patrick.net

Strategist says

Logan, why are rents shooting up?

Any chance it's because people don't have enough money saved up for a down payment, don't make enough in wages to afford mortgage payments and closing costs on expensive houses, have crappy credit and can't get approved for a mortgage? They have to live somewhere, so they're forced/trapped to pay the higher rents or live in a refrigerator box under a bridge.

Not really. The family I mentioned:
$10,400 monthly income. 80% of it was steady.
700+ FICO
The bread winner has a very stable job.
They have a car payment, and a bit on the credit cards.

6

_ 2015 Apr 13, 7:12pm

$10,400 monthly income. 80% of it was steady.

700+ FICO

The bread winner has a very stable job.

They have a car payment, and a bit on the credit cards.

Remember my thesis on CA ( 3X median income) and you should be fine that is 190K, 10,400 isn't good enough in some places in California to make it with other
debt liability and non debt liability cost

7

Strategist 2015 Apr 13, 7:21pm

Strategist says

My explanation is, they have not built enough homes for the last 8 years to serve a rising population.

There are still millions of houses sitting empty across the country, so I don't think it's a shortage in housing except for a few special areas. Have you noticed the increase of multi-generational housing the last few years? Do you think kids still want to be living in mom's basement at 28 or mom and dad want to move in with their adult children?

Why would this be happening?

Rents are increasing everywhere.

http://www.multpl.com/united-states-population/table

Rental market needs to catch up with booming demand

Population guys, population. We have 20 million more people than we did 8 or 9 years ago. This trend ain't changing. Even if the home ownership rate is declining, the population increase will still create a need for SFR housing. And renters still need to live somewhere. Many prefer to rent houses and condos, instead of apartments.
They will need to build, and build like crazy, which is why I love homebuilder stocks.

8

Strategist 2015 Apr 13, 7:25pm

Logan, forget Dunkin Donuts and go for homebuilders. it's a no brainer.

9

lostand confused 2015 Apr 13, 7:26pm

Rent prices are going up even here in the Midwest!

10

_ 2015 Apr 13, 7:26pm

http://www.census.gov/popclock/?intcmp=home_pop

homebuilders. it's a no brainer.

If you want to make a cases for home builders I would use a better population data center

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Strategist 2015 Apr 13, 7:30pm

Strategist says

homebuilders. it's a no brainer.

If you want to make a cases for home builders I would use a better population data center

http://www.census.gov/popclock/?intcmp=home_pop

Poor Mother Earth.

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_ 2015 Apr 13, 7:58pm

Poor Mother Earth.

You can see how much that census data line website is

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_ 2015 Apr 14, 7:59am

We have 20 million more people than we did 8 or 9 years ago

From 2000, 282 million to 320 Million

So the young are coming on line

Age 23, 24, 25 are the biggest group we have in America today. Now this group will be taking longer to buy homes is that gap supply in rental needs is trying to be met right now with the expansion on rentals.

It all falls back on the capacity to own the debt and dual income families look so much better on paper than single households

14 Entitlemented 2015 Apr 14, 8:06am

Playing catch up now, the equilibrium is just off. A natural hangover from a financial housing bubble that crippled our economy

What if:

What if instead of giving loans to people in poor communities, we would have created Community Jobs Act, which would have taught a trade and taught basic business skills to those with low incomes and poor credit? Was there a better way to get people to middle class.

I remember having to forgo nice cars for ~20 years to afford a house. Now I am able to drive a luxury car - a Ford Escape.

15

Strategist 2015 Apr 14, 8:07am

So the young are coming on line

Age 23, 24, 25 are the biggest group we have in America today. Now this group will be taking longer to buy homes is that gap supply in rental needs is trying to be met right now with the expansion on rentals.

It all falls back on the capacity to own the debt and dual income families look so much better on paper than single households

Informative chart. I think the birth rates are down though. Also don't forget immigration.

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_ 2015 Apr 14, 8:16am

http://www.census.gov/popclock/?intcmp=home_pop

Informative chart. I think the birth rates are down though. Also don't forget immigration.

