Stretched thin? You've got company: Part II

Some conclusions in the Center for Housing Policy study released Wednesday, "Stretched Thin: The Impact of Rising Housing Expenses on America's Owners and Renters, 2008," come from more recent data than the 1996-to-2006 study period.

Although home prices are declining, rents are expected to continue to rise as the economy struggles. Utility costs, not surprisingly, also are on the rise. (From 1996 to 2006, utility bills rose 43%, while the median homeowner income rose 36%. Utilities eat up about 5% of homeowner income.) And transportation costs will continue upward. So much for having bought on the outskirts of employment centers, where homes were more affordable.

Delving further into the study, a regional comparison of five metro areas showed that in Los Angeles homeowners were spending 49.5% of their income on principal and interest payments in 2006; their Boston counterparts, 31.7%; Chicago, 26.5%; Atlanta, 20%; and Houston, 18.9%. No wonder we've got problems. 

-- Lauren Beale

Your thoughts? Comments?

Photo: Michael Caulfield / Associated Press

Comments

[MyLessThanPrimeBeef]

More parallels between the end of the Romans' world and of our world:

1) Like their emperors, our Fed chairman is busy clipping coins.

2) Reports of virgin birth. This time, our messiah is a shark. A real shark, not the kind genetically engineered in our Ivy League schools.

3) An astroid was predicted and observed this past Tuesday near Kenya.

I guess the search is on for a newly-born shark in the East Africa waters. Capture at all cost!

[Rational Renter]

"Rents are expected to rise throughout the crisis."

No they aren't. I'd like to see that argument try to be made in the face of rising unemployment and deflationary pressure on wages.

[amir]

The study is wrong because it's looking at the rear view mirror (1996-2006).

Gas and oil prices are declining and will continue to decline, as will commodities. Also, corporations will have to find a way to lower prices or parish. The result will be lower bills, not higher.

Rents will go lower. They are more directly linked to income levels than house prices. Also, there is a housing glut. Some of it will have to be converted to rental units, increasing supply. The result will be lower rents.

We're currently in a deflation.

Like Cramer said "They know nothing!"

[Jim]

"Although home prices are declining, rents are expected to continue to rise as the economy struggles."

That's actually what got us to buy a house in a falling market in Fresno. My husband works up there, so we'd been maintaining an apartment. But as more and more people were forced out of homes they couldn't afford, they went back to renting, which was driving up our rent (supply/demand.. you know how it works). Finally, one day we looked at where housing prices had fallen to, and realized it would be cheaper just to buy a house, even if it continues to lose value. Do we did (and it did, but no regrets).

Not sure how applicable that will be down here in SoCal, though. The markets are VERY different.

[puckhead]

Rational Renter & Amir,

Both good points on the direction of rents. However, one could argue also that all these people losing their homes will turn into renters thereby absorbing the increase in rental units. One could also argue that with the credit squeeze, financing will be in short supply for any new rental housing construction thereby limiting supply. The demand for rental housing may also increase as our borders are still basically opened and new "immigrants" migrate north. As bad as our economy will be in 2009, it will still be much better than what faces people in Mexico & Central America.

[Steve]

Rent is and will increase. I own 5 rentals in CO and just upped the rent by 20% and still had a wait list. I have owned these houses for 10 years and there has never been a better rental market. It is simply supply and demand, more cannot quaify or lost their home. I estimate the pool of renters has tripled.

[Laker]

....Although home prices are declining, rents are expected to continue to rise as the economy struggles.....

Go back and check our local California recession of 1990-1993. Rents went down.
When people lose their jobs, they can't afford their payments and it doesn't matter mortgage or rent. In case of mortgage, they foreclose, in case of rent, the landlord might be interested in keeping them in the house and thus no need to fix/paint house, advertise, and look for new renters, have place vacant...

