housing bubble

[knabe]

how do you know when the housing bubble is almost over?  when rent is near or equal a payment.

An Associated Press analysis of 45 metro areas finds the gap between the monthly mortgage payment on a median-priced home and the median rent has shrunk from $777 a month to just $221 in the past three years.

http://news.yahoo.com/s/ap/20090721/ap_on_bi_ge/us_buy_vs_rent

 

[oakview]

I would think that when the spread between the two figures was larger would be an indication that people are willing and hopefully able to spend more for a house.  Increased demand would raise prices and raise payments, enlarging the spread.  A better indicator than rent/own spread might be when new housing construcion numbers increase and existing inventory decreases.  Some areas of the country have seen a slight reversal, it may be a long time coming in others.  I've seen figures stating that 25% of all of the nation's foreclosed upon homes were located in only 8 counties.  (source:  Dave Ramsey)  The rental property owners that I work with are enjoying good times.  Houses are at their lowest level, cost wise, in at least the last 10 years, government subsidized rent allowances have increased, and the number that qualify for assistance has multiplied greatly in the past six months.  I recently financed a rental property for one of my customers for 65,000.  He receives 1,100/month rent, of which 75% is paid for by the government through section 8.  This is not unique.

 

[vc]

I think that as the gap shrinks, renters are more likely to be able to afford to make the jump from rent to a mortgage.

 

[Jill]

I recently financed a rental property for one of my customers for 65,000.  He receives 1,100/month rent, of which 75% is paid for by the government through section 8.  This is not unique.

Unfortunantly something wrong with that picture!  The correct statement would be 75% is paid for by the taxpaying public, at some point we just will not be able to foot the bill any longer, what happens then.

 

[kobo_ranch]

When rental rates get to be above what a mortgage payment would be is always a good sign. 
The sad fact at least here in my County (really varies where you live) are the property taxes.
On our family owned ranch where I had huge hopes of building a beautiful home soon, after all this recession crap has really made me step back and think twice.  Just don't think I want to be burdened by the huge property tax bills year after year.  We've done well, but worked hard for all these years and don't want to work till I die just to pay property taxes.  The way our government is headed, all us working folks and the ones with ANYTHING are going to be expected to pick up the tabs of all the rest.  I have a huge problem with that! 
I just sold a house a bought a few years back I bought as an investment and have had as a rental property, but after a couple years of messing with renters, taxes, repairs, trouble  . . . I decided its just not worth the hassle! 
Real Estate has always been our best money makers . . . but now I think its turning to raw land, or farmland!  IF you have money that's the best place to put it!  <cowboy>

 

[oakview]

Most renters, not all, rent because they cannot buy a home for one reason or another.  No matter how thin the margin gets between rent and mortgage payments, especially in today's climate, many renters simply cannot qualify for a home loan no matter how easy the government tries to make it.  18 months ago a mortgage company called me and raved about a new program they were offering:  Loan of up to 125% of the home value, 70% debt ratio, and they'd do it for up to 40 years.  You can't get that today that I know of and I personally don't believe it should have been offered in the first place, but that's not my call.

I understand and agree that it just doesn't seem right that the tax paying public gets the bill for so many people's rent.  If you really want to get your blood pressure up, here's the rest of the story:  15-20 years ago the government gave cities money to build low income housing.  After many years of vacancies and other mismanagement, the government decided to let the cities sell these properties, none of which had generated any property taxes and little if any income.  The properties were offered to the public at below market values.  The purchaser got a property for about 70% of the market value.  It is then rented to a section 8 renter and cash flows all day long.  My customers have these properties rented the day they take possession.  In effect, the government, that would be us, built the house for you, sold it to you at a reduced price, and then pays for it with more or less guaranteed funds from government subsidized rent.  This is a condensed version of the story, but you get the idea.

 

[SWMO]

And we wonder why our government is Trillions of Dollars in debt?  Bunch of wise folks that we have elected to the highest offices in our country.

 

[Dusty]

In my part of the world the rent on a single family home is usually always higher than the payment.  Thats because the rents are kept artificially high because of the section 8 crap.  I recently bought a house and my payment is only $300/month.  I financed through my local bank and put 20% down.  I'll probably pay it off in 5 years and have no problem renting it out for 4-500 month.  I won't rent it to the dirt bags tho.  Every town around has a slum lord or two that buys cheap houses and then gets 5-700/month from the government to put a family on welfare in them.  Its too bad because it makes the rents higher for the people who truly just want to a rent a house and not have the government pay the tab.

 

[pjkjr4]

I live in a pretty small town in NC Oklahoma. Population 800. My wife and I have thought about buying $30-$40K houses and rent them to school teachers for $500-$600 a month. It seems like there's always a coach or 2 that will stay for a couple of years, and then go on. Looks like it would work, but I haven't got the cahones to do it yet.