House prices are down, why rents still high?

[AlphaCentauri]

The economy would recover faster if rents were down as house prices are.

[bobbolink]

1. Because we don't have anywhere else to go. Sound familiar?

:shrug:

[dkf]

2. Did your landlord's mortgage go down?

[joshcryer]

3. Unlikely, but house buyers are able to buy them cheaper, thus having a lower mortgage.

We'll see, if in the next couple of years, rents go down as these houses are bought up. It may be too soon to tell, but I'd wager the landlords are benefiting from an artificial demand in rent. (Wouldn't happen if all those empty houses, the hundreds of thousands of them, were squatted in.)

[dkf]

16. Is that really the Morality we espouse? Take what we want?

[AlphaCentauri]

5. I think many landlords are restructuring or renegotiating their mortgages

they are even getting better deals to lower their payments

[WannaJumpMyScooter]

7. and time and time again, reality has shown

that rents do not go down

[virgogal]

4. That would be nice------rents are horrific.

[TBF]

6. As foreclosures rise it creates a better rental market for the owners,

and they will charge whatever they can get away with as any good capitalist would.

[EFerrari]

11. It depends. If you are renting out apartments

and houses suddenly come open, your market goes to hell. We've nearly halved the rent in some of our units and still have vacancies. With a full building, we only break even any way. With a half empty building, it's hard to make the utilities, the taxes, and so on.

[pnwmom]

14. If you only break even with a full building, why even be in the business?

Sounds like a lot of work, especially for no money!

[EFerrari]

18. It's an investment, not a cash cow.

But believe me, I've often said exactly the same thing to the family. :)

[AlphaCentauri]

17. Many people think the demand for rental property is increasing now

but looks more like people is sharing apartments or houses instead of going out to rent

[EFerrari]

20. I bet that you're right about that. n/t

[AlphaCentauri]

32. if rents were lower tenants would be looking for vacant units n/t

[AlphaCentauri]

12. I have seen buildings with 6 or 7 vacant units for months

but the landlords won't even hint to lower the rent, they might have a Tax loophole somewhere to declare some losses

[EFerrari]

8. Because it's hard to refinance all those bad mortgages

that rents are still based on?

[rawbean]

9. future FEMA camp population

rent will go down shortly after the collapse of the banking mortgage system, should be very interesting.

[CoffeeCat]

28. So the banking mortgage system is going...

...to collapse--yet again. Why do you believe that this will happen?

I'm not doubting you, just wondering why you feel this will happen.

[rox63]

10. The folks losing their homes to foreclosure have to live somewhere

So they go to rentals. When demand rises, so do prices. More foreclosures = more renters = higher demand = higher prices. Yep, it sucks for renters.

[pnwmom]

13. Because the rental markets are flooded with people who had to

leave their houses?

[tammywammy]

15. +1 n/t

[DontTreadOnMe]

19. Many large apartment landlords can weather the storm for about 3 years

Large landlords can last 3-4 years before it starts to hurt them badly.

Take Florida, a state with one of the highest foreclosure rates.

Every large apartment building has 20-30% vacancy - even in swanky locations like Boca Raton and Fort Lauderdale! Many people moved to these expensive areas to retire, and now the elderly cannot afford to live in them anymore. A huge amount of people have moved away.

So why don't they just rent them.... they are! And they are still not full, just no demand.

After this 3-4 year period of holding on, the landlords will start to be underwater, and will be dropping rental rates to get anything they can - before they get foreclosed too.
We are almost at that 4 year period now. Next summer will see the crushing effect for many landlords of large buildings (300-500 units).

When people get foreclosed, they tend to MOVE out of the town... so they usually don't relocate in the same town -- in a rental. As mentioned by someone else, families that lost a job or all their income, tend to move in with parents or friends first. How can you go sign a new rental lease without a job?!

The main reason for foreclosure is loss of job. People will move to anywhere they can get a new job, and will jump even if it means moving to another state.

