Posted on 10/28/2009 6:54:09 AM PDT by SeekAndFind
Are you wealthy but homeless? Lucky you.
For well-off folks who don't own a home now and don't mind renting for a while, this is a something of a golden era. That's because renting--particularly at the high end--has become such a startlingly good deal in some cities.
There's no telling how long this period will last. But sellers of fancy homes, while refusing to drop their asking prices, seem happy to lease them out for a year or two on the cheap. It was true earlier this year, but it's even more so now, thanks to some hefty rent reductions.
Falling rents at the high end reflect the overall trend among landlords across the board. Green Street Advisors, a real estate research firm in Newport Beach, Calif., analyzed data from two firms that follow rents, New York-based REIS and Dallas-based Axiometrics. Green Street calculates that the apartment companies it follows, which include AvalonBay Communities ( AVBPRH - news - people ), Equity Residential ( EQR - news - people ), Essex Property Trust ( ESS - news - people ) and others, will experience 13% to 15% drops in their rental operating income (that's rent minus property taxes, fix-up costs and other routine expenses) on average during this recession.
We've been looking at preliminary data we've assembled as part of a new Forbes index of luxury rental homes. In November, we'll debut the index, which will cover fancy rental homes in 10 cities. But our early analysis of four of the cities--Chicago, Atlanta, Houston and Boston--shows just how good life can be for wealthy renters right now. (Obviously, the opposite is true for landlords who own high-end homes.) That's because, compared to what the owners are willing to accept for purchase bids, rents have dropped quite a bit
(Excerpt) Read more at forbes.com ...
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When the average housing prices = 100 x cost of rent of an anverage house you will know the housing bubble has deflated...
I’ve always read that the rich don’t own anything.
They use other people’s money.
Why tie up millions of $$$ in a big house when you can rent it and use the money to make more money?
I offer 70% OFF
Are you saying that the historical ratio of rent to purchase price is approximately 100? Just asking.
Doesn’t surprise me. I live in tear down/monster condo-ville. One of the last buildings built has one individual owner. The rest of the units that are occupied are leased. Other owners have been putting places on the market for six months or so, making a lease deal for a year, then putting the place back on the market when the lease is up. This has been going on for about the past few years.
I know a couple that wanted to sell their luxury condo in Bedford, MA for ~$600,000 and move to Georgia. When they couldn’t get that, they rented it out and rented a place in Georgia. I guess people get stuck on price points.
Yes. Historical averages:
1. 100 x monthly rent = cost of the house
2. 2.5-3.0 x gross income = cost of the house
3. 40% monthly take home pay should equal cost of monthly carrying costs of the house (PI, taxes, utilities, upkeep)
One of our younger relatives isn’t rich, but where he works, rental prices had been sky high.
He looked at half of a duplex two years ago and couldn’t afford the rent. The meltdown came, and one of the renters lost her job and had to give up her side of the duplex.
The owners contacted our relative and offered him the property, and he offered 1/3 of the original rent. They said no. He said fine. Two weeks later they showed up at his place of work and took him up on the offer. He got a two year contract and if anyone in the duplex complex go a rent reduction below his, he would get the same reduction. Another renter lost her job, and the owners dropped her rental a couple of hundred per month. Our relative found out and got a reduction for two past months and for the rest of his lease which he got extended to two years again.
Yes.
It appears their philosophy is, “Buy things that appreciate; rent things that depreciate”.
At least, that’s what I’ve read!
CA....
Interesting article about the ration of rent/value here:
http://www.zerohedge.com/article/what%E2%80%99s-your-home-worth
you said “cost of the house” I think you meant “worth of a house”
We have been in a housing bubble for almost 10 years. That is ending. It will get cheaper to buy than rent at some point in time. Even in or near NYC.
NYC (in particular) is going to get hammered. People leaving in droves, shrinking tax base, unemployment at 10% and massive tax increases. Keep renting for a while, you will get your chance to buy at reasonable levels. See NYC in 1970s-1980s to see what it may look like.
IMHO, $100 x rent is too low unless you are in economically depressed areas.
I think $150 x rent is a more reasonable historic ratio. That said, homes in the greater Sacramento area where I am reached $300-$350 x rent during the latest bubble. Home values today are running at about $175 x rent and may fall to around $130 x rent before going back up to $150ish.
If we see $100 x rent again we will be in a depression. Just my opinion. Please do your own research.
Just a little correction, Forest Hills is not near New York City, it’s IN New York City.
You and I know that but your readers may not.
That’s what smart people do, figure out ways to generate an income. That’s why a lot of smart people have so much money.
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