Piggingtonian renters influence on housing

[ra633]

I understand and agree with the Piggintonian perspective on housing in SD. However, it is interesting to see what the Piggingtonian influence will be on housing moving forward.

Specifically, if all Piggingtonian renters (PRs)wait too long for RE to be undervalued, or at the least reasonably overvalued, then in a sense, they could be letting the bubble stay above resistance levels for an extended period of time. Thus RE prices won’t drop to 60% peak as fast PRs would have hoped.

Plus, having all the PRs in the rental market, could allow landlords to keep the prices of rentals high, and maybe even inflate them.

One thing the PRs may have going for them is the ‘BIG LIE’ about housing shortages in SD. That is part of what hurt owners first, and may help renters for a while.

It’s funny but tragic how we ALL (ie upper middle class and lower) are just pawns to the Bilderbeger class of the world.

[SD Transplant]

Ra633,

For me (my family) it’s quite simple. I will wait until it makes finacial sense (GRM – gross rent multiplier) will be somewhere between 120-150 for the areas I’m looking as well as economic conditions for my family (job security/outlook). I know the later will have to suffer in the new economic conditions that are lagging.

Hence, my current townhome (currently estimated at $450k or 225 GRM will have ways to go)

willing to buy @ 120-150 GRM which would make it $240k-$300k townhouse.

anyone else?

[SD Transplant]

Ra633,

For me (my family) it’s quite simple. I will wait until it makes finacial sense (GRM – gross rent multiplier) will be somewhere between 120-150 for the areas I’m looking as well as economic conditions for my family (job security/outlook). I know the later will have to suffer in the new economic conditions that are lagging.

Hence, my current townhome (currently estimated at $450k or 225 GRM will have ways to go)

willing to buy @ 120-150 GRM which would make it $240k-$300k townhouse.

anyone else?

[no_such_reality]

willing to buy @ 120-150 GRM which would make it $240k-$300k townhouse.

About the same GRM for rent-saving. Much lower GRM for investment. All depending on interest rates, which are looking up up up. Particularly for any kind of documentation gap.

Currently, in Irvine in the OC, you can readily rent a $600K plus ‘home’ for $2400. After taxes, assuming 5% annual rent increases, if home prices just stay flat, after five years, I’ve saved 1/3rd by renting, $100K+. If you look outside of Irvine in the OC, the numbers are actually more in favor of renting as rents are lower by a larger amount than home prices are lower.

[no_such_reality]

willing to buy @ 120-150 GRM which would make it $240k-$300k townhouse.

About the same GRM for rent-saving. Much lower GRM for investment. All depending on interest rates, which are looking up up up. Particularly for any kind of documentation gap.

Currently, in Irvine in the OC, you can readily rent a $600K plus ‘home’ for $2400. After taxes, assuming 5% annual rent increases, if home prices just stay flat, after five years, I’ve saved 1/3rd by renting, $100K+. If you look outside of Irvine in the OC, the numbers are actually more in favor of renting as rents are lower by a larger amount than home prices are lower.

[ra633]

SD Transplant,

ty for the reply, good explanation. However, your case illustrates my point. You will stay a renter until the GPM deflates by at least 33%. As long as ALL PRs vow to hold out at least that long, the day may never come, or at least take several years…Something’s got to give.

If PRs don’t buy while the market is slowly going down, then it could take years to go down another 20%. In the meantime, what will happen to rents?

I suppose that part of the GPM calculation is based on rents, so if rents inflate a lot over the next few years, then your estimated purchase price will go up the same.

ra633

[ra633]

SD Transplant,

ty for the reply, good explanation. However, your case illustrates my point. You will stay a renter until the GPM deflates by at least 33%. As long as ALL PRs vow to hold out at least that long, the day may never come, or at least take several years…Something’s got to give.

If PRs don’t buy while the market is slowly going down, then it could take years to go down another 20%. In the meantime, what will happen to rents?

I suppose that part of the GPM calculation is based on rents, so if rents inflate a lot over the next few years, then your estimated purchase price will go up the same.

ra633

[Bugs]

I think you greatly overestimate the number of PRs out there and you greatly underestimate how smart the average PR is. Most of the PRs are bearish because that’s what makes sense in the current market given the current relationships between rents and prices, not because they’re afraid or stupid. They recognize that, unlike sales prices, rents are directly related and to and dependent upon wages and population trends and therefore have a definite ceiling regardless of sales prices. Unless the wages go up, the rents basically can’t increase that much. This is evidenced by the fact that they basically haven’t increased that much in relation to everything else.

