Welcome to the Housing Recovery: Rents are Rising, Incomes are Falling

Three years ago I wrote a an article on housing titled: Residential Housing: Why it Doesn’t Stand a Chance. In it, I speculated that the targeted centrally planned price recovery in residential real estate would fail to materialize in any meaningful manner, and my rationale was the younger generations would be unable to afford a new home and would instead move in with their parents. As a result, I speculated that household formation would plunge and housing values would not move higher. I was wrong.

Well I was partially wrong. While I was right about young kids being too broke and saddled with debt to buy homes, I was definitely wrong about the price direction of residential real estate. My error was that I failed to anticipate private equity money coming in and outbidding average Americans in their quest to become feudal slumlords. I also failed to anticipate the U.S. government allowing billions upon billions of dollars of foreign laundered money in the market. Simply put, like so many other things, the fundamentals of the market demanded one thing and central planning demanded another. Central planning won in the near-term.

While central planning has seemingly achieved its goal, they have merely created another bubble. A bubble in which fundamentals will have their day and a completely unsustainable societal situation has emerged. Rising rents and falling incomes. For example, in Minnesota we find that “since 2000, rents have risen about 6 percent statewide, but renter incomes have dropped about 17 percent.” More from local news channel WXOW:

ST. PAUL, Minn. (AP) — A new report says there’s a shortage of affordable rental housing in most Minnesota counties.

The analysis from the Minnesota Housing Partnership says that in all but three of the state’s counties there are more low-income renters than affordable units.

Researcher Leigh Rosenberg tells Minnesota Public Radio News (http://bit.ly/14t5sKv ) that since 2000, rents have risen about 6 percent statewide, but renter incomes have dropped about 17 percent.

As I said yesterday on Twitter:

The new American Dream is to one day be able to move out of your parent’s basement and rent from Blackstone.

Full article here.

In Liberty,
Mike

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  1. Financial Reform: The Silent Guns of August
    Posted August 23, 2013 By Janet Tavakoli

    The financial reform farce continues. The DOJ and so-called regulators tickle bankers with feathers as CEOs shriek: You’re too tough!

    September 2008 marks the five-year anniversary of the 2008 global financial crisis. Earlier this month, Attorney General Eric Holder said the DOJ is pursuing cases as the statute of limitations runs out for many of them. He “declined to discuss specifics or say when such cases would be announced.”

    The revolving door between Washington (including friends and relatives) and Wall Street continues to spin. Grateful beneficiaries of campaign contributions protect cronies.

    Bi-Partisan Corruption

    http://www.tavakolistructuredfinance.com/2013/08/financial-reform-failure/

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