This is why I said use a good demographic webstie when you look at this census population data line ( forward in line forward demand)

Look at 18-28 ... that is a big portion of people needing shelter and not single family homes until they get married

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_ 2015 Apr 14, 8:17am

Entitlemented says

What if instead of giving loans to people in poor communities, we would have created Community Jobs Act, which would have taught a trade and taught basic business skills to those with low incomes and poor credit? Was there a better way to get people to middle class.

States have a better shot at doing something than a Federal Program, because one politics gets involved into the equation rational thought gets thrown out

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_ 2015 Apr 14, 8:25am

*

My guess is that the population growth will slow, mainly because these kids in their late 20's aren't getting married and aren't starting families, as they can't even to afford to pay for themselves, much less a wife, a house and kids...

It's why I didn't have kids, it's awful I know to say, but in 1999 I did the math and I said it's 250K per child adjusting it through college and not looking to help out with shelter cost ages 25-29

That was it for me, which makes dating a lot different because I had to disclose I didn't want kids

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_ 2015 Apr 14, 8:54am

Oh, you chicken.... You need to suffer through parenthood like the rest of us...

Much braver men than I will be parents.

https://confoundedinterest.wordpress.com/2015/04/14/about-the-credit-is-too-tight-meme-freddie-mac-average-ltv-and-dti-the-same-in-2001-and-2013/

Who's going to carry the family name in the next generation?

My younger brother will not get married for different reasons, the name dies out, all that will be left will be charts and a blog

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_ 2015 Apr 14, 9:14am

Another article going after the tight lending myth crew

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ja 2015 Apr 14, 9:27am

It's why I didn't have kids, it's awful I know to say, but in 1999 I did the math and I said it's 250K per child adjusting it through college and not looking to help out with shelter cost ages 25-29

I'm curious. How did you do the math? My understanding is other than basic shelter, most of the $$ for kids go into day care and college. So I'd imagine there is lot of variance there based on your situation.

$250k looks for median US family. Probably not in bay area
http://money.cnn.com/interactive/pf/cost-of-children/

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Strategist 2015 Apr 14, 9:34am

My guess is that the population growth will slow, mainly because these kids in their late 20's aren't getting married and aren't starting families, as they can't even to afford to pay for themselves, much less a wife, a house and kids...

They could start off as DINKs as opposed to SINK - Single Income Nasty Kids.
Until then, live in the parents basement.

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Strategist 2015 Apr 14, 9:39am

It's why I didn't have kids, it's awful I know to say, but in 1999 I did the math and I said it's 250K per child adjusting it through college and not looking to help out with shelter cost ages 25-29

There is no greater pleasure than having kids. Those smelly, pooping, demanding, hungry, trouble makers are worth more than all the money in the world.
By the way my 19 year old son is for sale. No down, take over the payments.

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_ 2015 Apr 14, 10:58am

There is no greater pleasure than having kids

I would never disagree with this, but for me it wasn't in the works

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_ 2015 Apr 14, 11:03am

ja says

$250k looks for median US family. Probably not in bay area

http://money.cnn.com/interactive/pf/cost-of-children/

Looking at that CNN article and they have it at $245,000 today, that's not even accounting for helping for College education which the cost of tuition has sky rocketed

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ja 2015 Apr 14, 1:42pm

hat's not even accounting for helping for College education

LEt's hope that by the time they grow old, the college bubble will be bursted ;-)

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_ 2015 Apr 14, 2:36pm

ja says

LEt's hope that by the time they grow old, the college bubble will be bursted ;-)

I don't believe that can happen anytime soon because the real poor people in the American economy are those with just a high school education and the unemployment rate
for college grads is like 2.5%. So for a bubble to burst you need a mass amount of college educated working Americans to stop paying which it isn't in their interest to do

30% of all student debt are had by those who never finished college and 70% of the debt is under 14K

This cycle has been going on since 1978 and nothing has really be done to address it

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_ 2015 Apr 15, 7:28am

Using today application data, it was never about tight lending, it was always about incomes and assets

29 bob2356 2015 Apr 15, 7:48am

At the end of the day, everybody needs a place to live, but they also need to be able to PAY for that shelter. When you have 93 MILLION people not in the workforce, they aren't going to be going out and renting or buying their own places anytime soon.

Over half of these are over 55, mostly retirees. I don't think they are worried about going out and renting anytime soon.

