- Wait, wait wait. I thought we were headed for a terrible shortage? http://t.co/ctM3D2fL "Apartment vacancies rising again" via @realestatepi #
- RT @PSBJ: 29% of Wash. banks under "severe" enforcement action http://t.co/0kODNMNi #
- J. Lennox Scott: "Housing is the way out of a recession." Um, no. That & more misguided claims in his latest screed: http://t.co/C1WH8Igk #
- KILL IT, KILL IT, KILL IT! @BloombergNews takes on the Mortgage Interest Deduction http://t.co/15xLRDrB #
- Downtown Seattle apartment building "Aspira" up for sale: http://t.co/r7U2PABn via @realestatepi #
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JLS- the very definition of “one trick pony.”
“•End the conversation of eliminating the Mortgage Interest Deduction (MID). It’s only giving prospective home buyers a reason not to invest, specifically in the high-end and 2nd home markets.
•Find a way to settlement with the state Attorney General’s regarding their foreclosure law suits with the banks. Individually there are just too many potential suits which could go on for years to come. We should consolidate the suits in the interest of quickly stabilizing the housing market and the economy.
•Get rid of credit score overlays. Banks should be willing to accept FHA requirements for FHA loan programs and not impose their own set of requirements on these types of loans. Doing so only makes it harder for borrowers to get loans.”
Right on! We don’t need no laws, we don’t need no balanced budgets, we don’t need no standards. We just need to sell more houses!! We just need more liar’s loans and realtors driving leased luxury SUVs!
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“Average rent stayed relatively flat [2009-2011], hovering a little over $1,000. But the share of units coming with incentives fell from 62 percent in the spring of 2010 to 28 percent this spring, and the average value of those incentives fell from $826 in the fall of 2009 to $664 this spring.”
Let’s remember this one, when the next industry cheer leader says rents are sky rocketing… buy before the latest phony scare.
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“29% of Wash. banks under “severe” enforcement action”
The top 10 nationals control 80% of the market, and the regulators are pretending they’re not in worse shape… at the same time bailing them out — from what they’re great!
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We have for sure seen a lot of rentals. I don’t understand this thing about raising rents. You would think people would wise up that we are in an era of deleveraging and that people will pay less to save more. Even if you wanted to buy you have to save more.
I thought two years ago that some developer would wise up, and build cheap, small, housing units for rent. Better yet I would think converting some of the over abundance of commercial space to work, or live spaces might be good projects for some land lords.
It just seems to me that people would rather hold out for things to change back to 2004 rather than see the realities.
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RE: David Losh @ 4 –
“I thought two years ago that some developer would wise up, and build cheap, small, housing units for rent.”
Cheaper than the crap they’ve already built? Hardly. The land is expensive. The labor and materials are expensive. Taxes and permitting are expensive. Builders build for the high end because that’s the only way to make money in pink pony land.
In 30 years your idea might work. After the same slow decline in wealth the middle class had the last 30.
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RE: David Losh @ 4 –
We see nothing of the sort in Pierce County. One add on CraigsList with a reasonable rent of 1000 is met with at least 25 calls in a week. The demand is definitely HIGH for SFH’s priced affordably.
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Just read the full article about rent demand: The headline is very misleading. Although there has been a tiny rise in the vacancy rate, it is attributed (by Dupre and Scott) to increased home buying. Basically, rents will continue to rise and vacancy will drop a bit before providing relief to renters in years to come.
“But the vacancy rate is up a touch, to 4.6 percent, Dupre + Scott report.
“(O)ur region didn’t add any new rental demand at all in the past six months,” they wrote in their latest report. “We’ve added about 15,000 new jobs since March. Based on the historical relationship between jobs and rental demand, that should have created demand for an extra 1,800 units. But it didn’t.”
What happened? Some people are buying homes again, Dupre + Scott said.”
…
“Dupre + Scott expect the region’s vacancy rate to fall from 5.3 percent now to a low of 4 percent in March 2013 and then start to rise. They predict rents will rose (sic) by 4.9 percent in the next 12 months and just over 15 percent through 2015.
Incomes can support this increase, and more, “especially since rents have fallen behind in the past couple of years,” they said.”
I find myself agreeing with Ray Pepper on this one (a rare thing indeed). Tenants in North Seattle are bidding up rents when a nicer place in the $1,000 to $1,500 range comes on the market.