PRs are watching the sales volumes and the inventories, because they know that those are the relevant numbers to watch, not the sales prices themselves or the medians. Trees and forests. A lot of the tree-inspection that goes on here is done primarily in the name of entertainment value. The health of the forest is already well-establihsed and therefore not worthy of debate, let alone discussion.

What this means is that many of the current bears are probably going to go shopping while the bulls are still trying to figure out how to create a new credit identity to escape the poor decisions they made during the last few years. You could say the bear of 2007 will be the bull of the future and vice-versa.

[Bugs]

I think you greatly overestimate the number of PRs out there and you greatly underestimate how smart the average PR is. Most of the PRs are bearish because that’s what makes sense in the current market given the current relationships between rents and prices, not because they’re afraid or stupid. They recognize that, unlike sales prices, rents are directly related and to and dependent upon wages and population trends and therefore have a definite ceiling regardless of sales prices. Unless the wages go up, the rents basically can’t increase that much. This is evidenced by the fact that they basically haven’t increased that much in relation to everything else.

PRs are watching the sales volumes and the inventories, because they know that those are the relevant numbers to watch, not the sales prices themselves or the medians. Trees and forests. A lot of the tree-inspection that goes on here is done primarily in the name of entertainment value. The health of the forest is already well-establihsed and therefore not worthy of debate, let alone discussion.

What this means is that many of the current bears are probably going to go shopping while the bulls are still trying to figure out how to create a new credit identity to escape the poor decisions they made during the last few years. You could say the bear of 2007 will be the bull of the future and vice-versa.

[SD Transplant]

I guess you’re assuming the rents will raise significantly.
Here is my lease renewal for this year $25/month more. I just got my notice 2 days ago.

currently lease $2020
new lease $2045
______________________
Total increase $25/month

Percentage increase 1.23%

I can live with that. in fact, I could be renting for a loooong time.

I guess this springs up a new post, WHAT’S YOUR RENT INCREASE THIS YEAR???

[SD Transplant]

I guess you’re assuming the rents will raise significantly.
Here is my lease renewal for this year $25/month more. I just got my notice 2 days ago.

currently lease $2020
new lease $2045
______________________
Total increase $25/month

Percentage increase 1.23%

I can live with that. in fact, I could be renting for a loooong time.

I guess this springs up a new post, WHAT’S YOUR RENT INCREASE THIS YEAR???

[lniles]

SDT I honestly don’t understand the correlation between piggs renting and the market staying bubbly. Are you saying that property owners who rent to piggs will be buoyed by this rental income?

One of the major points of this website is the fact that the cost to buy a house is so extremely disproportional to the cost of renting that house (it’s how some people determine value: what would it rent for).

Can you explain how piggs renting will keep the market inflated? Make sure to do the math before you reply.

[lniles]

SDT I honestly don’t understand the correlation between piggs renting and the market staying bubbly. Are you saying that property owners who rent to piggs will be buoyed by this rental income?

One of the major points of this website is the fact that the cost to buy a house is so extremely disproportional to the cost of renting that house (it’s how some people determine value: what would it rent for).

Can you explain how piggs renting will keep the market inflated? Make sure to do the math before you reply.

[SD Transplant]

lniles,

I think you missunderstood. All I was saying/confirming is, as follows (replying):

1) My criteria for buying is base on GRM notes above (I only need a place to live, so I won’t invest more in RE than that)

2) I replied with the terms of my rent stating that if the rates of the rent/leases (stay the same – around 1% / year) for me, and the priceses won’t come down to the GRM expectations that I have, I will rent for a long time.

Vis-a-vis my math …I’m not sure what was wrong with it, but I guess I could have been more explicit.

[SD Transplant]

lniles,

I think you missunderstood. All I was saying/confirming is, as follows (replying):

1) My criteria for buying is base on GRM notes above (I only need a place to live, so I won’t invest more in RE than that)

2) I replied with the terms of my rent stating that if the rates of the rent/leases (stay the same – around 1% / year) for me, and the priceses won’t come down to the GRM expectations that I have, I will rent for a long time.

Vis-a-vis my math …I’m not sure what was wrong with it, but I guess I could have been more explicit.

[Author]

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