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Strategist 2015 Apr 15, 8:06am

bob2356 says

Call it Crazy says

At the end of the day, everybody needs a place to live, but they also need to be able to PAY for that shelter. When you have 93 MILLION people not in the workforce, they aren't going to be going out and renting or buying their own places anytime soon.

Over half of these are over 55, mostly retirees. I don't think they are worried about going out and renting anytime soon.

That 93 million are living somewhere now.
Most retirees who own their homes, own it free and clear.

31

Strategist 2015 Apr 15, 8:08am

Using today application data, it was never about tight lending, it was always about incomes and assets

Lets say tight lending is not the problem. FNMA has announced plans to make it easier for first time buyers to buy their own homes. This will give a boost to housing.

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_ 2015 Apr 15, 8:41am

FNMA has announced plans to make it easier for first time buyers to buy their own homes. This will give a boost to housing.

You mean pay 3% of closing sot, in terms of debt to income ratio that actually doesn't do anything to help that and it's a reason why the first Home Path program didn't take off so much.

Devils is always in the details sir :-)

Buyers must complete the full online HomePath Ready Buyer training course on the HomePath website and receive a certificate of completion

The buyer must be a first-time homebuyer (did not own a property in the past three years) with plans to reside in the property as their primary residence. Auction, pool and investor sales are not eligible

The request for closing cost assistance must be made at the initial offer, submitted on or after April 14, 2015

There has been assistance programs reducing the down payment to just 0.05% of a home.

One of the problems for lower down payment borrowers is that taxes have to be impounded which tends to be the highest cost factor of any purchase. Paying 3% of closing cost will help that factor, but it doesn't address the debt to income ratio or the down payment factor, it does allow more liquid asset to be used for a the down payment.

I understand why the government wants to start bending the rules

-5% GSE down to 3%
-Pay for 3% of closing cost

It's been the worst demand cycle for mortgage buyers at the lowest rate curve post WWII.

However, these are patches at best, the best thing solve this is for Americans to make more money, that will address the housing weakness in demand

33 bob2356 2015 Apr 15, 9:19am

bob2356 says

Call it Crazy says

At the end of the day, everybody needs a place to live, but they also need to be able to PAY for that shelter. When you have 93 MILLION people not in the workforce, they aren't going to be going out and renting or buying their own places anytime soon.

Over half of these are over 55, mostly retirees.

Sorry Bob, nice try... Go check your numbers, they aren't retirees...

The number is 58% of not in labor force is over 55. So what percentage of over 55's are retired or on disability if you have the numbers in front of you? What percentage of the 54 million not in the labor force over 55's are living with their parents waiting to rent their first apartment? How about the 19 million not in labor force 25-54's (which includes housewives), are they all living with their parents waiting to get their first apartment also? Retirees and people staying in school longer is most of what is driving the labor force numbers. The participation rate of 25-54 has only dropped 2% in the last 20 years. I'm really sorry you can't grasp the math behind all this.

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_ 2015 Apr 15, 4:50pm

35

Strategist 2015 Apr 15, 8:11pm

Good charts. Employment continues to improve. More people to buy homes. :)

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_ 2015 Apr 16, 7:09am

http://www.cnbc.com/id/100533720

More people to buy homes. :)

See how sluggish starts number were today, these are numbers coming in year 7 of the economic cycle with 3.75% rates. This was what I have been talking about for years going against the Housing is Nirvana crowd

Mind that Ivy and I aren't on talking terms anymore... shocking ;-)

http://loganmohtashami.com/2014/04/11/miss-housing-nirvana-crys-uncle/

I offered my assistance to her firm in 2014 .... tsk tsk.... a lack of discipline

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_ 2015 Apr 16, 8:28am

Apparently, they don't know what they have in their own pipeline....

builders confidence and activity has had a big gap these last 18 months.

Total sales should be up at least 8%-12% this year with maybe some upside but in context to this being year 7 of the economic cycle with 3.75% rates it's just very soft and this is the market place for the wealthy with a very low 440K level to work from

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_ 2015 Apr 16, 8:33am

Numbers, facts and data always wins out in the end

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_ 2015 Apr 16, 8:34am

â€œAll truths are easy to understand once they are discovered; the point is to discover them.â€
â€• Galileo Galilei

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Strategist 2015 Apr 16, 9:23am