View Full Version : who's really buying all the houses?
I have heard story after story of people trying to buy houses around here only to be beaten out by cash buyers. Many are sold before they are even listed. We have been looking at homes in a small town nearby and everytime I go to inquire, I am told it is pending or sold with multiple backups. The realtor tells me it is investors often from out of state. It does not strike me as very fair that investors and/or firms are snatching up single family homes either to rent or flip and sell for $1000s more when there are people who are just looking for a home to buy for themselves or their families. I am sad that houses are nothing but investments now and not homes. Makes me wonder too how this is all going to play out when the market goes down again.
try2bfrugal
6-4-13, 5:00pm
We went to an open house over the weekend for a home listed at $500K. The realtor said they would be looking at the "offers" on Thursday, and that most of the winning bids lately in that price range were all cash. It was just a normal middle class house - around 1500 sq ft. It was on a golf course but had a small yard and was other wise rather nondescript. Schools were okay but not great and it wasn't near mass transit.
You can look at average net worth and median income figures in the U.S. and know that even in California these aren't your average two earner families paying cash for so many of these overpriced middle class houses. Something unusual is going on. Hedge funds? Foreign investors? I dunno.
Yet there are still many homes in foreclosure but not on the market. I don't know what is going on with housing in "hot" markets but it isn't any kind of normal supply and demand.
We looked at other open houses and the one thing that struck me is they were all staged and being flipped. It wasn't like some family was selling because one of the parents got a job transfer. These were all being marketed by professional fiippers. One house even had a table with two financing people sitting at it.
My gut says this will all end very, very badly for the average home buyer as soon as interest rates rise, mortgages are harder to qualify for and investors and hedge funds move back in to the bond markets.
My next place will be a cash purchase. I briefly considered buying that condo I linked using a combination of savings and equity in my current house and then paying it off when Chez Albatross sold, but I really don't have the nerve for brinkmanship, so here I sit. It may be at least some of the churn can be due to people downsizing from more valuable properties.
According to news reports, the Seattle area is "hot," with bidding wars and everything. As I said in an earlier post, watching Zillow ratchet up my "zestimate" by a thousand a week or so is great fun, even if it's not a bit realistic.
I've been looking at real estate ads again, and I can only hope the good stuff isn't making it to market before it's snapped up--because what I've seen in the Portland area is pretty pathetic.
try2bfrugal
6-4-13, 6:15pm
I get the cash purchase by people who want rental income and families cashing out of existing homes in most markets, but not in markets where houses go for $500K to over $1M and more. That isn't usually your average family trading up, even in California.
That is more like the -
International Super Rich Target California
http://www.reuters.com/article/2012/06/14/us-property-investors-idUSBRE85D0M320120614
ApatheticNoMore
6-4-13, 6:56pm
I get the cash purchase by people who want rental income and families cashing out of existing homes in most markets, but not in markets where houses go for $500K to over $1M and more.
Yea to just have 500k *ALL* cash sitting around for an extra home to rent out .... However, the trading up thing: if one is a baby boomer and bought a house in California decades ago they can probably cash it out for 500k and buy another home for that if they are just moving (but this does not lead to a statewide increase in housing costs AND Prop 13 would tend to greatly discourage that behavior from a financial standpoint!). There is some silcon valley wealth that went into housing in certain areas, but that tends to be mostly concentrated in a few northern CA locations (palo alto - menlo park etc.). So for most of it there is definitely investor money involved. The thing is I'm not sure it's even worth railing against these investors taking all the housing, as it's not clear they even have sustainable long term business plans. The speculation might leave quite a mess to be cleaned up though and that's a problem.
rodeosweetheart
6-4-13, 7:40pm
We have been trying to buy a house with cash, out of state, for a year now, and have found the same situation with multiple offers, etc. We are probably being described as "investors with cash from out of state," and really, we are regular people wanting a home to live in for the duration--we want to move closer to family, brothers, sisters, new grandchild, back to where we used to live. But since we are currently out of state, we get looked at as rich or investors from out of state. We are looking at bank held foreclosures, Huds, Homepaths, around 60000, which will stretch us terribly and push us to a nervous level of lack of margin, but we can do it without selling here first. This last house was a bank foreclosure that we paid cash for, and we had to have something fast because we have 2 dogs and a cat. I think our dogs have been teh driving factor in the last 5 houses, sigh.
All markets are regional. Even the low end markets we look at seem to be in bidding wars. But I decided aI cannot do a mortgage again, it is just too stressful. This is stressful, but not nearly as stressful as having a mortgage again.
I would not be surprised if a lot of the "cash investors from out of state" are b aby boomers trying to set themselves up for a place to live in retirement.
iris lilies
6-4-13, 7:51pm
I have heard story after story of people trying to buy houses around here only to be beaten out by cash buyers. Many are sold before they are even listed. We have been looking at homes in a small town nearby and everytime I go to inquire, I am told it is pending or sold with multiple backups. The realtor tells me it is investors often from out of state. It does not strike me as very fair that investors and/or firms are snatching up single family homes either to rent or flip and sell for $1000s more when there are people who are just looking for a home to buy for themselves or their families. I am sad that houses are nothing but investments now and not homes. Makes me wonder too how this is all going to play out when the market goes down again.
Hunh? What do you mean about not being "very fair?" You have the same opportunity as any other buyer. What do you propose, have Nanny G mandate some sort of regulatory standard of "fairness" for you personally? or just for your group of non-developers? Or what, exactly would make the market "fair?"