The states with the highest unemployment tend to follow the weakest real estate markets. I live in NJ. We have very high unemployment. New Jersey is a strange state that comprises of VERY WEALTHY communities with surrounding towns made up of mostly condos. Wealthy towns seem almost unaffected by the recession, while the lower incomes towns are devastated. Condos in NJ are down an average 30-40% in value. Rental prices are now dropping dramatically. Condos are the first thing that owners will walk away from, so the majority of the condos are owned by banks. They don't want to get into the rental business, but after many years, they end up with no choice.

We have not even hit rock bottom yet. Real estate is going to get even worse.

[silverlib]

21. This is what happened in the 80's.

You are so correct. Just a little more time...people will be moving from the rentals that they can no longer afford into multi-family dwellings and shelters, or worse...just plain homeless. Rentals are migratory - falling behind the housing, but it will eventually happen - and probably is in some parts of the greatest country on earth.

[Dappleganger]

24. Are you in the RE business?

Your post was quite helpful in explaining what's going on. I live in NE FL and agree with you in what's happening in our state. I think we're at least a year or more away from rock bottom, depending upon when banks begin to really unload their shadow inventory. The RE situation here is quite frightening.

[NutmegYankee]

37. I understand your position.

I find myself in one of those areas that has jobs to offer, and have noticed that the apartments are for the first time in years completely or mostly full.

[Starry Messenger]

22. Captive market.

Capitalism 101.

[mmonk]

23. Mortgage costs, insurance costs, property taxes and maintenance costs.

The landlord has to cover these.

[unblock]

25. rents and house prices are not nearly as tightly correlated as you might think

in the case of this housing bubble, housing prices went sky high, far outpacing the rental market. in fact, that was one of the key warning signs those who predicted the bursting of the bubble pointed to.

so when housing prices came back down, much of the decline was merely giving back the fluff it shouldn't have had in the first place.

more generally, there are time lags involved and locales as well. many housing markets have zero renters and many rental markets have zero home ownership. so it's quite possible for housing prices to be going down while rents are going up simply because all real estate is about location.

housing prices are stabilizing in some areas, at least. i've lost a ton of money on my house that i moved into almost 3 years ago, but it's gone back up like 10% just this month, at least if you believe www.zillow.com.

[liberal N proud]

26. Supply and Demand

People losing their houses have to live in Apartments.

[xchrom]

27. It's regional #1 and # 2 it's what the markets will bear? Nt

[county worker]

29. The real estate bubble toped out in 2006. A property bought then has a high monthly payment

compared to one bought today. If the rent is used to cover the 2006 payment it will be high too. Also all those people put out of their homes by foreclosure or by their own making are renters.

[Samantha]

30. Well, I lost $100,000 off the value of this house

but my property taxes still went up. So did my utilities. So did the rent for the basement here. I couldn't carry the place by myself with everything going up the way it has at the price I formerly charged. Utilities alone in Maryland continue to rise. My theory is with so many bankruptcies and foreclosures, cities still need to make a certain amount to cover their budgets. They have fewer people to collect from, so they just hike up the cost of those still here.

Sam

[Nay]

31. Did they actually hike the rate, or have they kept the value of

your dwelling artificially high? We contested our property taxes by showing our house was not worth what they were using as the base to figure taxes.

[Safetykitten]

33. Because people have to live somewhere when they are foreclosed on.

In markets like Las Vegas, the rental market is hot because of the huge foreclosures.

[Safetykitten]

34. Because people have to live somewhere when they are foreclosed on.

In markets like Las Vegas, the rental market is hot because of the huge foreclosures.

[old mark]

35. Landlords complain about hig heating and maintenance costs - I used to hear

them complaining about losing money on rentals, but the few landlords I know now are terrible and the last 3 we dealt with were crooks - I would never want to be a renter again.

mark

[NutmegYankee]

36. If anything, it will get worse.

As millions lose their homes they will seek to rent once again, driving up demand and therefore prices.

[Ignis]

38. K&R

:kick: