When will this end?

[Mega]

Generation tenant: How Britain has become a nation of renters in just 10 years (and TORQUAY is among 51 new rental hotspots)

• Numbers rose from 1.9million tenant households in 2001 to 3.6million in 2011
• There are now 51 rental hotspots in Britain compared to eight 10 years ago
• Popular areas with tenants now include Torquay, Hastings and Norwich
• Bournemouth is the largest rental hotspot outside of London
  

By Emily Allen
PUBLISHED: 08:36, 26 August 2013 | UPDATED: 11:07, 26 August 2013 17 shares
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The number of people renting homes has soared by a staggering 89 per cent in 10 years as householders struggle to get on the housing ladder, new data has revealed.

Figures show a dramatic rise in the number of tenants in England and Wales, from 1.9million households in 2001 to 3.6million in 2011.
The rise has lead to a surge in the number of 'rental hotspots' emerging across the country.

In 2001 there were just eight 'hotspot' areas in England and Wales that had between 20 and 40 per cent of homes rented out, but by 2011 this had climbed to 51 areas.

Rental surge: The flooding of colour across the 2011 map shows how widespread this new market has become, with large numbers of people renting in London, Kent, Nottingham and Leicester



Changing times: The rental picture looked dramatically different in 2001 with large swatches of people in Wales, Devon and Cornwall and parts of the North renting properties ten years ago

Experts say the phenomenon - dubbed 'Generation Rent' - is down to the battle many face to raise enough money for a house deposit, and the older generation being forced to release capital from their own homes to pay for their care in later life.

More...

• Chichester and Oxford top London as least affordable places for locals to buy a home - but where is it getting easier?
• Back with a boom: House prices rise three times faster than wages to highest level since the crash
• North-South divide on house prices forces first-time buyers to leave the areas where they grew up
• A new boom is the last thing Britain needs: Why house price increases will inflict the feel-bad factor on first-time buyers

Traditionally, London has always been the area where large numbers of people choose to rent, due to the spiraling cost of buying.

However the new data shows that in the past decade this has expanded to include large pockets of the South, East and North. Now only a few small areas of the country have little or no properties lived in by tenants.

Seaside town: Bournemouth (pictured) is the top rental hotspot outside of London. More people are renting for longer as they struggle to raise a deposit meaning the rental market has changed dramatically in just 10 years


Hotspot: Many of the renting hotspots tend to be university cities or major business hubs, but more unusual hotspots include Torbay, (pictured) Eastbourne and Hastings where landlords are cashing in



Many of the hotspots tend to be university cities or major business hubs, but more unusual hotspots include Torquay in Torbay, Eastbourne and Hastings.
Others include Blackpool, Liverpool and Salford in the North West, Nottingham and Leicester in the Midlands and Oxford and Reading in the South East.

LANDLORD'S DREAM: TOP RENTAL HOTSPOTS OUTSIDE OF LONDON


1. Bournemouth

2. Brighton and Hove

3. Hastings

4. Manchester

5. Oxford

6. Reading

7. Blackpool

8. Cambridge

9. Southampton

10. Slough



The South East is also popular with many seaside towns seeing rising numbers of rental properties.

Ten years ago, the picture was radically different and rental hotspots were centred on large parts of Devon and Cornwall, London and the west of Wales.

Housing experts believe that although home-ownership will remain constant, more people will have to rent for longer as it becomes increasingly difficult to raise a deposit.

Stephanie McMahon, Head of Research for Strutt & Parker said: 'The private rental sector has changed dramatically over the past decade, and although this brings us more in line with our northern European peers we are still some way off the scale of the rental sector in countries like Germany and Switzerland.
'In our view it is likely that overall home ownership will remain between 60 and 70 per cent over people’s lifetimes, but we will see much more openness to rental at different life stages and for longer time periods.'
She added: 'It is widely acknowledged that long-term rental is increasingly common, driven by factors such as whether the younger generation are able to raise deposits to buy, or indeed the older generation releasing capital from their homes for care and pensions.

Capital bubble: There are a significant number of London boroughs where the rental increase has been dramatic with Barking and Dagenham seeing an increase of 230 per cent in 10 years


'The varied growth of this market across the UK clearly points to a need to understand local markets rather than just the big picture.'
Within London, a number of boroughs have seen an increase in the number of rented properties, such as Barking and Dagenham, which has seen an increase of 230 per cent in 10 years, and Tower Hamlets, which has seen a rise of more than 150 per cent.

