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Tactically Inept

Rent is too damn high.


kuhla

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I'm shopping. I want a studio or single bedroom but damn is it hard.

 

"L.A.-O.C. housing market is least affordable in U.S., Zillow says" - http://www.latimes.com/business/realestate/la-fi-unaffordable-homes-20140821-story.html

"Rents in Southern California will climb faster in next two years, study says" - http://www.latimes.com/business/realestate/la-fi-rents-in-southern-california-will-climb-20141006-story.html

"Rents rise at hottest pace in six years" - http://www.marketwatch.com/story/rents-rise-at-hottest-pace-in-six-years-2014-12-17

"Average asking rent at county's big complexes at all-time high" - http://www.ocregister.com/articles/county-638638-percent-rent.html

"Orange County housing prices at all-time high" - http://abc7.com/realestate/orange-county-housing-prices-at-all-time-high/354147/

"County Remains Among Worst in State for Affordable Housing" - http://www.voiceofoc.org/healthy_communities/article_217fad0e-ade3-11e3-8aa6-001a4bcf887a.html

"There’s Only One Way Rents Will Go: Sky High" - http://www.thefiscaltimes.com/2014/10/28/There-s-Only-One-Way-Rents-Will-Go-Sky-High

 

Isn't there some kind of breaking point to all this?!

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All markets move in upward trending cyclical patterns. The short answer to all this is to buy a house (I'm only partially kidding). The housing market right now in LA/OC is actually flat or even falling a bit, all the investors have had their fill and the market is now a buyers market. http://www.latimes.com/business/la-fi-case-shiller-20141125-story.html

Note that the case-shiller index trails 60 days.

 

Also FHA loans only require 3.5% down payment (don't get me started) although to add a small amount of reasonableness, you would be required to buy mortgage insurance if your down payment is below 20%.

 

Rent prices will eventually become high enough that it makes no economic sense to rent and everyone will look at buying. Once that happens the inverse becomes true, housing prices will rise until no one can afford to buy and everyone will look to rent.

 

As far as the people who feel priced out of the market, just remember that these prices would not move in this direction without appropriate market forces. There are enough people renting at these rates to justify them, and then there's demand to justify the current trend of increasing rents.

 

tl;dr

No breaking point yet, ask again in 2 months.

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Some anecdotal information.

 

Called a place this morning which had a listing for a 1 bd/bath, 800 sq/ft, near current home, in La Habra (on border with Fullerton) for $1205-1270/mo and the complex had pretty good reviews.

 

Part of the phone call:

 

Her: Can I ask where you saw the listing online?

Me: I'm not in front of my computer so I can't really tell the original source but it was one of the results on pad mapper.

Her: Ok, I just wanted to ask because sometimes the data online is outdated on price. Our 1 bedrooms currently start at $1340.

 

That's already $100+ higher than the listing but sure go ahead and put me down for an appointment for a viewing anyways because I need to get as many data points as possible.

 

Later at the complex:

 

Her: Yes and our rates will be going up in January. Our lowest priced units will then be $1400.

 

What the hell? The listing is a full $150-$200 lower than what you are telling me. I showed her the listing. She dismissed it as "just old".

 

She wasn't rude but it irritated me because I felt baited.

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1400 for 1 bed bath hollyfuk

 

There are a lot of 1 bd/bath listings for $1400 or more (I've seen plenty that are over $1600 too) but the point I wanted to make was the difference between the price I saw online and the one that was told to me over the phone and the one by the manager.

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We're living in one of the highest cost of living areas based on this data compiled on this website.

 

http://livingwage.mit.edu/places/0605928000

 

In regards to the buying a home comment from Malaphax. Don't even consider doing it unless you're ready for a ton of commitment in DIY repairs, maintenance, utilities bills you probably were never aware of etc. I've gone super cheap and minimally furnished my home, relying mostly on home warranty and DIY for repairs and I'm already ~$20,000 in over the past 2 years (counting from the day I got the keys). Now I just discovered earlier this week that my entire drain pipe system (cast iron) is severely damaged by root intrusion and collapsed pipes. The same is true for pretty much every house in my neighborhood. Current estimated cost for repair? $15-25,000. Insurance and warranty certainly is not going to cover it. Say goodbye to buying a new car any time soon.

 

So due to repairs, the monthly costs, repairs can potentially double your living expenses.

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don't you have like contractor checking on your shit before you purchase the house ?

 

my parents knows going in what needs to be replace and stuff that potentially could break. in fact they end up replacing all the pipes to copper before we go in.

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If I am straying too far out of the topic, please move this post.

I've learned my lesson for sure this time regarding things that can break, but despite spending 2 years researching before I purchased (and another years now as a home owner), there is still many things I do not know about home ownership.

 

I had a general home inspection done, yes, and they found countless problems, but most of them were reasonable and nothing major was discovered. I failed to hire specialists though, and that was my biggest mistake. I also purchased a slab foundation home, another big mistake. The 3 most expensive home repairs possible, #1 foundation, #2 roofing, and #3 plumbing, I am subjected to two of them.

The issue experiencing now is not the water lines but rather than drain lines. If you recall Tino, I almost walked away from the home, when I discovered the home had partial copper/galvanized steel as the water mains and I was concerned about the costs for re-plumbing. Thankfully, I discovered they already did basically a complete copper re-pipe to most of the home (bathrooms & kitchen). They only missed the garage/laundry sink. So I'm not particularly worried about that anymore but rather drainage issues where the pipes are buried underneath the slab and needs to be replaced.

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  • 4 weeks later...

Average asking rent by apartment size    
Apt. type Q4 2014 1 Year Change
Studio $1,324 5.0%
1 Bed, 1 bath $1,545 4.9%
2 Bed, 1 bath $1,628 5.4%
2 Bed, 2 Bath $2,029 4.6%
2 Bed Townhome $2,197 4.8%
3 Bed, 2 bath $2,347 1.7%
3 Bed Townhome $2,736 4.1%
All Size Average $1,781 4.8%
Source: RealFacts    
     
Average asking rent by city    
City Avg. asking rent by month 1 Year Change
Santa Ana $1,687 9.0%
Fountain Valley $1,634 8.8%
La Habra $1,455 8.7%
Huntington Beach $1,690 7.4%
Mission Viejo $1,733 7.2%
Lake Forest $1,749 7.0%
Laguna Niguel $1,777 6.7%
Placentia $1,688 7.0%
Costa Mesa $1,840 6.3%
Aliso Viejo $1,894 6.0%
Brea $1,568 7.0%
Garden Grove $1,479 5.6%
Westminster $1,451 5.5%
Newport Beach $2,271 3.4%
Anaheim $1,468 5.2%
Cypress $1,602 4.6%
Irvine $2,085 3.4%
Orange $1,736 4.1%
Rancho Santa Margarita $1,655 3.8%
Stanton $1,356 4.5%
Tustin $1,695 3.5%
Fullerton $1,555 3.3%
Buena Park $1,390 2.2%
Source: RealFacts    
     
Average effective rent by metro area    
Metro area Avg. effective rent by month  
New York $3,223  
San Francisco $2,237  
Boston $1,898  
Fairfield County $1,894  
San Jose $1,879  
Long Island $1,655  
Orange County $1,648  
Source: Reis    
     

Source: http://www.ocregister.com/articles/month-648388-rent-county.html

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I've been sending emails, applications and making phone calls and basically, if a listing is older than 72 hours, it's not even worth trying to get an application. All the ones that old that I have contacted have said they are waiting on a security deposit from an approved application or the unit has been filled. I can rarely even get an application to fill out.

 

I'm guessing landlords are getting applications the same day they list units and, considering demand right now, at least some have decent credit/history so they don't have much issue getting one that meets their requirements. There isn't much reason for them to sit on one and wait either since people are going for whatever they can get.

 

I feel I am getting closer but I don't like the rules of the game right now.

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  • 4 weeks later...

Following up since the Case-Shiller numbers are out for December:

 

http://www.zerohedge.com/news/2015-02-24/december-home-prices-jump-most-march

 

The parts I would focus on:

“The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak. Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The softness in housing is despite favorable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates and positive consumer confidence.

 

“Movements in home prices show clear regional patterns. The western half of the nation plus Miami and Atlanta enjoyed year-over-year increases of 5% or more. San Francisco and Miami were the strongest. Dallas, Denver, Las Vegas and Atlanta also experienced solid gains. Phoenix was an exception to the western strength with only a 2.4% increase; San Diego was a bit under 5% at 4.8%. The regional patterns and the weakness in new construction and new sales may reflect decreasing mobility – fewer people moving to different parts of the country or seeking jobs in different regions.”

 

tl;dr December looked "decent," Western US looks ok. But housing starts are in the toilet along with mobility. Affordability is low and this will affect further home sales.

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  • 2 weeks later...

Some notes about the housing market and the wonders of statistical models.

 

Homeownership%20Rate%20Q3%202014.jpg

median%20asking%20rent%20Q3%202014.jpg

Homeownership%20Rate.jpg

This last graph shows what the home ownership rate would have looked like without the change that was implemented in 1994 (along to the changes added to CPI calculations that were implemented).

 

I personally take these graphs with several grains of salt. But my gut feeling is that they're not too far off from reality.

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  • 2 months later...

source - http://www.bloomberg.com/news/articles/2015-06-08/these-are-the-13-cities-where-millennials-can-t-afford-a-home

 

"I'm making a good salary and I'm doing all these things that I'm supposed to be doing," such as saving for a down payment, he said. "But you're just not able to save enough to get to that number. Housing is so inflated."

 

This is what I find the most infuriating part. You do a lot of the things you were told you are supposed to do but that is no longer enough. It's a recipe for insanity.

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The issue is that home equity has become a big savings/retirement account and we've fucked ourselves over pretty heavily by allowing significant inflation in the housing market.
It's exacerbated by the depressed wages for younger workers, and the aging workforce that refuses to retire (mostly because they didn't save).

We can't get by doing "what we're supposed to do" because it no longer works that way.

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I wanted to post this picture mostly because it does a fantastic job of showing the current state of home loans and available credit. One might argue if you looked at this graph over a longer period that from 2000 to 2007 would be a wider than average distribution but it's still interesting all the same.

 

S5oqMSh.png

 

And when you combine the above graph with this one, you quickly understand the housing crisis.

dPfkkS1.png

 

http://toddwschneider.com/posts/mortgages-are-about-math-open-source-loan-level-analysis-of-fannie-and-freddie/

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  • 3 weeks later...

Randomly came up on conversation with someone else at the wedding on saturday, he was shopping apartments and had actually looked at the same complex where I am now. He threw out some numbers and I double checked them. Since I moved in just 3 months ago it looks like prices have already gone up about $200/month.

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Doing napkin math for that graph Malaphax posted (2080 hours * $26.65 per hour) means $55,432 a year.

 

oh boy thats fast

 

There was one complex that I know that went up at least that much during the time I was shopping (about a 6 month time span).

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