But if you are looking at 'burbs of Austin, why would you think they wouldn't be hot as well? Austin is hot. You can complain about it, or you can cash out, take the change and buy a house in Las Cruces and bank some of that change. Opportunities and challenges, sometimes the same thing.
ApatheticNoMore
6-4-13, 7:56pm
I would not be surprised if a lot of the "cash investors from out of state" are baby boomers trying to set themselves up for a place to live in retirement.
There's some documented investment money in the housing market, there are funds buying single family houses. It's not just random rumors about: "psst investors!""
http://www.reuters.com/article/2013/05/06/us-vegas-housing-specialreport-idUSBRE9410IL20130506
The open question is whether the housing market "recovery" stands on it's own or could without this fund speculation.
What do you propose, have Nanny G mandate some sort of regulatory standard of "fairness" for you personally?
It seems to me the whole housing market at this point is as much Nanny G's creation as anything else.
I'm selling my horse property and buying a small patio home. I was outbid on several properties before my offer on the patio home was accepted. I had to bid nearly 10% over the asking price to be competitive, offer cash, and accept an as-is sale. There are 90% less homes on the MLS in my town, compared to just a year or so ago, so yes, properties are being snatched up and the prices are rising rapidly.
I believe this is because banks are only trickling inventory onto the market to keep prices up. Fair? The banks own these properties and they can do whatever they want, I guess.
For the sale of my horse property, my real estate agent thinks that it will sell very quickly and well over the asking price. So, while I bid high to buy my smaller home, I will sell high to sell my horse property, making this a wash.
It seems to me the whole housing market at this point is as much Nanny G's creation as anything else.
I get that sense too.
My gut says this will all end very, very badly for the average home buyer as soon as interest rates rise, mortgages are harder to qualify for and investors and hedge funds move back in to the bond markets.
Personally I don't see how it is logical for home prices to ever rise more than their long-term historical averages. Bottom line is that people can only spend x% of their take-home pay on housing. Low interest rates translate into a higher purchase price and vice versa since the monthly payment ends up the same, but regardless, unless average incomes increase (and they're actually falling from what I've read) then the average monthly house payment can't continue to rise. The only way that can happen is if significant money from investors is pouring into housing. Eventually that game will have to end, either when interest rates rise and investors can do better elsewhere, or when prices have risen so high that cash investors can't get a decent enough return from rent payments to make the investment worthwhile.
If this is indeed what's going on then whether the average home buyer benefits or gets burned will depend on whether they bought now in a bidding war or waited and bought after the crash happens.
Two more articles about this:
http://dealbook.nytimes.com/2013/06/03/behind-the-rise-in-house-prices-wall-street-buyers/?smid=fb-share
http://colorlines.com/archives/2013/05/the_dangerous_new_housing_boom.html
iris lilies
6-5-13, 12:14am
Two more articles about this:
http://dealbook.nytimes.com/2013/06/03/behind-the-rise-in-house-prices-wall-street-buyers/?smid=fb-share
http://colorlines.com/archives/2013/05/the_dangerous_new_housing_boom.html
Ok, what am I missing? The NYT article shows a graph that depicts a 5% raise in prices over 3 years. This is worth the handringing and alarmist news stories and this thread? 5%? Over 3 years?
Oh-Kaaaaaaaay.
I hope that increase stuff comes to my town, I want to unload one of our tiny houses.
Ok, what am I missing? The NYT article shows a graph that depicts a 5% raise in prices over 3 years. This is worth the handringing and alarmist news stories and this thread? 5%? Over 3 years?
Oh-Kaaaaaaaay.
I hope that increase stuff comes to my town, I want to unload one of our tiny houses.
The article had quite a bit more to say than a graph showing 5% over 3 years.
So that's what the banksters have planned for our bail-out money...:devil:
But seriously, prices seem to be climbing apace--at least around here. I've read over ten percent in the last 12 months, and that seems about right.
ToomuchStuff
6-5-13, 1:01am
I would HOPE it is people (investors, or families, I don't care), who can afford them. Do you really want people who may be local, to get them even if they can't afford them? Isn't that part of why the bubble burst?
I have two houses on my block, that are both vacant. The families upgraded when the market hit bottom and they are holding onto these ones, until the market recovers more. Out of the local foreclosures I know about, one was sold for around $50k less then was owed on it, while another was only owed, less then $20K when it was foreclosed on, and they seem intent to hold it until the market comes back to make up profit for others that might have sold, before.
The market is bouncing around here, it still comes down to buyers and sellers agreeing.
iris lilies
6-5-13, 1:06am
The article had quite a bit more to say than a graph showing 5% over 3 years.
To your point above, if there are still homeowners who are participating in a "bidding war" after the crash just 5 years ago and who might lose if this market crashes, I have a hard time feeling sorry for them. For heaven's sake.
That investors have bought up 68% of damaged houses--so? Before the last real estate boom where everyone and his brother thought they could buy an old house in my city, make some cosmetic changes, and flip it--my city was developed by commercial companies. The fly-by-night amateur flippers were in business for only about 5 years, here today and gone tomorrow. Our houses are too far gone and too problematic for the typical non-professional construction guy to make much money and even then the pros seldom make much money gut rehabs. That's why we have historic tax credits that go toward developing properties. I applaud the professional real estate developer.
However I do not think it is good for a neighborhood or a section of a city to be owned by one owner. Witness the governments here and their ownership of swaths of houses. ugh. It is bad news. A healthy neighborhood has a good mix of owner occupied places where some people have developed equity by sweat and others write a check plus some rentals.
