Over-Capacity Fuels "Renters Bonanza"
It's a "Renters Bonanza" the TriCity Herald reports. "As occupancy rates drop in the Tri-Cities, renters are getting move-in incentives and a choice of amenities. Vacancy rates, which averaged about 3 percent in 2002, increased to 9 percent in Richland, 11 percent in Kennewick and 8 percent in Pasco."
"Pasco's vacancy rates will probably catch up soon. Permits have been issued for three new apartment buildings at Chapel Hill that will add 668 units, bringing the city's total number 1,959. 'There was a lack of complexes in Pasco, but now that's taken care of,' Sylvia Erickson said. The landlord profits are done for too!
"The average price for a two-bedroom in Richland is $667, compared with $708, the average price in spring 2003. The average rent for a one-bedroom Kennewick apartment is about $486. In Richland, it's $563, and in Pasco it's $524."
"Those selling include San Francisco-based developer Robert Young, who has placed his eight properties on the market. 'I'm bullish on the Tri-Cities. I've always been bullish on the Tri-Cities.' So why is he selling his eight apartment buildings? Young said he wants to devote his energy to a commercial development he is building."
"It could be one of the best times to sell an apartment building in the Tri-Cities, said David Eagle. (He) said many investors are turning away from primary markets like Seattle, Portland and Los Angeles, where real estate prices are extremely high and the opportunity for growth limited. He said they're looking more seriously at 'secondary' markets."
15 Comments:
Low rents are because of high home prices and Fed wants that so it fits in CPI numbers posting "low" inflation and therefore only modest increase in social security checks that same Fed has to issue.
Alan has a plan, next Fed chief will have the same plan. Artificially boost the economy with housing boom. Eh maybe 2010.
This was kind of amusing. Apparently anyone mentioning a bubble is just envious of homeow[n]ers.
http://www.inman.com/inmannews.aspx?ID=46298
Well, I'm a homeowner and I think we are in the midst of bubble. There's a lot of "investors" who are going to get caught holding the bad when this thing busts. You guys should see the latest issue of Fortune and Money magazines - there's a sign if I ever did see one.
JLP
AllThingsFinancial
6L31 -- the article was written by a mortgage broker, of course.
From the Economist 3/3/05:
"America's ratio of prices to rents is 32% above its average level during 1975-2000. By the same gauge, property is "overvalued" by 60% or more in Britain, Australia and Spain, and by 46% in France.
"The ratio of prices to rents is a sort of price/earnings ratio for the housing market. Just as the price of a share should equal the discounted present value of future dividends, so the price of a house should reflect the future benefits of ownership, either as rental income for an investor or the rent saved by an owner-occupier. To bring the ratio of prices to rents back to equilibrium, either rents must rise sharply or prices must fall. Yet central banks cannot allow rents to surge as this would feed into inflation. Rents directly or indirectly account for 29% of America's consumer-price index, so rising inflation would force the Fed to raise interest rates more swiftly, which could trigger a fall in house prices. Alternatively, if rents continue to rise at their current annual pace of 2.5%, house prices would need to remain flat for over ten years to bring America's ratio of house prices to rents back to its long-term norm. There is a clear risk prices might fall.
"Today in many countries it is much cheaper to rent than to buy.
"...a new study by the National Association of Realtors shows that one-quarter of all houses bought in 2004 were for investment, not owner-occupation.
"Since 1950 American house prices in real terms have risen by an annual average of just over 1%. To expect them to rise faster from their current dizzy heights smacks of irrational exuberance, to say the least."
As the lyrics go in a country music song that I like, relative to low rent prices:
"I like it, I love it, I want some more of it."
As Prices Rise, Homeowners Go Deep in Debt to Buy Real Estate
I don't have access to the WSJ but I saw this artice referenced here:
http://bigpicture.typepad.com/comments/real_estate_/index.html
anyone read the whole thing ?
Closehaul said...
I read that WSJ article.
One comment that some interviewed in the article made stuck with me (I'm paraphrasing here):
That people using their home equity to buy investment properties is akin to the use of margin during the 2000 stock bubble.
I had several friends lose it all to margin calls in 2000. I'll have even more friends lose it all to foreclosure this time around.
"I'm bullish on the Tri-Cities. I've always been bullish on the Tri-Cities.' So why is he selling his eight apartment buildings? Young said he wants to devote his energy to a commercial development he is building."
Boy is this some bullshit! This person is heading for the hills! He knows to jump of the train wreck.
"Boy is this some bullshit! This person is heading for the hills! He knows to jump of the train wreck."
Yep, that's exactly right! He won't say his true feelings until he has sold all his apartments.
JLP
AllThingsFinancial
"America's ratio of prices to rents is 32% above its average level during 1975-2000. By the same gauge, property is "overvalued" by 60% or more in Britain, Australia and Spain, and by 46% in France."
Sometimes I get irritated when I hear pundits mention these figures as if to say that "our bubble isn't so bad, just look at the UK"! First of all, I don't believe that the US will overheat as much as those other countries before experiencing a correction. The US is a much larger economy than all of those countries (combined?) and therefore it takes a lot more hot air to inflate bubbles here. An 80% to 200% overvaluation in the coastal markets still only translates to 32% nationwide when you factor in a lot of the red states. Once again, who cares if there is a national bubble when CA, NY, FL, and many of the other biggies are in a horrific bubble?!?
CA is definitely slowing in terms of sales volume. This is a matter of fact and is not conjecture or wishful thinking in any way. Also a matter of fact is that lower median prices always follow lower sales volume, although there tends to be a several month lag. Thanks to all of the spec/refi/arm/io activity, there is virtually NO CHANCE of a soft-landing. I personally know several people who have had to reduce their homes several times here in Sacramento because they're not selling (mostly higher-end stuff 700K+. Low end still selling well.)
These are all of the signs of an RE bubble and now the slowly-changing psychology element is turning in favor of the bears. GET OUT NOW WHILE YOU STILL CAN!!!
-end of rant-
I wish these low rents would occur here in las Vegas. I pay $900 w/o utilities for a small 2 bedroom? Is there light at the end of the tunnel?
"I wish these low rents would occur here in las Vegas. I pay $900 w/o utilities for a small 2 bedroom"
Come to LA and see if you wouldn't kill for a 2 bedroom for under a thousand. You've got low rents.
Jim in Venice: I realize this isn't your end of LA, but here on the east end of town, near the east end of Pasadena in Monrovia, Arcadia, Alhambra and Sierra Madre, you can find two bedroom apartments for about $900/month. That's near the low end, but they do exist (I know, I have some friends who are teachers and they live together in one.) Go a little further east and they get bigger. BTW - the equivalent home on the same block is selling for $400K, which is way overpriced.
"here on the east end of town, near the east end of Pasadena in Monrovia, Arcadia, Alhambra and Sierra Madre, you can find two bedroom apartments for about $900/month."
We'll probably buy in that region once this thing cools off. I've always liked the foothills.
Until then, we'll keep our bargain rent here near the beach!
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