Why rent and home prices are so high

[Jon Donahue]

As for rent, landlords are making up for losses due to Covid.
For both rent and home prices — in 2008, the Federal Reserve started an emergency lending program... PDCF, the Primary Dealer Credit Facility... that let large lenders borrow more govt money to stimulate housing after the Crash. The program ended in 2010.
But then came Covid. In March 2020, the PCDF program started up again. And this time every large bank and hedge fund group jumped on it. Huge companies like Blackstone, using $6 Billion of the Fed money to buy up literally hundreds of thousands of homes. Want to sell your house? If their computers say you are in an area that will go up, they offer cash on the barrelhead.
Problem is, homes have expenses. So all over the country, these jerks are raising rents, over and over. Can't pay? Get out. Here in Tombstone, this just happened to a friend, who had managed an 11-unit apartment complex for 18 years. Free rent in exchange for taking care of the place. New owners a month ago, an investment company, and she has to be out by Jan 1st. SS $700/month is all she has. Luckily, she will go live with a daughter in California? But what if she didn’t have a daughter? Rents here have doubled in the two years. And if you are working, your tax money is funding the Fed's PCDF. Politics? Both parties support the Fed, and to be honest, I don't believe Trump and now Biden had/have any idea of what's going on!
https://www.federalreserve.gov/monetarypolicy/pdcf.htm

 

[gizmotron]

Plan B, become a self sufficient Nomad.

 

[user 423]

.....these jerks are raising rents, over and over. Can't pay? Get out. Here in Tombstone, this just happened to a friend, who had managed an 11-unit apartment complex for 18 years. Free rent in exchange for taking care of the place. New owners a month ago, an investment company, and she has to be out by Jan 1st. SS $700/month is all she has.

Was she able to save a nice sized nest egg over those 18 years of zero rent?

That should have been possible even with a limited income.

 

[PeterPiper]

Looking at my magical crystal ball.......

Oh gosh....it says hang on cause you aint seen nothing yet.

 

[Jon Donahue]

Slow — she hasn't saved much. Car payment, food for dog, gas, etc, etc. We've all been there, one time or another. The goddess Fortuna spins her wheel, and sometimes we are up, other times down. Life!

 

[crofter]

Paying high rent is a recipefor disaster. Make a budget and stick to it. If you are paying more that 30% of income out for housing related expenses then you will not have savings, healthy food, insurance, and dare I suggest recreation money.

Never fall in love with a house, it must remain a thing. It must remain an economic vehicle, otherwise your love for it will turn it into a money pit. And do not fill the house with stuff. A little used furniture is all you need. Or better yet lawn chairs that youcan later use in your van when you sell that money pit.
-crofter

 

[Calaverasgrande]

There was an article I read a few years back when I lived in California. It explained that a large driver of housing costs in the Bay Area was that foreign investors are looking for a place to park money outside of their own volatile economies. Investing in property is of course safer than investing in stocks or securities. The other shoe dropped later on in the piece.
A lot of these foreign investors were not willing to lease the properties after buying them. They would rather hold them off the market than deal with tenants, or a middle man who would deal with the tenants for them. They just want the money parked in the property and will get that back plus appreciation when they sell at some point in the future.
So a double whammy.
I'm also certain that AirBNB is having a terrible affect.
I know a few people who are just AirBnB-ing properties they own year round.
There really should be a law that you cannot AirBnB a place you don't live in.

 

[Malamute]

Another aspect, when the covid plague hit, there was a ripple effect in materials supply, then cost, then labor availability, and new home building dropped significantly. Some builders simply stopped taking new jobs on since their costs were increasing constantly and few customers wanted to have an open ended budget with no end in sight. Few contractors could afford to stick with a price and end up losing large amounts of money in the process due to the insane increases in materials prices and unknown delivery dates on much of it, so, existing homes were suddenly in high demand. Not all were bought up by Evil Empire builders, everyday people suddenly found bidding on their houses above asking price in many cases, and asking prices started jumping up radically. One place I looked at online in Az was around $125K 3 years ago (itself a significant increase from 5 years before that, but still within reach for many), today its double that, for a 1970s single wide mobile on a lot.

Hopefully the bubble will burst and get back closer to sanity, as i want to retire-ish to Az in the next couple few years.

 

[Casemods]

I work full time at decent pay and even a cheap apartment that I can afford is not possible since they all want me to make 3x the rent on my paycheck. Also they want 2 months rent up front and a security deposit. I could buy a used van, suv or wagon flat out with the money they want to move in to an apartment.

Luckily I live at home at $400/month.