ApatheticNoMore
6-5-13, 3:16am
I would HOPE it is people (investors, or families, I don't care), who can afford them.[
for the investment companies affording only means that their projected models end up being right - because it's all based on models of how much rent will increase, how much maintenance will be needed, etc.. So noone really knows yet whether they can afford them. Though there is lots of skepticism expressed about the models.
Do you really want people who may be local, to get them even if they can't afford them? Isn't that part of why the bubble burst?
I think people mostly don't want a situation where almost all the housing stock is owned by landlords rather than individuals, it's all rather feudal. Maybe that translates to housing not unobtainable by x% of the population or something - maybe 70% I don't know (but if it's out of some people's budgets - that's always been the case) But I'm not quite conspiritorial enough to think that's really some sort of plan as opposed to more ordinary bubble mania in a flood of easy money: with "pump and dump" and speculation and dubious IPOS going on. As the doomsters have said for ages: get the popcorn ...
Housing prices are rising because of 1) low interest rates, and 2) reduced inventory. Everyone knows what the Fed is up to. Regarding inventory there are several reasons. First, the big builders who produce thousands of units a month scaled back in 2008 and either have not or have only very recently returned to their pre-crash volumes. At the same time our population has increased meaning there are more buyers in the country now than there were five years ago. Prices dropped in most areas which, combined with the low interest rates, means a lot more people can afford to buy now than they could in the past. Additionally, there is a shortage of resale homes in many markets. Some because people are choosing to renovate and stay where they are (watch Home Depot stock price to follow that trend). Quite a few potential sellers are staying in place because their home's value dropped and is still lower than they think it should be so they are waiting for the market to catch back up to their perceived value. Overall it is a classic supply/demand curve, nothing more.
As for being fair, if you were a seller and someone (anyone) came to you with a full price, cash offer what would you do? Not sure about everyone, but the door wouldn't hit me in the butt. As for the house vs. home sentiment, a house is nothing more than sticks and bricks. If an investor buys it then it will most likely be well maintained simply as a matter of protecting the investment. Whoever lives in it, whether renter or owner, can make it a home.
While we're on the subject, if anyone out there wants to find a lovely home in a close knit community for literally pennies on the dollar I will be happy to direct you to any of a hundred small towns in Nebraska that would love to have you. If you're looking for that same situation in Austin, Seattle, San Diego, etc. well, best of luck. Let me know when you find it.
I was outbid on several properties before my offer on the patio home was accepted. I had to bid nearly 10% over the asking price to be competitive, offer cash, and accept an as-is sale. There are 90% less homes on the MLS in my town, compared to just a year or so ago, so yes, properties are being snatched up and the prices are rising rapidly.
I believe this is because banks are only trickling inventory onto the market to keep prices up. Fair? The banks own these properties and they can do whatever they want, I guess.
Based on my experience in buying two foreclosed houses through a morass of their administrivia and paperwork, I think a concerted effort by lenders to manage inventory seems very much beyond what they are capable of doing.
Besides, foreclosures are PITA properties to lenders. Some of the houses are in questionable condition, some so bad that it will not be possible to bring them to saleable condition and make any money on the deal. All of the properties require maintenance (securing, winterizing, lawn mowing, snow shoveling), and the lender has to deal with dozens of municipalities and agencies to pay taxes, secure permits, etc. I'm not saying all lenders do a sterling job of this. But they don't want to own these houses. That's not where the money is.
And I agree that any rise in prices caused by investor "speculation" will be largely self-limiting. You can't routinely overbid for properties, spend the money on even cosmetic flips (nevermind true rehabs), and manage tenants and make money. And, as soon as the money is out of there, so will be the "investors".
rodeosweetheart
6-5-13, 10:04am
The other reason investors are buying the foreclosed houses with cash is that they are the only ones with cash to buy them. The ones we have tried to get a mortgage on (3 now) have all fallen apart because they will not lend on houses with the kinds of problems these houses often have, such as structural issues, wet basements, can't pass the well and septic. So you have to pay cash, and accept them as is.
So they are too expensive for regular buyers who want to live in them, who need mortgages. There are many houses sitting out there or going to investors because they are too expensive for cash, but in too poor condition for a mortgage.
And mortgage lenders have become MUCH pickier than they used to be about the house conditions--seriously, we looked at one house for 125k that had sold with a mortgage 4 years ago for 250k, foreclosed on, would no longer qualify for regular financing because of the condition of the house. So there is a sea change in what the banks will lend on these days.
As for being fair, if you were a seller and someone (anyone) came to you with a full price, cash offer what would you do?
It would never be just about money for me unless I was in dire straits. The intangibles of place can't be bought. As I have put much love and time into my house, I would want someone who would treat it similarly. Someone who would be at home in our special neighborhood. I have seen online pleas from young couples locally looking for a house who don't even get a chance - I would like to have them in my hood where they can raise their kids and stay. I don't think very highly of investor groups buying houses, renovating and then doubling the price which in turn causes our RE taxes to go up, either. If they aren't buying to renovate, those same investors are buying older, small homes so they can use them as rentals in this high rent city - homes at a more affordable price that ought to be available to young or retired people.
I am in Michigan not the best place or the worst for real estate. Our small sub has about 24 homes. In the last two months 4 homes took accepted offers the first weekend, only one seemed low and those people want to be gone to their Florida home. It was as if the market was on fire. We have been here 3 1/2 years and are 11 th in seniority. This neighborhood only had one forclosed home and that was three years ago.