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RE: Ray Pepper @ 6 – RE: Macro Investor @ 5 –
I have seen the 25 calls from Craigslist, and the renters who come out of the wood work. I agree people are stupid. People are paying very high prices for housing. I also agree that builders count on that stupidity as they create more of these over priced pieces of carp. That’s exactly my point.
We over built residential housing units. Only about 5% of building permits from 2005 to 2008 were for multifamily. Many multi family buildings converted to condos. All of those units are renting for a premium as compared to what mortgage payments are. The price of housing hasn’t yet begun to go down.
You are right, the price of land is still very extremely high because no one has run the numbers on that. There is no one who wants to admit that what they own is worth less now than it was, so we have this pause in the market place.
People really want to believe we just had a bad spell. People want to believe that property will have higher values, but they won’t. We over built, we way over built residential housing units while we ignored the construction of Multi Family.
In the next few years, probably five, builders will wake up, and begin building for rental income.
I’m amazed that every one forgets that people doubled up ten years ago. People lived more conservatively rather than spend thousands on rent.
You can fit three to four families in a McMansion. Those people can collectively save to pay cash for a property. Those people can build wealth, which is what the purpose is of owning, rather than giving a land lord a gift of rent.
And as prices continue to drop, more people will get the idea. We are simply in a lull. We’re in a time of disbelief that the price of dirt will continue to drop like a rock.
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RE: NESeattleSeller @ 7 – What specifically do u disagree with me about? I’d like to know…
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On the rental article. I am just amazed how these people try to predict job creation, housing to be built, people moving to the area, percentage of vacancy for the next 3 years, etc.
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By Ray pepper @ 9:
I’m not sure of the answer to your question, but many disagree with you that “they’re all coming back.” They are of the mindset that, as rents are bid up, house prices will follow.
I read a really good article written in 2005 that predicted the looming housing bubble collapse and provided a guide of what would occur at specific points along the way. So far, it’s turned out to be a spot on guide of what would occur. One point was supply would be restricted as owners held out for higher prices even as prices continued to fall. As prices fell, many owners couldn’t list because they would be underwater on their mortgages. Meanwhile foreclosures would increase but banks would withhold inventory, which would lengthen the correction period. Another point was, there would be upward pressure on rents in many areas as those who lost their homes competed for rentals to house their families. Meanwhile, new construction would slow.
It took me a while to wrap my head around what the author had said, as at first it seemed counter-intuitive. It seemed reasonable to me that, if the housing bubble collapsed, we would see massive inventory which would drive down rent prices.
Despite being foreseeable symptoms of a market correcting downward, many take the symptoms mentioned by the author as signs of a stabilizing market on the verge of a serious upward correction. However, after much contemplation, I tend to agree with the author.
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RE: Cheap South @ 10 –
Dupre Scott is all about rental income projections. Rental income is the basis for value of rental property. Blah, Blah, Blah, it’s CAP rates, and calculations, Blah, Blah, Blah.
Dupre Scott is a bunch of stooges catering to people who will pay them to prop up prices of dirt that is dropping like a rock.
Let’s take that price of dirt. 2001 you bought a four plex for, let’s be generous and say $75K per unit. That’s $300K. You tear that down and build 6 town houses and sell them, and let’s be kind and say $300K a piece, because some sold for as much as $400K, God help us. In the span of less than a year that dirt doubled in value?
When we arbitrarily changed land use to residential, well I mean by profit, everyone forgot about building apartments.
Second, here in Seattle we had the CAP Initiative that effectively shut down down town development for ten years. A lot of the dirt was kept lower in price during the big boom. Now that the Initiative is lifted developers can bull doze Broadway and generate rental income. They won’t right now because a lot of people want to believe Real Estate will be coming back. It won’t.
Real Estate is an asset. You buy it, use, generate income, raise a family, and sell it. Every dime you pay to a mortgage is a loss. You have to weigh that loss against your return. It’s just money you flush down the toilet. In the past you could make some case that your property was appreciating enough to cover the mortgage payment. Once that stopped it was all loss.
Then there are some people who want to get rid of the tax deduction? Stick a fork in it.
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RE: Jonness @ 11 –
Personal income, employment rates, interest rates- that’s all I watch now. As you suggest all these little bumps up and down are just part of the adjustment process, the equivilent of spring ice flows grinding and bumping against themselves, sometimes locking up, but eventually clearing then washing out to sea.
