- This topic has 18 replies, 10 voices, and was last updated 17 years, 1 month ago by
sdrealtor.
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May 10, 2007 at 11:01 AM #9050May 10, 2007 at 11:25 AM #52317
gn
ParticipantUnlike home prices, rents are not subjected to speculation. Usually, incomes need to go up for rents to rise.
With that said, consider the following scenario:
There is massive foreclosures & the result is a large number of SFHs & condos (some of which are formerly appartment units) being held by the lenders. These SFHs & condos are vacant. This result in a reduction in the supply of the rental units & push rents up. How realistic is this scenario ?
May 10, 2007 at 11:26 AM #52318Ash Housewares
ParticipantRents can’t go up if wages aren’t rising. Wages have been stagnant (or even falling) for the past few years. It’s gotten to the point that government jobs have higher pay than private sector jobs, at least in some fields.
May 10, 2007 at 11:36 AM #52322an
ParticipantI don’t really care how this all play out. As long as housing is affordable again. If I get 20% raise every year for the next 3 years, great. I have no problem with that.
May 10, 2007 at 12:15 PM #52326(former)FormerSanDiegan
ParticipantRents can’t go up if wages aren’t rising. Wages have been stagnant (or even falling) for the past few years. It’s gotten to the point that government jobs have higher pay than private sector jobs, at least in some fields.
Can you point us to the data that show flat or falling wages for the past few years ?
Thank you.
May 10, 2007 at 12:23 PM #52329HereWeGo
ParticipantI’d stay away from domestic REITs at this point. There may be a substantial amount of rise left in the international RE market, though.
May 10, 2007 at 12:56 PM #52334Anonymous
GuestRents will be moving down: folks are leaving the county; the multiple years supply of empty condos completed and coming online will be rented out; jobs are starting to fall.
Prices for homes are falling and rents will begin moving down, too.
May 10, 2007 at 1:09 PM #52340davelj
ParticipantI doubt rents will fall. If they do it probably won’t be by much. I believe I remember looking at what happened to rents in San Diego during the 90s downturn and found that they stagnated or were slightly down – like maybe less than 2% – for a couple of years and that was it. Anyone else ever see that data series?
May 10, 2007 at 1:16 PM #52342ParticipantThanks SHILOH. You saved me from having to dig up a source.
May 10, 2007 at 1:22 PM #52344GuestYou’d be surprised, Dave. Go look at the BLS rent index data for San Diego:
In 1989, the BLS rent index for San Diego was 144.6; CPI was 130.6
In 1996, the BLS rent index for San Diego was 156.0; CPI was 160.9Real rent index for San Diego in 1989: 144.6/130.6 = 1.11
Real rent index for San Diego in 1996: 156/160.9 = 0.97Real rents declined 15% (1.11/0.97) over 1989 to 1996.
May 10, 2007 at 1:23 PM #52338SHILOH
ParticipantStagnation of wages is described in the excerpt below. It is apparent in the disparity between corporate profits distribution to workers, while worker productivity rises. Also – things like health care costs rise and eat into wage increases (inflation) and so there is stagnation because the average American worker cannot get ahead. The hamster on a wheel –running, expending energy –but going nowhere. It’s a well known business trend that executive pay is 100s times higher that worker pay – a disparity that has grown in enormous proportions over the past couple decades.
“…The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.
As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”
Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data….”
(Real Wages Fail to Match a Rise in Productivity
By STEVEN GREENHOUSE and DAVID LEONHARDT
Published: August 28, 2006,NYT)On a related topic, one article said corporate profits are held at the top for “investment” having to do with propping up their stock value. Can someone give a good explanation of that?
May 10, 2007 at 1:31 PM #52349ParticipantSHILOH – Thanks.
I also found a partial history of these data, but only through 2005.
An observation.
After a couple decades of bouncing around between +/- 2% of 13.00, the inflation adjusted hourly wages jumped about 11 % from 1995 until 2005.
Did rents keep up with wages (inflation + 10%) during this period ?
Is this jump structural or caused by under-counting inflation ?[img_assist|nid=3390|title=Inflation Adjusted Wages|desc=|link=node|align=left|width=466|height=315]
May 10, 2007 at 1:35 PM #52351ParticipantJG – You and davelj are both right.
REAL rents declined by 15% from 1989 to 1996
BUT inflation was a cumulative 27.5%* over this period.
So, nominal rents increased by ~12.5%
* per the inflation calculator
http://inflationdata.com/Inflation/Inflation_Rate/InflationCalculator.asp#resultsMay 10, 2007 at 1:43 PM #52352Participant“The absence of any growth over the last five years in real average weekly earnings for 80 percent of workers is particularly striking given the fact that productivity has been soaring. The Labor Department reports that nonfarm business productivity (output per hour of labor) has increased nearly 17 percent during the past five years ending in the second quarter of this year. Yet the cumulative increase in the average real hourly earnings of production/nonsupervisory workers has been only 2 percent, rising from $8 per hour in the second quarter of 2000 to $8.16 per hour (constant 1982 dollars) for the second quarter of 2005. (In fact, during the last two years, when nonfarm business productivity has increased by 6.6 percent, the average real hourly wage for production/nonsupervisory workers has actually declined.)
Other data indicate that incomes have stagnated for a large portion of U.S. families. For example, the median level of real household income has actually declined from a cyclical peak of $44,922 in 1999 to $43,318 in 2003, the latest year for which statistics are available. This $1,600 difference reflects a decline of 4 percent.” THIS IS FROM 2005 but is still relevant. The trend continues and now the bubble will really hurt workers.
link:
http://www.washtimes.com/op-ed/20050824-091828-7473r.htmMay 10, 2007 at 3:08 PM #52380kev374
ParticipantRemember that inflation is also location specific. Per the stats inflation in Orange County is 4.3% which is much higher than the national average.
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