Posted on 04/29/2014 8:01:11 AM PDT by Nachum
Each quarter, when we perform our regular update on trends in US homeownership and rents using Census Bureau data, we say that "The American Homeownership Dream is officially dead. Long live the New Normal American Dream: Renting." One thing we added in 2013 is that the American Dream has now officially became a full-blown nightmare after mortgage rates exploded, even if declining modestly afterward, and in the process pummeling the affordability of housing as well as grounding any new mortgage-funded transactions to a complete halt (don't believe us - just ask the tens of thousands of mortgage brokers let go by the TBTF banks in the past 6 months) while sending mortgage origination activity to record lows. Which is why it was not at all surprising to find that the just updated Q1 homeownership rate was 64.8% - the lowest in 19 years!
Furthermore, even as household formation has continued to implode (more on that in a subsequent post) despite the shrill promises of housing bulls who still have to realize that the transitory pick up in home prices has nothing to do with organic growth or a stable consumer, and all to do with the Fed's balance sheet, the now effectively finished REO-To-Rent program, and illegal offshore cash parked in the US, Americans have to live somewhere. That somewhere is as renters of Wall Street and other landlords. As the next chart shows, the median asking rent has soared to fresh records and hitting an all time high of $766 as of the first quarter.
Luckily Owner Equivalent Rent is largely adjusted (hedonically) by the Fed in its CPI calculation making it seem quite friendly, or else its all time highs may give the impression that inflation is not quite as dead as the Fed portrays it. Although don't tell that to renters in the Northeast, where the average rent just soared to $1,043, a record increase of 16%, or $147 compared to a year ago.
At least one entity is enjoying this wealth extraction from the middle class which no longer being able to afford buying a home is forced to hand over an ever greater portion of its paycheck to America's largest landlord - Wall Street's very own BlackRock.
A chicken in every pot.
The list, Ping
Let me know if you would like to be on or off the ping list
Where will they store the cheap imports they bought?
Millions of young people buried in student loan debt in no position to be taking out mortgages.
Heh. ‘They’ certainly interchange having a mortgage and owning a home as the same thing.
Bankers suck along with lawyers. Get used to it.
“Where will they store the cheap imports they bought?”
I find they are usually on the curb waiting for the trash man to pick them up.
The rent chart looks like a 4% inflation rate to me. Big deal.
The home ownership graph looks like those who shouldn’t have owned homes during the boom no longer own them. As it should be.
Carlyle Group (based in DC and the most politically connected of private equity outfits) is buying trailer parks.
That tells you how the smart money views our economic trend.
“Bankers suck along with lawyers. Get used to it.”
I disagree. No one forced you to go to a bank and get a loan and not repay it.
With lawyers, you can be minding your own business when they pop up and steal most everything you own, all your bank accounts and even part of your future earnings that you have not even made yet.
/johnny
Combine the Japanese near-obsession with having the latest and greatest tech gadgets with tiny living spaces and it makes sense to part with well-kept but dated “stuff.” Very few others want it either, so they toss it. They just don’t have attics, basements, garages, spare rooms and multiple walk-in closets to accumulate crap the way we do.
The one thing I am trying to impress on my kids now is never buy into a home where the mortgage owns you. Like many of you, I have gone through the ups and downs of this economy but thankfully was able to keep my mortgage payments current. I could not have done that if I had lived outside my means with some exotic mortgage loan.
Home ownership should have never been pushed on everyone in the first place. There should always be a segment of the population who are able to quickly relocate to where the jobs are.
What do you expect when the currency has been devalued by 30%?
National candidates running on a platform of rent control cannot be far behind.
“The rent is too damn high” platform?
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