The supply is there- all 18 million plus empty housing units. The income is not- as posted before, it’s back to 1999 levels. What I have consistently missed is the time line. This contraction or deleveraging is going to take a long time, perhaps decades, especially if those in power are able to prevent various collapses along the way. A good shock to the system will still have us looking at 3-5 years to rebalance.
There will be inflation in some goods and services, but probably not wages. If you buy today basing your cap rate on current wages/rents I think a rude surprise awaits.
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RE: Jonness @ 11 –
I’m not sure of the answer to your question, but many disagree with you that “they’re all coming back.” They are of the mindset that, as rents are bid up, house prices will follow..
Oh in that case maybe I should rephrase it (” in plain English so a child or dog could understand” ) like the Loss Prevention analyst attempted to tell Jeremy Irons in Margin Call:
Over the next decade people will continue to short sale, deed in lieu, and let/fight/litigate foreclosures to their properties to shed their upside down debt. Loan modifications that receive no principle write downs over the next 5 years or so will also join this group.
In the end ALL the upside down properties valuations will return to their current value one way or another. Massive Fed influence on BAC, WFC, and JPM should not be discounted or ignored but irregardless THEY WILL ALL COME BACK!
The only questions people must ask themselves is how are they preparing for it and what are they doing NOW when faced with this situation. We have all been dealt a hand in life and how we choose to play it is all that really matters!
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By David Losh @ 8:
What else are we supposed to do? A decent 2-bdrm apartment in North Seattle does not go for less than 1600$, unless you are willing to live on a busy street or in a really run-down multiplex building. Rental prices in Seattle (at least North Seattle) are too expensive. On the other hand, you don’t want to jump in and buy if you are not sure whether you will be living in Seattle for longer than another 12-24 months. So, you are stuck renting an overpriced apartment/house/townhome.
Look for example at Radfordcourt apartments which are meant for UW students and staff:
http://seattle.craigslist.org/see/apa/2651268373.html
1600$ for a hole in a high-density packed place???
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RE: HappyRenter @ 15 –
Happy maybe you can move in with David and not be “stupid.” Or possibly “tent it” with the Occupy Seattle movement. Its getting a bit nipply out there though..
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RE: HappyRenter @ 15 –
You are absolutely right, and it is exactly what I’m saying. Rents have gone through the roof. Radfordcourt should be $800 or below. The same for any 2 bedrooms in good areas, some might be $1200 if they are really nice.
Land lords are scamming the heck out of the public based on hype. It’s also because builders stopped building apartments in 2003, and a little before. Builders could slap in some granite, and stainless steel, and call them condos that would sell for, and still do, for $300K per unit.
Now if you had to, you could buy one of those with the idea to pay it off within seven to ten years. The value will drop, but the less you spend on interest you may come out, depending on the deal.
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RE: Ray Pepper @ 16 –
I already have a full house, but yes, I would rent, or buy the biggest place I could and cram people into it. I know land lords have all kinds of tricky language, but there are plenty of rentals out there.
In addition, as an added bonus, there is a whole crop of idiot Real Estate agents who are now property managers. They break the law ten times a day, and the owners are really desperate for rents. A sharp renter can make a good deal, and save up some more cash.
Or, as I hear from another Real Estate broker, a sharp renter could move into a place where the owner is behind on the mortgage, and just not pay rent.
Wait there is more. Many of these new reluctant land lords who are renting places out for the mortgage payment are just on the edge. One threat of squating, or moving out, and they cave in with a rent reduction. I’m seeing a lot of that, where the reluctant land lord starts with a $500 positive, and end up $200 negative within two years. Another two years that negative will be $600, and a little more desperate.
If you are a renter you need to be prepared to move. People at the University can’t move, but this year landlords were having a harder time filling up than in the past five years. Some of the renters are a little sub par.
However, if you are prepared, you can find a better situation than the one you have now.
No, apartments are definetly in short supply, but there are houses out there were the owner is in deep doo doo.
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RE: David Losh @ 18 –
David I feel drawn to your posts each time I see your icon. I cannot explain it.
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By David Losh @ 18:
Houses for rent is not a much happier market either. 1600$ for a 2-bdrm house in North Seattle. The owner expects you to mow the loan and take care of the gardening. Most of them have really really old bathroom and kitchen appliances.
I’m wondering whether rental prices will drop throughout the winter when landlords realize that they need to lower the price or keep it empty.
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