than 2x what the property costs are, but it might increase the market rates which would be a good thing for me.
Of course, if there’s a complete economic implosion like Daniel DiMartino Booth and nearly every article on zerohedge thinks there will be, then all bets are off.
One way or another you wont anything. Or at least a lot of people. I see stories of people in average homes paying 1000 a month in taxes and barely holding on. Id burn it to the ground. Tax that.
The median rent prices are what Europeans are going to be seeing in their winter gas bills. The monthly fee will have a comma in it.
People stopped paying rent for over a year. Landlords have no choice but to charge more. And the current administration doesn’t give a crap. Democrats favor more housing over there, but never where they live.
conservatives are always afraid of something
Disintermediation: An Old Disorder With A New Remedy by R. ALTON GILBERT and JEAN
M. LOVAT
link to files.stlouisfed.org
when market interest rates have risen above legal ceiling rates on time and
savings deposits by similar margins (for banks and nonbanks), the growth of
these deposits has slowed sharply. This is called disintermediation.”
a situation in which there is both a massive loss of faith in the credit of the
banks and an inability on the part of the Federal Reserve to prevent bank
credit contraction, as a consequence of its depositor’s withdrawals.
“Disintermediation is Made in Washington”.
and thus total bank deposits never contracted. I.e., the economy is being run in reverse.
During the pandemic rents fell dramatically, especially in places like NYC. Now they are rising quickly. How much of this new rate increase is just undoing the fall in rents?
For example, if rents were 1200 pre-pandemic fell to 1000 during the pandemic and then rose to 1300 now, it looks like a 30% rate increase, but smoothed out for the pandemic, it’s only an 8% increase, which is actually less than that per year, since it’s been 3 years now, so just 3% a year.
This isn’t true, of course, for places that never saw rental prices fall, but it IS true for many places. I don’t have a way to find out.
There’s going to be a lot of angry homeowners who will see property tax bills double.
And….this will also affect rents. Any properties that are barely making money will now be underwater and the landlord will increase rent to compensate. My property is fine, since I’m clearing more than 2x what the property costs are, but it might increase the market rates which would be a good thing for me.
Of course, if there’s a complete economic implosion like Daniel DiMartino Booth and nearly every article on zerohedge thinks there will be, then all bets are off.
Wonder if all these big rental corporations formed in 08 are passing their losses from dead beats onto all the units owned.