Now, our property up north in rural area that was hit badly, we just got the check from the sale. 1/3 of what we paid cash for the property. So that was bad. We bid on a couple homes last year, cash offers and we're out bid on all. These were strictly investment homes and the other bidders were investors also, since they were non mortgageable. Now do I think we could sell for what we paid for our home 3 1/2 years ago? Nope, but I feel today it would sell for what would be fair today, there are buyers now.
Article in New York Times today about investment firms spending billions over the last year buying homes in depressed markets. Wonder where this rise in housing prices will end up.
http://dealbook.nytimes.com/2013/06/03/behind-the-rise-in-house-prices-wall-street-buyers/
"Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing."
I must live in the wrong place. Houses in our neighborhood are turning into rentals (by owner or rental company) so our property values are falling. Houses that do sell are only selling for their original purchase price 20 years ago.
Sobering facts from the colorlines website article posted by redfox:
"But as investors make money hand over fist, many others are frozen out. First time homeownership in the U.S. has fallen by 25 percent.
Driven by the foreclosure crisis, homeownership for blacks and Latinos has cratered, leading to the lowest level of wealth on record for these two communities. Housing is the single largest asset for African Americans and Latinos. As The Christian Science Monitor notes, the homeownership gap between whites and blacks is the largest in over fifty years. And as a recent Alliance for a Just Society report detailed, there are now more than 13 million homes underwater and headed toward foreclosure; they are clumped disproportionately in zip codes with majority people of color.
The irony of this foreclosure crisis, which was caused by Wall Street’s irresponsible behavior, is that it created the massive supply in homes that those very same financial institutions are now profiting from at a record pace. Having profited first from millions of risky mortgages and eventually taken away the homes that underwrote them, institutional investors are now purchasing those same foreclosed houses at rock bottom prices."
I also blame the HGTV housing flip TV shows which whip people into a frenzy about the monies to be made from investing in and flipping real estate. How does the average new potential homebuyer have a chance?
The colorlines article is an interesting exercise in how to use statistics to tell a story regardless of the actual story.
First, the bit about the 1.6-million-dollar studio is spurious. Someone shopping for "affordable housing" -- even in New York City -- does not have a 1.6-million dollar home on their radar. So it exists. So do million-dollar cars. It doesn't have any bearing on the real market except for royally skewing averages (which is why medians are much better statistical measures).
Second, some of the numbers they bandy about seem to serve their cause -- until you look for what's missing. The Morgan Stanley guy who is "amassing a billion dollars to purchase up to 10,000 homes" does sound elitist -- until you do the math and come up with an average purchase price per home around $100,000. That, frankly, does not buy you much house in most of the U.S. And there's no word on what will be spent to fix up these places (they're not all move-in ready) and to resell them or rent them out. Similarly, the allegation that all of these sales are being closed at above-market prices and in cash is factually unsupported in the article and ... well, as I see it, it's good that these houses are being purchased because the alternative is letting them rot in place. That serves no one.
The article also ignores completely a tradeup market which, pre-Recession, was full of homeowners of all colors and economic classes selling their homes to buy new more-expensive homes. When even upper-middle-class white people are underwater on their mortgages, trading up just isn't going to happen. The loss of that market is quite significant in the scheme of overall real-estate sales. The article also fails to discuss that many people, seeing that owning a home is not a guaranteed investment as it was pre-Recession and given today's mobile workforce, have decided that renting makes more sense. In fact, the artlcle almost presents renting as a bad thing, as if only poor people do it.
I'm not saying that "Wall Street" (however the colorlines folks define that) didn't have a hand in the burst of the housing bubble. Lenders did get creative in how the debt was marketed and the risk "shared". I'm not saying lenders have done an exemplary job of handling the fallout of that crisis; clearly things could have been done both more humanely and more pragmatically.
But home buyers did their bit, too, with many people purchasing even a bit more home than they could afford with the hopes of growing into the mortgage as the market went up and up and the economy did well -- until it didn't. Individual homebuyers speculated, buying houses in the boondocks and hoping suburbia would reach them Real Soon Now; they got badly burned when the price of gasoline went to $4.00+/gallon and prospective homebuyers started adding the costs of their commutes to the mortgage. Lots of people treated their houses as piggy banks with second mortgages and LoCs financing fancy cars and expensive vacations and other luxuries, all the while remaining a couple of paychecks away from disaster.
There's more than enough blame to go around here. I think the colorlines article is an interesting read, but what it does not say is at least as important as what it does try to say.
It would never be just about money for me unless I was in dire straits. The intangibles of place can't be bought. As I have put much love and time into my house, I would want someone who would treat it similarly.
Its a lovely idea on the surface and I'm happy for you that you are in a position to feel that way, but I'm not sure it is a reflection of the larger reality. When people are moving it often has a lot to do with jobs. Most of them don't make enough at their job to be able to afford two houses so they need to sell one so they can buy another. Since they've usually identified the second home it is critical to sell the first asap. Holding out for the "right" buyer is also a form of forced gentrification. Not necessarily in any kind of evil way, but it is still limiting the market by creating conditions that exclude certain buyers. In most cases that isn't sustainable.
Its a lovely idea on the surface
Yes, I have a problem with having too many lovely ideas.
gimmethesimplelife
6-6-13, 11:30pm
Hunh? What do you mean about not being "very fair?" You have the same opportunity as any other buyer. What do you propose, have Nanny G mandate some sort of regulatory standard of "fairness" for you personally? or just for your group of non-developers? Or what, exactly would make the market "fair?"