Traditionally established areas in prime central London such as Hammersmith and Fulham as well as Kensington and Chelsea have also seen increases of between 30 and 60 per cent.
Ms McMahon said: 'It is widely acknowledged that long-term renting is now immensely common for the younger generation and even more affluent older generations are exploring this different lifestyle option and seeing how much more they can get for their money in rental rather than committing to buying.'






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[Forrest]

Re: When will this end?

I don't know that it will end, exactly...it's going to change. I finally got my Dad's apartment building sold, at a 200K loss, to be turned into condos! I'm glad I've got the cash out, but I don't have permission to use any of it yet...there's a lawsuit against the estate! And look what's happening everywhere else!

The worm is turning for investment real estate: American Homes 4 Rent posted a net loss of $14 million. Wells Fargo announces layoffs for 2,300 due to drop in refinancing activity.

It is no secret that Wall Street has been a big player in this current real estate run. The two biggest single-family landlords in this game are Blackstone Group LP’s Invitation Homes followed by California based American Homes 4 Rent (AH4R). The interesting thing about AH4R is that they own about 20,000 properties throughout the country where investors have been diving in head first. AH4R recently announced a $14 million loss and was also reported to be laying off people because of the recent loss. This is an interesting case study coming from the second largest single-family landlord in the country. It is also interesting to dig through the financials since it shows us that some are overplaying the rental game. Property management is an intensive business. Any investor with time in the business realizes that having one or two bad tenants can set you years back in regards to profits. The gross rents must look extremely appealing to those new to the game. Some are quickly going to realize that they may have overestimated their potential profits.
American Homes 4 Rent
It is interesting to first see where AH4R holds their nearly 20,000 properties:

Source: American Homes 4 Rent
This is a fairly diverse portfolio. Based on the average price per property, you can see that they are buying at the lower range. However, in many of these markets, these are likely to be mid-priced homes. What you begin to realize is that there were definitely generous estimates on earnings here.
Even with the IPO in early August, there was a need to pullback:

“(Bloomberg) The real estate investment trust, founded by self-storage billionaire B. Wayne Hughes, plans to raise as much as $794 million in its sale of 44.1 million shares scheduled for later today. With aprice range set at $16 to $18 a share, the IPO is poised to be far smaller than the $1.25 billion amount estimated in an initial propectus by the Agoura Hills, California-based company in June.”

Going from $1.25 billion to $794 million is a big deal. AH4R is currently trading at the lower range (last priced around $16 a share). The latest data is not all that pleasant especially after reporting a loss:

“(Bloomberg) American Homes 4 Rent (AMH) yesterday fired a group of workers, with a focus on acquisition and construction staff, after the housing landlord reported a fiscal second-quarter loss, according to a person with knowledge of the terminations.”

Keep in mind the location of the properties here. These are in lower priced areas. Of course places like Florida and Arizona are incredibly over played by the Wall Street crowd. It seems like the rental game is not all that easy:

“Single-family landlords have struggled to turn a profit while acquiring homes faster than they can fill them with tenants. Hedge funds, private-equity firms and real estate investment trusts have raised more than $18 billion to purchase more than 100,000 rental houses in the past two years. American Homes 4 Rent, founded by B. Wayne Hughes, is the largest single-family landlord after Blackstone Group LP’s Invitation Homes, which has spent more than $5 billion on 32,000 homes.”

Keep in mind that a weak underlying economy is going to directly impact the rental business. A large portion of the current action in the housing market is because of investors. Do you think these kind of trends are going to push more and more people in?
Getting out
I’m noticing more and more people getting out while the market is hot. There is an interesting post over at NASDAQ from an investor selling his property in Denver:

“(NASDAQ) Of course, all real estate markets are local markets. Until recently, I owned a single-family rental property just north of metropolitan Denver, where vacancies are at a 13-year low. Rents are also at a multi-year high.
I bought the property since 2003, and it’s been a solid income investment. It’s consistently provided monthly rental income of 15% to 20% above my costs. When my last tenants moved out, I could have negotiated a 12-month lease with new tenants willing to pay 20% more than what the previous tenants paid.
But instead of finding new tenants, I decided to sell the property. The reason was simple: I don’t expect real estate to stay hot much longer.
There are a few obvious reasons. Multi-year trends in both vacancies and rents are unsustainable. I expect more multi-family units will mean lower rents. That aside, the market simply looks and feels like it’s approaching a melting point. For evidence, look no further than bidding wars for homes that hit the market.”

