"We have seen corporate landlords—who own a larger share of the rental market than ever before—use inflation as an excuse to hike rents and reap excess profits beyond what should be considered fair and reasonable."
That’s not really reflective of the market in reality. Rent in a competitive market (I.E. anywhere people want to live) tends to hover around the cost to own, buying with 20% down, plus property tax and mandatory homeowners insurance required by the mortgage holder.
In fact, usually it’s cheaper to rent than it is to buy with only 20% down and good credit.
This is because people do this calculation, come to the conclusion “it will cost us a little more, but we get to own our dwelling, our payments eventually go to principal (though this is rigged by the banks too), and hopefully the market goes up and we get equity”
Yes, the market fluctuates, particularly in economic crisis. But it teeters back and forth based on the costs to buy and rent. Because if rent exceeds the cost to buy, investors snap up property just to rent it out, and that raises demand on real estate to the cost goes up.
The rates going up as fast as they have when prices are still high have killed buying as an alternative to renting in my city.
I feel for people who weren’t “smart enough” to buy during the pandemic, because unless prices, rates, or both drop dramatically, it looks like they may have been permanently priced out of buying and renting is only getting less affordable.
I agree. It sucks all around right now for anyone on the market to rent or buy. We’re all squeezed. Only people that had the luxury of owning and/or capital and foresight to invest are happy right now.
The wealth divide has only increased substantially.
But that doesn’t mean that rent is “predatory” except in the cases of long time owners hiking rates when their costs have stayed the same. The reality is that rent is closely related to the current cost of buying at any given time.
But that doesn’t mean that rent is “predatory” except in the cases of long time owners hiking rates when their costs have stayed the same. The reality is that rent is closely related to the current cost of buying at any given time.
Not all landlords are predatory maybe, but at least in this city the overwhelming majority of them are. They’re also like a half dozen corporations that hold most of the apartment buildings. They raise their rates dramatically like clockwork even though I’m in California and we have Prop 13 which holds their tax raises to very low percentage increases yearly.
I would say that for the most part, yes, it has a relationship to what it would cost to buy the same property…but it’s location dependent. You can’t (for the most part) buy an apartment here. It’s almost certainly the case (I’m only not 100% sure because a lot of the apartment complex holding companies are private) that they have low rate mortgages or no mortgages at all on the buildings, and they charge more and more as time goes forward despite their costs not really increasing.
We’re entering a neo-feudalistic economy and while yes, again, there’s some relation to the cost…a lot of it is just straight up greed.
I feel like this argument falls flat in the current bubble market where you can triple your housing investment in five years. I bought my condo in 2017 for $360,000 and today it’s worth $550,000. Even with property taxes, renovations, insurance, etc etc, I have made a killing on buying this property.
Your argument might make sense in a recessionary market like the 2008 subprime meltdown.
For someone to buy your condo today, they will be signing up for a mortgage whose monthly cost is near the going rent price. And most likely, more than the going rent price.
If they were to just buy and rent it out, they will likely be doing so at a loss.
The market going up or down after the purchase of the property is independent. It may go up, it may go down. That’s the gamble you make if you’re doing it as an investment.
Your experience happened to take place at an extraordinarily good time to already own property., and FOMO was certainly fueling the frenzy during the peak.
Whether that continues to be the case is unknown. Economists are all over the map.
It made you more rich on paper, but the reality is that you aren’t in the same boat as landlords. The reason is that if you live in your property in order to realize the profit on it you’ll have to sell it and move somewhere less expensive (i.e. somewhere likely less desirable).
Prices in real estate going up only really benefits real estate tycoons, the local government (depending upon location), and other side players in the market (e.g. real estate agents). For the rest of us, if you sell it just means that you have to turn around and buy in a more expensive market. Also (depending upon location, California properties aren’t completely re-assessed for taxes until they change hands) it hikes your taxes.
As a single property owner in California, I’m rooting for prices to drop so I can upgrade and still pay the same amount of taxes (or less).
That’s not really reflective of the market in reality. Rent in a competitive market (I.E. anywhere people want to live) tends to hover around the cost to own, buying with 20% down, plus property tax and mandatory homeowners insurance required by the mortgage holder.
In fact, usually it’s cheaper to rent than it is to buy with only 20% down and good credit.
This is because people do this calculation, come to the conclusion “it will cost us a little more, but we get to own our dwelling, our payments eventually go to principal (though this is rigged by the banks too), and hopefully the market goes up and we get equity”
Yes, the market fluctuates, particularly in economic crisis. But it teeters back and forth based on the costs to buy and rent. Because if rent exceeds the cost to buy, investors snap up property just to rent it out, and that raises demand on real estate to the cost goes up.
The rates going up as fast as they have when prices are still high have killed buying as an alternative to renting in my city.
I feel for people who weren’t “smart enough” to buy during the pandemic, because unless prices, rates, or both drop dramatically, it looks like they may have been permanently priced out of buying and renting is only getting less affordable.
I agree. It sucks all around right now for anyone on the market to rent or buy. We’re all squeezed. Only people that had the luxury of owning and/or capital and foresight to invest are happy right now.
The wealth divide has only increased substantially.
But that doesn’t mean that rent is “predatory” except in the cases of long time owners hiking rates when their costs have stayed the same. The reality is that rent is closely related to the current cost of buying at any given time.
Not all landlords are predatory maybe, but at least in this city the overwhelming majority of them are. They’re also like a half dozen corporations that hold most of the apartment buildings. They raise their rates dramatically like clockwork even though I’m in California and we have Prop 13 which holds their tax raises to very low percentage increases yearly.
I would say that for the most part, yes, it has a relationship to what it would cost to buy the same property…but it’s location dependent. You can’t (for the most part) buy an apartment here. It’s almost certainly the case (I’m only not 100% sure because a lot of the apartment complex holding companies are private) that they have low rate mortgages or no mortgages at all on the buildings, and they charge more and more as time goes forward despite their costs not really increasing.
We’re entering a neo-feudalistic economy and while yes, again, there’s some relation to the cost…a lot of it is just straight up greed.
I feel like this argument falls flat in the current bubble market where you can triple your housing investment in five years. I bought my condo in 2017 for $360,000 and today it’s worth $550,000. Even with property taxes, renovations, insurance, etc etc, I have made a killing on buying this property.
Your argument might make sense in a recessionary market like the 2008 subprime meltdown.
Your use case reflects what I said exactly.
For someone to buy your condo today, they will be signing up for a mortgage whose monthly cost is near the going rent price. And most likely, more than the going rent price.
If they were to just buy and rent it out, they will likely be doing so at a loss.
The market going up or down after the purchase of the property is independent. It may go up, it may go down. That’s the gamble you make if you’re doing it as an investment.
Your experience happened to take place at an extraordinarily good time to already own property., and FOMO was certainly fueling the frenzy during the peak.
Whether that continues to be the case is unknown. Economists are all over the map.
It made you more rich on paper, but the reality is that you aren’t in the same boat as landlords. The reason is that if you live in your property in order to realize the profit on it you’ll have to sell it and move somewhere less expensive (i.e. somewhere likely less desirable).
Prices in real estate going up only really benefits real estate tycoons, the local government (depending upon location), and other side players in the market (e.g. real estate agents). For the rest of us, if you sell it just means that you have to turn around and buy in a more expensive market. Also (depending upon location, California properties aren’t completely re-assessed for taxes until they change hands) it hikes your taxes.
As a single property owner in California, I’m rooting for prices to drop so I can upgrade and still pay the same amount of taxes (or less).
I wouldn’t bet on it happening though.