But if you are looking at 'burbs of Austin, why would you think they wouldn't be hot as well? Austin is hot. You can complain about it, or you can cash out, take the change and buy a house in Las Cruces and bank some of that change. Opportunities and challenges, sometimes the same thing.I see both sides here, both pinkytoe's and Iris Lilly's.....OTOH, I do find it very depressing and dehumanizing that a house is considered an investment instead of a place to hang your hat and live your life. And I agree that eventually, housing will turn down again, nothing stays up forever. I am saddened too that this kind of thinking - housing as an investment before all else - has spread all over the world. Look at how this has brought Spain down to it's knees economically - their problems so I have read are not from insane spending but from overheated real estate being the chief driver of the economy. Which of course can not last over the long haul.
But I also see the flip of it, too. For some willing to be flexible, there is a chance to cash out and move somewhere less expensive, and I find it interesting that Iris Lilly has mentioned Las Cruces, NM - this place has been on and off my radar over the years. For those willing to do it, there is a chance to take the cash and run and pay cash for property somewhere else - only problem here is that this tends to jack up housing prices in the new place - I witnessed this during my years in Portland, when Portland was THE PLACE to be, kind of like Austin is now.
Thinking it over, for myself only, would I live in Austin faced with those prices....Nah. I love Austin and have been there twice in the past half year but pay those prices to live....nah. I would visit, spend some time there, and then go back to Las Cruces and be glad to own outright. So I see both side to this, and also I did not mention that I understand the stress of leaving somewhere you have spent years in and the turmoil moving can cause. Rob
I lived in the same house from birth to HS graduation. It was our family home and had been in the family long before me. You can't get a whole lot deeper roots than that. At the same time my Dad understood that it was an investment. It contributed to net worth. In the case of most homeowners in the US their house is their largest single investment. I'm a little baffled as to why acknowledging that is depressing to some folks. Had my family been forced to move to a different house, a double wide, an apartment or whatever, I'm certain my parents would have made that new dwelling into "home" in short order. Just my perspective.
I agree with Gregg. My family also lived in the same house from when I was about 1 year old until after I'd graduated from college. The difference between Gregg and me is that my parents rented that house the whole time. Nonetheless it felt entirely like 'home' to me. And we did the same things people who own their homes do. We decorated it. Mom grew flowers in the yard. We kept up the nicest lawn on the block, etc. I can't imagine our lives would've been lived at all differently if we had owned it.
iris lilies
6-7-13, 10:52am
I see both sides here, both pinkytoe's and Iris Lilly's.....OTOH, I do find it very depressing and dehumanizing that a house is considered an investment instead of a place to hang your hat and live your life. ... Rob
For heaven's sake it can be both, but if one doesn't look at (what is likely to be) the biggest financial sink of your adult life as an "investment" then you (the collective you) are just silly.
So buy a property using sound analysis of it as a safe place to put your money, and then and make it homey and embracing and wonderful and all of that touchy-feely stuff.
And I will watch for pinkytoe to sell her hot Austin property $30,000 below market value to that special young couple without much money but with lots of love to give to her house. She has the power to keep those evil developers out, will she exercise it?
ToomuchStuff
6-7-13, 11:21am
I've understood investment, to mean peace of mind, for a long time. Others I have known, think it always means financial, and try to pull money back out, via refinancing, etc, and were hit with the drop.
As a kid, one class I remember them saying the baby boomer generation (my parents hit here, some of my peers hit the hippie generation), was larger then the amount of kids they produced. I brought up how real estate would drop then, as there would be too many houses and was pretty much told that wasn't possible, with no explanation.
A house is just a box (or whatever shape), a home is what you make of it.
I will watch for pinkytoe to sell her hot Austin property $30,000 below market value
Not likely...that would be dumb:) The reality is I fear change in my hood. It has been a simple Leave it To Beaver kind of place and now mega-houses with Range Rovers are creeping in to change it all. Similar scenarios are playing out all over central Austin where families and seniors who have been in their unppretentious homes for years will now be forced out.
ApatheticNoMore
6-7-13, 1:33pm
Much "investment" is really just speculation I think. Time will tell I guess.
gimmethesimplelife
6-7-13, 3:22pm
I lived in the same house from birth to HS graduation. It was our family home and had been in the family long before me. You can't get a whole lot deeper roots than that. At the same time my Dad understood that it was an investment. It contributed to net worth. In the case of most homeowners in the US their house is their largest single investment. I'm a little baffled as to why acknowledging that is depressing to some folks. Had my family been forced to move to a different house, a double wide, an apartment or whatever, I'm certain my parents would have made that new dwelling into "home" in short order. Just my perspective.In my way of thinking, a house being viewed as an "investment" carries the implication that at some point the "investment" - in this case shelter - may rise to the point where it becomes exclusionary and unavailable to some segment of the population. It also implies to me that there will be some who will loose money in the viewing of housing as an investment - very sad and sorry as housing is a basic human need. In this case I think capitalism works against people and not for people, and I don't just blame the US for this - this kind of thinking about housing is pretty much all around the globe. Not much I can do about it but try to minimize the cost of housing in my life I guess. Rob
In my way of thinking, a house being viewed as an "investment" carries the implication that at some point the "investment" - in this case shelter - may rise to the point where it becomes exclusionary and unavailable to some segment of the population.
That doesn't make any sense. I view bonds as an "investment", that doesn't carry the implication that at some point I expect bonds to become exclusionary and unavailable to other investors. I do expect an income stream, that's it.