The above explanation ties in with the rise in multi-unit housing starts:

More and more rental housing will be hitting the market and people can only stretch their household income so much. What we are now seeing is investors selling into momentum; things are going up because they are going up. They are fully disconnected from underlying fundamentals.
And if you don’t think that rates have an impact on the real economy, Wells Fargo recently announced layoffs for 2,300 workers because of the jump in interest rates:

“(WSJ) Wells Fargo & Co. said Wednesday it is cutting 2,300 mortgage-related jobs across the country, a sign that a refinancing boom that helped boost the U.S. home-loan market and bank earnings continues to fade.”

Combine all of this with crazy talks of apartment-to-condo conversions and we are reaching some sort of tipping point. The fact that more than half of purchases this year are coming from non-traditional sources really highlights that this massive flood of money into the market may need to think twice on the rental game.
The fact that some of these big single-family landlords are producing losses at a time when real estate prices are booming should really tell you something.

[BadJuju]

Re: When will this end?

That would suck, Forrest. Real estate just really comes with a lot of problems.

[Forrest]

Re: When will this end?

It does. I will need about 1/3 of my eventual inheritance to pay off the loan on my house (95K) and another 100K just to refurbish it...new pipes, new electrical...new fixtures, new flooring where there is rot...you name it. It's a small money pit! But at least I will have no monthly rent payment or mortgage payment again! The rest is going into gold, Greenhouses, and Solar energy to run the entire place, while I live on my disability and my production of food for fun and money until the gold play is finished. The only housing cost will be insurance and taxes, which are kind of the same thing.

Vultures are everywhere...everywhere.

[shiny!]

Re: When will this end?

I wish you all the best, Forrest. You've mentioned several times that your inheritance is in probate. If I haven't done so already, allow me to offer you my condolences on your loss of a loved one. I hope your new house brings you a measure of comfort.

[Forrest]

Re: When will this end?

Thank you, sweet Shiny...it's been just over a year, and life is seeming much more sane. As for the 'new' house...you might say re-newed house...fixing the house and growing things is a positive way to move forward. I plan on enjoying it, and mastering my greenhouse succession planting. Nothing like a good challenge to get the juices flowing!

[Mega]

Re: When will this end?

Me too Forrest...........sorry for you loss.
Mike

[shiny!]

Re: When will this end?

Thank you, sweet Shiny...it's been just over a year, and life is seeming much more sane. As for the 'new' house...you might say re-newed house...fixing the house and growing things is a positive way to move forward. I plan on enjoying it, and mastering my greenhouse succession planting. Nothing like a good challenge to get the juices flowing!

Glad you're healing, Forrest. A grief counselor told me to give myself at least two years for the worst of the grief to pass. I'm finding that to be true. I tend to be very type-A; it's been hard to see my standards slip, but as time is going by I'm finding it easier to do things that have been piling up for the last few years. Literally piling up into big piles of stuff. I thought I had become a terminal procrastinator, but now I see it's been grief taking up a huge amount of my energy. With enough time life does get easier. Just be gentle with yourself for as long as you need.

[Forrest]

Re: When will this end?

Glad you're healing, Forrest. A grief counselor told me to give myself at least two years for the worst of the grief to pass. I'm finding that to be true. I tend to be very type-A; it's been hard to see my standards slip, but as time is going by I'm finding it easier to do things that have been piling up for the last few years. Literally piling up into big piles of stuff. I thought I had become a terminal procrastinator, but now I see it's been grief taking up a huge amount of my energy. With enough time life does get easier. Just be gentle with yourself for as long as you need.

Thank you both...but this will cheer you a bit Mike, because if it's spreading in the U.S., it will sooner or later happen to the U.K.:


Investors pigging out in Las Vegas Real Estate: Investors pay 50 percent more for housing over last year yet rents remain the same. The mechanics of rebuilding a bubble.

