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The Housing Crisis Is Terrible, But What About Renting?
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Real quick, before we review the abysmal state of housing in America from another angle. Numero Uno. By a show of hands, how many people think the market claws back most of its losses by the end of the week? The Juice raises its pulpy little fingers in the affirmative. Numero Dos. By a show of trade confirmations, how many people think Monday presented the buying opportunity of a lifetime? The Juice shows our pulp-stained confirmations. Over the last five days …
Do you think Microsoft suffered the least because it pays the best dividend among the five most popular stocks in our Trackstar database? The Juice 110% thinks so. Anyhow, we think the value of a free subscription to The Juice is that we hit investing and personal finance in a way most everyday investors can relate to. So today’s nickel worth of free wisdom: If you have a long-term time horizon, this is definitely a buying opportunity. If you’re a little skittish, maybe go lighter on the high flyers and opt for relative high flyers that pay solid dividends. Like Microsoft. Or even Apple. On personal finance. We know the housing market — if you’re looking to become a homeowner — is in crisis. Even with the interest rate on a 30-year mortgage plummeting (at least check, it’s at 6.34%), the cost to own most anything at or above the median in America still requires an annual salary in excess of six figures: To not spend more than 30% of your income on housing, you need to earn $11,000 a month, or $132,000 a year. Breaking news: The typical salary in the United States these days is considerably less than half that amount. Go north of the median to, say, $750,000, and the monthly payment increases to $5,630, which requires a hefty income of $18,767 a month, or $225,204 annually. We ran that math at 6.62%, so it’s not all that different at 6.34%. And, as we have been predicting for months now, The Juice thinks prices will soar as rates continue to come down. Once they cross the psychological barrier into the 5% range, look the bleep out. All of this said, two realities exist in America that matter to this conversation:
All of this said, there’s the rest of the country. Particularly young people just starting out and realizing that the down payment on the early innings of the American dream (be it becoming a homeowner or renting your first apartment on your own) is cost-prohibitive. It’s not like it was back in the day for your Gen X parents. So, renting it is! The cost of renting these days, via Bill McBride’s Calculated Risk blog: From ApartmentList.com: Apartment List National Rent Report Rents are up 0.2% month-over-month, down 0.8% year-over-year … Prices increased just 0.2% in July and today the nationwide median rent stands at $1,414 … From Realtor.com: June 2024 Rental Report: Median Asking Rents Continue To Fall In June 2024, the U.S. median rent continued to decline year over year for the 11th month in a row, down $7 (-0.4%) for 0-2 bedroom properties across the top 50 metros, slower than the rate seen in May 2024. The median asking rent was $1,743, up by $13 from last month following a typical seasonal trend. As with the cost to buy, these tiny decreases mean very little, if anything. As the Realtor.com report Bill cites said: “Despite the 11th month of decline, the U.S. median rent was just $11 less (-0.6%) than the peak seen in August 2022. Notably, it was still $305 (21.2%) higher than the same time in 2019 …” To this end, we tend to focus on the theme that, yeah, housing is expensive nationally, but in the big cities, it’s literally out of reach. A bit of a gear shift today with this somewhat surprising news from the American Apartment Owners Association, which is basically a landlord organization: More and more owners are filing for evictions in some Sun Belt cities as tenants increasingly struggle to pay rent. Evictions are up by more than 35% compared to pre-pandemic averages in half a dozen cities, most of which are in Sun Belt states, new data from Princeton University’s Eviction Lab shows. During the past 12 months, filings grew by 46% in Gainesville, Florida, compared to pre-Covid-19 years. The Eviction Lab also reported increases of 43%, 42% and 35% in Las Vegas, Houston and Phoenix, respectively. Rates are also high in Minneapolis-St. Paul and Columbus, Ohio, which registered 44% and 37% increases in eviction filings. Total eviction filing notices for the 34 cities tracked by the Eviction Lab increased by 15% over the past year. Wow. Wow. Wow. This isn’t good news. It really reaffirms another position The Juice has had for some time. Before the masters of the now obvious came along. That when these once affordable places start to fall — on renting, buying or both — we have even bigger trouble in the housing market. And this could indicate something even worse: A full-on recession.
The Bottom Line: With a weak jobs report last week and the market cratering, we’re seeing increased predictions of a recession. If our haves and have nots housing market is any kind of a reliable indicator, The Juice thinks there’s something to all of this. As with most money matters in America, how this impacts you comes down to whether you’re a have, have not or something in between. Use the feedback link at the bottom of this page to give us your thoughts and let The Juice know where you stand. |
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