I own a *lot* of real estate. I bought it because it produces income via rents, not because I'm keen on the price rising to the point where other people can't afford to buy it from me (thus poor liquidity) or because I want to raise rents to drive out tenants...
gimmethesimplelife
6-7-13, 4:03pm
That doesn't make any sense. I view bonds as an "investment", that doesn't carry the implication that at some point I expect bonds to become exclusionary and unavailable to other investors. I do expect an income stream, that's it.
I own a *lot* of real estate. I bought it because it produces income via rents, not because I'm keen on the price rising to the point where other people can't afford to buy it from me (thus poor liquidity) or because I want to raise rents to drive out tenants...That's great that you are not raising prices to the point of non-affordability, Bae, kudos to you and I mean that sincerely. Problem is, not everyone thinks like you do here and there are a rising number of people in the US who are spending over 50% of their income on housing. This is what I am getting at when I talk about housing being exclusionary and unavailable. What do these people do when housing costs 60, 65, and 70% of their take home pay? Here in Phoenix if I hadn't bought this fixer upper house with my cousin years ago I'd be in the same boat - it's just pure dumb luck that I'm not and I'm under no illusions about this. Their housing issues are my housing issues but for the grace of pure dumb luck. Rob
If *nobody* can afford to live in a home in an area, what exactly is the market for those homes? Are they sitting vacant, being traded like Picassos between speculators?
I live in an area with some of the highest-priced real-estate in the country. Yet human beings for the most part own the homes, and live in them or rent them out to other human beings. Except for the trophy-second/vacation-home subset, and even then the owners live there part of the year, they don't just rot like gold coins in Scrooge McDuck's vault...
A perusal of an Econ 101 textbook might prove instructional.
gimmethesimplelife
6-7-13, 4:22pm
If *nobody* can afford to live in a home in an area, what exactly is the market for those homes? Are they sitting vacant, being traded like Picassos between speculators?
I live in an area with some of the highest-priced real-estate in the country. Yet human beings for the most part own the homes, and live in them or rent them out to other human beings. Except for the trophy-second/vacation-home subset, and even then the owners live there part of the year, they don't just rot like gold coins in Scrooge McDuck's vault...
A perusal of an Econ 101 textbook might prove instructional.Bae, I know you live out in the country so it's possible you are not aware of this.....But you are not too far away from Seattle, a beautiful city with sky high and rising rents and wages for a good chunk of the populace remaining flat. Problem here is rents high and continuing to rise and wages not increasing.....a simple graph would show eventually these conditions lead to unaffordability.
Were there some mechanism in place to rehouse these people somewhere less expensive - let's say Des Moines, Iowa or maybe Indianapolis, I would not be so against society's view of housing as an investment but I know of no such mechanism. Rob
When housing becomes "unaffordable", then people become creative. They share, they remodel, they live in less. London is one place where even the wealthy cannot afford a house and will often have a shared space for during the week and leave for the weekends. Many share small spaces. We are probably the only country where we complain if every person does not have a bedroom and bath.
The Japanese have lived in small spaces for many decades due to the simple lack of land. Often families live in two rooms and small ones at that. One bathroom appears to be the norm and closets are few. Kitchens are miniscule. Life is arranged within these parameters. Bedding is brought out at night and put away during the day. Not a lot is bought or stored. You can only buy a car if you can prove space to store it. Even a friend who has a Single family house in the "suburbs" has a very small simple house with multipurpose spaces.
Americans "demand" so much more.
gimmethesimplelife
6-7-13, 4:26pm
When housing becomes "unaffordable", then people become creative. They share, they remodel, they live in less. London is one place where even the wealthy cannot afford a house and will often have a shared space for during the week and leave for the weekends. Many share small spaces. We are probably the only country where we complain if every person does not have a bedroom and bath.
The Japanese have lived in small spaces for many decades due to the simple lack of land. Often families live in two rooms and small ones at that. One bathroom appears to be the norm and closets are few. Kitchens are miniscule. Life is arranged within these parameters. Bedding is brought out at night and put away during the day. Not a lot is bought or stored. You can only buy a car if you can prove space to store it. Even a friend who has a Single family house in the "suburbs" has a very small simple house with multipurpose spaces.
Americans "demand" so much more.I'd be thrilled if these simpler, smaller spaces were widely available but where I live in Phoenix, I'm not seeing this happening. I think you have a good point though.....how do we as a society change to accept this and how do we get these simpler, smaller spaces built then? Rob
Were there some mechanism in place to rehouse these people somewhere less expensive -
There is Rob, it's called the market. The housing market doesn't move instantly, unlike currency markets, but it does integrate data, react, and move.
Thus the Econ 101...
how do we as a society change to accept this and how do we get these simpler, smaller spaces built then? Rob
Check out the Community Land Trust movement. I helped run ours here for many years, we've built permanently affordable homes for 120 families - about 12% of our school age population lives in one at the moment.
gimmethesimplelife
6-7-13, 4:29pm
There is Rob, it's called the market. The housing market doesn't move instantly, unlike currency markets, but it does integrate data, react, and move.