The flood of investor money going into Las Vegas real estate is amazing. It really is. The proportion of investor buying is ridiculously high and has kept a steady pace since recession ended. In fact, Las Vegas is a market purely driven by speculative demand from investors. Last month 58 percent of all purchases in the Las Vegas market came from “cash” buying. These are large and small investors buying up properties with no mortgages being recorded. This isn’t your typical Las Vegas family buying a home. When you look at the reasons for investor buying, many are in the market for rentals but you now have people going after flips. In fact, for investor purchases the median price is up a whopping 50 percent over last year. There is a mania occurring when it comes to Las Vegas housing.
The rising prices of Las Vegas
Las Vegas is seeing some of the fastest appreciation of any real estate market in the US:




Source: DataQuick
The median price for all homes is up 34 percent over the last year. Even if we compare this with Case Shiller data we find that prices are rising at a stunning pace:

The Case Shiller Index is registering a 25 percent year-over-year increase in the market nearly replicating the rise during the last mania. If money flowing into the market is being driven by rental demand, let us look at the prices being commanded for rentals in the market:


Rental prices for the Las Vegas market have stayed relatively stable since the recession ended. Yet investor money continues to flood into the market. Why would investors pay 50 percent more this year than they did last year if rents are virtually stagnant?

Median price paid by Las Vegas cash investors
July 2012: $105,000
July 2013: $155,000 (+47.6%)
Of course flipping is also increasing:
Percent of homes flipped (selling twice within 6 months)
July 2012: 5.7%
July 2013: 6.2% (+8.8%)
The Las Vegas market has been dominated by investors since the recession ended:

Starting in 2009 the number of investors in relation to regular buyers never went below 40 percent (the average has been solidly over 50 percent). This is a market fully drive by investor demand. The fact that flipping is picking up is telling you we are reaching a frothy point in this market. Of course, irrational buying can go on for many more years. Yet run the numbers on investment properties here and the return isn’t all that great. What is making the market look good right now is the incredibly high number of investors buying keeping prices inflated. How much longer does this trend have?
A place like Las Vegas will be the first to show signs of a top for investor buying. The market is essentially driven by investors. This is clear. Plus, Las Vegas is largely a luxury based economy (does well on booms, contracts heavily during recessions). The stock market rally since 2009 is one for the record books and real estate prices are now increasing at double-digit rates (all the while incomes remain stagnant). This disconnect cannot last. When I look at the Las Vegas market I’m reminded of all the buying that occurred from California households picking up properties and second homes during the last boom. This time the money is coming from institutional buyers and investors with deeper wallets.
While prices are higher, locally the housing market gets poor grades:

“(Las Vegas Review Journal) In its second-quarter Nevada Housing Stability Index, the state Department of Business and Industry gave the real estate market here a D+. That’s the same grade it earned in the first quarter, when the department launched the index.
…Plus, the share of homes bought by investors fell to 54.2 percent, though researchers still found that number abnormally high: The market earned a D- for its percentage of investors.”

Mike, the silliness of pie in the sky buyers just doesn't quit. Take heart, all those buy-to-rent people will be in trouble soon.

[Milton Kuo]

Re: When will this end?

Take heart, all those buy-to-rent people will be in trouble soon.

That is most certainly true. Unfortunately, the government and central bank will intervene--bailing out the idiot lenders and some of the idiot speculators--again unless the rest of the world takes away the printing press. I am talking about both the US and UK.

[Forrest]

Re: When will this end?

That is most certainly true. Unfortunately, the government and central bank will intervene--bailing out the idiot lenders and some of the idiot speculators--again unless the rest of the world takes away the printing press. I am talking about both the US and UK.

Yes, I expect it to, until printing no longer works, and the people are angry enough to take the printing press away from the Reserve Banks, and put the control of money directly in the Government's hands...with of course, a different government.

I expect we will have a lot of ups and downs before that...deflation for a time, War, terrorist attacks, more attempted control by an ever growing Mercantilist government.

Fortunately, nothing lasts forever, and along with the good times being brief but enjoyable, bad times and momentous change will come as well, and we will get the Jantzen Scenario in due time.

I just wish we didn't have to straighten out a hundred year old con game.