I know a friend that rents in high desert area. He used to pay $2500 for a nice 4 bedroom house with pool and all nine yards on 1 acre land. About 6 months ago, he lost his job, he called the landlord and notified him that he could not afford the payment, the landlord reduced his payment to $1000 a month!!!.

As i told you about 8 months ago, my rent also went down about 5% from the year before. My landlord is a good guy, but other than that, he knows it is better to get little less that sit vacant.

Steve, if you have 5 rental homes in CO, and you raised your asking rent 20% and have a waiting list you are a fool.
You should raise the rent up to the point that your waiting list is 1-2 people and you rent them the place.
You either lying to us or simply charging way less than market value.

[Brad Neal]

Rational renter and Amir: You are wrong. If you owned rental property in West LA you would understand. My rents have gone up 20% during the past 6 months (as recently as last week).

[Tokyo Temp- Ex LA Renter]

Maybe for now Brad, but wait long term. This financial fiasco will and does affect all of America, including West LA and the rich.

Your current renters may opt for cheaper places which will abound in about a year or so..

Good luck with that..

It seems that your properties are not all rented out yet?

[shockg]

"I know a friend that rents in high desert area. He used to pay $2500 for a nice 4 bedroom house with pool and all nine yards on 1 acre land. About 6 months ago, he lost his job, he called the landlord and notified him that he could not afford the payment, the landlord reduced his payment to $1000 a month!!!.

As i told you about 8 months ago, my rent also went down about 5% from the year before. My landlord is a good guy, but other than that, he knows it is better to get little less that sit vacant."

Any story from Laker that starts off with "I know a friend" must be true. As true as his 5% discount from his landlord.

[sheila]

Amir, those of us in SCE territory just got notice of a price hike in our electricity bills, in large part due to increased NATURAL GAS prices. average increase $1.21/month,.

By the way, Germany (and 40 other countries) have been PAYING people to put solar panels on their roofs as a way to increase local, clean energy production, improve property values, stimulate the economy, create local skilled jobs, and save open spaces (Big Wind uses 50 acres per MW!!!). Even though tens of thousands of people are collecting checks, and even though solar output is much lower in Germany than in every state of the US, their power bills have increased less than $3/household, and renewable energy has increased to over 12% of their mix.

This seems to be a fantastic option, so i hope people will support local, point of use renewables (and payback for people who do the right thing by generating more clean power than they consume) in the form of Feed in Tariffs. People here want to be rewarded for "doing the right thing." Nobody can argue that solar power (but only that which does not kill off our deserts!) and conservation don't fit that description, so let's support!

[Cal]

I have yet to live in a rental that keeps up with the pace of inflation and I've lived in both corporate and private rentals.

On thing about being an excellent tenant they are reluctant to raise your rents.

[Laker]

shockg or shmuck G, How about we bet $1000 and deposit this with Peter. then i will give peter all the details and proof.
Let see....
Rest assured, the guy from high desert did pay $2500 and IS now paying $1000. The landlord build a new custom house and the renter (the guy i know) really takes care of the place - As Cal is saying too. The place is not worth the mortgage, and the landlord can't sell. However, he did build it himslef and has some pride about it, so he would rather get something and knows that the house is being taken care of 100%.
Also my rent is about 5% less than last year. I don't live in a new custom home, buy the idea is similar, my landlord knows for a fact that I'm taking care of the place like he never seen. So, i offered to leave and find another place, but the smart landlord knows that he can save unneeded advertising, painting walls, cleaning carpets, etc...
Shmuck G, indeed, where have you been???

[Laker]

sheila ,
I have read a research that said that the $700 billion dollars that is about to be spent on buying bank stocks and propping up the stock market could have been used to put solar panels on 50 Million houses around US for FREE !!!
That is about half the households and just imagine the amount of savings from not using fossil fuels and the effect on the environment and reduce funding from terrorist countries...and less demand on oil so lower oil and gas prices...
But i guess propping up the stock market and Goldman Sacks stock is much more important....