Thus the Econ 101...What I meant is some program to pay for these people to move somewhere less expensive.....I guess you could call it protection against the market you speak of, I'm a firm believer in that as I never really have believed in the free market. Rob
Were there some mechanism in place to rehouse these people somewhere less expensive - let's say Des Moines, Iowa or maybe Indianapolis, I would not be so against society's view of housing as an investment but I know of no such mechanism. Rob
The mechanism in question is a moving van.
gimmethesimplelife
6-7-13, 4:34pm
The mechanism in question is a moving van.The problem with this is simple - those most vulnerable to the free market in housing somewhere expensive like Seattle can't afford the moving van, the mechanism you describe. This is why I think there should be a program in place to pay for those victimized by the free market in housing prices to move somewhere less expensive. My question here is - what about those who can't afford the moving van? Rob
ApatheticNoMore
6-7-13, 4:36pm
If everyone who lived somewhere expensive (say New York city) moved somewhere cheaper there wouldn't be anyone left to do the actual work that keeps the city going. Ok clearly not going to happen, nor is a program to move people to cheaper areas in mass ever going to be popular (for so many reasons - yes we're just bussing out all the poor people - what you have a problem with that? :)).
If everyone who lived somewhere expensive (say New York city) moved somewhere cheaper there wouldn't be anyone left to do the actual work that keeps the city going.
And perhaps that would cause some changes in the market...
My question here is - what about those who can't afford the moving van? Rob
When we moved to the West Coast from The Least Coast, my wife and I had no money. We rented a giant U-Haul truck, sold off shares to other people wanting to move, made enough from selling off space to pay for our share and our expenses along the way.
gimmethesimplelife
6-7-13, 4:46pm
And perhaps that would cause some changes in the market...I don't disagree with you here - if enough people started moving out, probably the housing market would become less expensive. This happened in Pittsburgh for example, or a very extreme example would be Detroit. My question is, to those most vulnerable to the free market in housing, those who become victims due to not having sufficient income to lock in housing costs or to flee to somewhere less expensive, do we as a society just pretend this is not a problem and let them live on the streets? I'm getting the sense that this is OK with some here. For me this is not OK, I have major major major issues with this, and this is kind of at the core of why I see this society the way I do. The seeming lack of concern and care for those most vulnerable to it, as housing to me is a basic human right much like health care is. Maybe it's easy now to understand why I often feel I'm in the wrong society. Rob
Indy has a lot of creative options right now due to our Housing Development Corporations that are not for profit groups set up to develop affordable housing.
1. Income affordable apartments along with some market rate units. Got a big new one right down the street from me. 1010 Central.
2. Expansion of supported housing for the homeless. 700 units that I know of downtown. Again fairly close to me. Met one of the program directors.
3. Expansion of subsidized housing for low income elderly and handicapped. Again close to me. State and Federal program.
4. Two apartment buildings on Mass Ave. one of the hottest spots in town and all are affordable. One caveat, they don't come with parking.
5. Renovation of a 1920s building on a bus route downtown again without parking and affordable. They really had to fight to get the permission because of the lack of parking. Some of the business owners would rather have an empty graffiti covered building rather than allow the variance for lack of parking.
These are just the ones I am familiar with. There are a variety of units all over. Habitat for Humanity can help families get into homes if they have stable jobs and can afford the mortgage. They have trouble finding enough families some years to qualify.
What I am seeing and hearing about is new young professionals who want their own "subsidized housing" so they can live near the hot spots. Sorry, aint going to happen. They don't want to live in a studio or in an older building. (Must not go with their new car.) They don't want roommates. They want the washer/dryer and dishwasher.
You may not believe in the free market, but it believes in you.
I'm not sure how the type of program you describe would work in a practical way. Why would Des Moines or Indianapolis be interested in accepting the Seattle refugees? If they had the skills or capital to make them desirable as new residents, surely they'd be capable of moving themselves. Anyone so economically helpless as you describe would probably require a lot more assistance than some kind of moving voucher.
A number of "public" solutions have been tried, ranging from vagrancy laws to rent control to various "affordable housing" programs. They quite often have unfortunate consequences for the markets in which they are tried.
gimmethesimplelife
6-7-13, 5:00pm
I wish there was a like button to click on as I really like the above post re: affordable housing in Indianapolis! Rob
ApatheticNoMore
6-7-13, 5:00pm
I think people are saying that there are a lot of options in housing. Housing prices are where the speculation and a little mini-boom is. But rentals on the other hand are an entirely different story and have not been in a boom. Or if your own rental is not reasonable renting a room is, or renting a couch is (though I'm not going to say one should love that last lifestyle). I mean lots and lots of people do make the living somewhere expensive work (and no they are mostly very far from rich - and no they really don't all rent couches either).
What I am seeing and hearing about is new young professionals who want their own "subsidized housing" so they can live near the hot spots.
I've never heard anyone advocate that. How many groups do you think there are out fighting for cheap apartments for yupppies - I've never seen any ..... There are poverty advocates though since there is always plenty of real poverty and real poor people outnumber the yuppies. Now it is true there are many people that will get caught in the middle of housing affordability schemes, too rich to get an "income affordable" house and too poor to afford market rates. They have no advocates though really, and just end up renting.
If everyone who lived somewhere expensive (say New York city) moved somewhere cheaper there wouldn't be anyone left to do the actual work that keeps the city going.
The way that works here is that service workers live in the burbs or small towns outside of the city and commute back and forth to take care of those who can afford to live here. Or they live 3-4 to a rent house to afford the ridiculous rent.
Or they live 3-4 to a rent house to afford the ridiculous rent.
When my wife and I first moved to Silicon Valley, we rented a nice 5 bedroom house. With 7 other people.
Most of us lived there for over a year. We shared cooking/food expenses as well.
It was remarkably similar to the dorms we'd just been living in.
When we left after 18 months, most of us had saved up first/last month's rent and security deposits for "real" housings secured better/decent jobs, and all that boring stuff.
gimmethesimplelife
6-7-13, 5:19pm
When my wife and I first moved to Silicon Valley, we rented a nice 5 bedroom house. With 7 other people.