 

[bpdchief]

We lived in Fort Walton Beach Florida. Rent for a 2 bdrm 2 bath went from $595 to $1250 because the 4-5 military bases in the area were paying $1100 housing allowance. Average Joe at McDonalds couldn't afford a slum unless he had a couple of roommates. As it is, with both of us now on Social Security, we are paying 48% of our income in rent plus utilities. But only until the "new to us" conversion van is ready for us to move into. This will be our third van... it's a great, freeing life going the minimalist route.

 

[RonDean]

I think housing cost, just like any other cost, is a balance between buying power and income. It is no secret that income disparity is getting worse every day and tax policy favors the landowners (foreign and domestic). The political power of the rich and corporate/industry pressing for more beneficial (to them) policies make for a perfect poverty storm for the vast majority of us.

I believe in capitalism as much as anyone, but I have also studied enough history to know there must be enough controls on it to protect us from the human greed of the few that actually WANT a large class of people forced to do any job just to get by.

 

[WILD@HEART]

Not a new concept,
never ending
GREED by the EGO

Me, Mine, More, I don't only want what I have and deserve, but I'm also entitled to what others have too, and don't ever ask or expect me to share with others, I'm special and separate from others, and I will do anything I think I can get away with, to get it for myself.
Since the dawn of mankind and womankind.
It goes way beyond modern materialism and money, although it definitely is complicit.
Sure there's also our primal brain for competition and survival.
And then there's The Game Of Life, which is also a very old book on my reading list, that I may share a review on at a later date.

 

[Bliss149]

Looking at my magical crystal ball.......

Oh gosh....it says hang on cause you aint seen nothing yet.

Afraid you may be right. I live in an "affordable" housing part of the country but its not very affordable any more.

But what happens if millions or tens of millions can't afford rent?

 

[John in Montreal]

Capitalism is rule by bankers and far removed from a free market.

Housing is unaffordable for more and more people because the investor class has become wealthier and can buy more real estate.

 

[MortimerEbinesr]

Capitalism is rule by bankers and far removed from a free market.

Housing is unaffordable for more and more people because the investor class has become wealthier and can buy more real estate.

I'm lucky enough to only pay $200. for lot rent for 40 ft 5th wheel. Yesterday I got notice that rent was going up $25. Not bad considering average rent for 1 bedroom apt. is $800. Landlord says he's been offered a generous amount for property, but still holding out. 30 years ago in Seattle there were many trailer courts, but slowly they were bought out for large apartment buildings, I doubt there are any more left now.

 

[Malamute]

Im not in the rich conspiracy camp, but as the post above mentions, if a piece of property gains value in the local market, and the owner is still muddling along with low returns on the value of the piece, its eventually going to sink in that they are basically throwing money out the window to ignore the current value of a sale or rental. If they stick with it in a stubborn refusal to give in the the evil new market values, great, if they can afford to let money go so easily, but the reality for most of us is we dont have that luxury in any property ownership or investment, and its not just rich corporate evil empires that own property and investments.

 

[rruff]

I believe in capitalism as much as anyone, but I have also studied enough history to know there must be enough controls on it to protect us from the human greed of the few that actually WANT a large class of people forced to do any job just to get by.

Not a new idea... basically this was Marx's criticism of capitalism in mid 1800s... that it would tend to self destruct... and he was right!

It was controls and "wealth sharing" (unions, minimum wage, work hour laws, government benefits) that saved it. The smart capitalists wanted these things! Unless the wealth is shared with workers the "pie" can't grow... sales and production can't increase unless worker wages do as well.

We've been running a new paradigm since the late 70s though. By going global and manipulating currency and escalating debt, capitalists are no longer dependent on domestic worker income/wealth. The excess going into the pockets of the "investor class" is simply escalating asset prices rather than going to real investment (infrastructure, production, research, etc). That's why RE and stock prices have kept going up at higher rates... for 40 years.

The recent bubble is due to huge deficit spending in response to covid, far in excess of the "cost" for many, resulting in a windfall that they "invest" driving up the price of assets even more.

 

[RonDean]

I am more concerned with the facts "on the ground" than political/economic philosophies. US homelessness has increased 2.2 percent just since 2019. There is increasing housing insecurity and increased housing % of income, which is an entirely different metric. Nor are all landlords part of the evil 1%. None of this is a good picture.

Many in the RV community do what we do as a choice unrelated to this. If so, good on you/us. But, there are also many for which this is a necessity, and just feel lucky not to be living under a tarp somewhere. And the impact will eventually be felt by all of us.

 

[rruff]

I am more concerned with the facts "on the ground" than political/economic philosophies.

If you don't understand the "why", then any "solutions" are likely to make the matter worse.

 

[bigskybob]

I ordered a crystal ball off the internet.All it would predict was cold weather.Found out later they had sent me a damn snow globe.