Most of us lived there for over a year. We shared cooking/food expenses as well.
It was remarkably similar to the dorms we'd just been living in.
When we left after 18 months, most of us had saved up first/last month's rent and security deposits for "real" housings secured better/decent jobs, and all that boring stuff.Not a bad idea Bae....problem is what if you can only find PT work like millions of our college degreed young face. What if the reality is that you don't have much of a shot at a better or secure job - and is there anything such as a secure job today anyway? What if the rent in a shared place like this is extremely difficult to sustain due to only finding PT work? On paper your solution here works, I'll give you that much. However, it does not seem to fit into the realities many young people in the US face today.....Rob
PS In such a situation, where does the money come from to keep student loans current on top of the rent? It's a different world today from when we were both young, Bae.....I wish it wasn't but it is.
Shelter, without question, is a basic human need. But I think we have to be careful about what level of shelter is considered "fair". And I don't believe it's fair to look at the problem without considering the role of those needing shelter.
Case in point: we had a friend of a friend of ours stay with us for several weeks as she looked for someplace to live. Her previous apartment roommate got married and so Jane (not her real name) needed to find a new place. Jane works at a local department store, making not much more than minimum wage. It took her more than a month to find a decent place with non-scary roommates that fit her budget. She managed to do it. We're happy we were able to help out this way.
I did not know much about Jane when she got here. She worked a lot of hours during her stay here. There wasn't much of an opportunity to ask questions about her life. As I looked at Jane's car, though, (newer than mine) and the tablet computer she toted around and the $$ groceries she bought that we don't spend the money on anymore, I have to wonder a little about financial priorities. I also have to wonder how long Jane can work at the department store for a somewhat-close-to-living wage and make it. But she does, and she does it on her terms.
I made a substantial income while I was working. My job wasn't safe, either. But you plan around it. I didn't buy every last square foot of house they said I could. I tried to buy in a neighborhood where I thought values would appreciate. I watched what I spent on what went into the house.
Point is, as bae and LDAHL and others have said, the market -- "sellers" and "buyers" -- will find some equilibrium. Rent can't keep going up because eventually renters will not be able to pay the going rate. Housing that is very expensive can be addressed by desirable buyers avoiding the area because housing takes too much of a bite out of their paychecks. Or they adapt -- older dwellings, smaller dwellings, more people living in the house. It is not uncommon for Asian immigrants new to this area to buy a decent home in the 'burbs and have three generations living in that home -- at least until some of them can save the money to move to their own places. Folks who tire of sharing a place with two or three others can decide to go for lines of work which will pay them more. There's only part-time work? Then maybe you end up working two PT jobs. Or you move further out of town (if the price of the commute does not nullify the savings). Or maybe drive a clunker for a few years.
There are people who are in dire straits through no immediate circumstance of their own. They should get some help. But I do think that some of the issues facing the cost of housing come, in part, through the choices of buyers.
The downtown YMCA here in Phoenix has announced it's getting out of the room rental business. This one has a larger remodeled fitness center, and an adjacent tower of Single Room Only/"SROs" that rent for about $600/month including utilities. The rooms are 99 sq. feet, like tiny hotel rooms, except with no separate bathroom - the toilet/shower area is not even curtained off. It was remodeled about 8 ? or so years ago, has a gated entrance with security guard, a common area with access to a few computers, and also access to the fitness center. It's well managed and been a blessing to the disabled and those on tiny fixed incomes.
But, the siren call of developers with cash has proven too strong, and the new thought is to remodel the SROs into small apartments to rent to students or young urbanites. So. Where are those 135 residents going to move to?
It's fine to discuss macro-economics, but these are real human beings. And as we watch this happen again and again, and blithely dismiss it saying they can go to the homeless shelter or sleep on someone's couch, then we are being blind to the fact that this country is continuing its downhill slide into a deeper and deeper economic divide.
ApatheticNoMore
6-8-13, 12:22am
and blithely dismiss it saying they can go to the homeless shelter or sleep on someone's couch
meh, couch is an option I was pointing out, but most people don't end up on the couch, most end up in some kind of rental situation or some do live with relatives, but then I only know how many people manage to get by in southern california using many creative strategies, which I thought was a pretty good template for fairly expensive housing (and no the wages are not high enough to entirely offset it). But you can definitely get a room here for $600 so I have no idea why rents are so high in Phoenix.
I could rage against the housing bubble for all the good that does, or I could wait for it to collapse of it's own weight which it probably will. The Federal Reserve is very deliberately driving the speculation but I'm very used to it by now, it's nothing but housing bubbles all the time. And either way, other than dreaming of ownership, it's kind of irrelevant to me and most renters as it seems to be having very little effect whatsoever on the cost of *RENTALS* at the moment - which is a lot more relevant than the costs of a mortgage if the concern is actually the poor. Rentals were increasing a lot more in 2007 than now. Do I wish rent was less? Sure and high basic costs of living causes it's own economic issues (requires higher wages etc.) but that's the way it is.
And if housing prices were collapsing rather than bubbling there would probably be people giving the exact same lecture on how we are ignoring real human beings whose houses are underwater and blithly dismissing them (so which is it, are high housing prices good, or are low housing prices good?) Btw I have seen a lot more real worry over healthcare and not having insurance and needing healthcare (usually for something non life threatening) than over rents. Pretty much everyone realizes that there are usually options when it comes to rents, even if it's having many roommates.
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