I have a subscription to this stodgy, British magazine that comes weekly and covers a broad range of topics. They recently ran a piece on how mortgage access needs to be improved in this country--citing the dearth of loans to midfield credit scores as a hangover of policies from the Great Recession. Amazing stuff.
So, one of my points of contention is that you seem to think that defending build-to-rent is the hill we need to die on in order to even start climbing our way out of the crisis.
Is this an accurate characterization? I’m trying to be fair here, since you’re a pretty honest interlocutor.
But in general, it feels like that particular hill is not the one we need to die on. Rather, it’s the previous ones - legalizing SRO, stuff like that.
Also, fixed rate mortgages IMO aren’t as much of a threat as the other factors that screw up the market. The implied alternative — variable rates — has already proven itself disastrous. You theoretically get the benefit of not fucking up the incentive to move, but in reality you just end up with underwater mortgages and a disposable income crunch any time inflation forces interest rates up.
I mean, can you imagine the horror of the Biden inflation PLUS a mortgage crisis?
Yes. There are problems with some of those mortgages. I think I linked to my suggested mortgage product that I think brings many of the benefits of both in the post. I agree with you that floating rates with balloon payments, etc. have issues.
On the build-to-rent issue, it isn't the hill I would choose to die on. It's just the hill that the next battle will be fought on because a plurality of the public and policymakers will be aimed at making things worse rather than making things better. Absolutely, loosening mortgage access, building codes, and zoning restrictions are much better issues to tackle. But, while those issues are being mired in debate, obstructions to build-to-rent would be devastating.
I’m far from a “Heighten The Contradictions”-style Leninist, but I kinda feel like one of the challenges of modern Abundance thinking is how to strike the correct balance between Mamdanist “just tell the rubes what they want to hear and do the right thing on the back end so they get the thing they actually want” thinking, and “push for the correct policy because people aren’t THAT stupid” thinking.
My baseline instinct is to leave dumb issues like blocking B2R alone and just get a single-minded focus on the other stuff that actually matters. Blocking B2R is bad and dumb, but maybe we need to let the public touch the stove on it so that we can be ready to offer them the better solution when they get burned as we know they will.
I just don’t see that as my role. I write about things I discover and things I think are important. The median low-information or low-intelligence reader of my writing might go away defensive or indignant. I can’t concern myself with that. I’m concerned mostly with trying to convey what I know.
In my area, north of Seattle, I see the big problem is build to rent communities. The rent is higher than a mortgage and people are stuck in identical low end homes. New inventory is all over and is not selling quickly. Most new homes are about $1 million so that drives up the resale prices as well. The biggest issue to buyers is down payment money. And build to rent homes take away income that could be used for saving towards a down payment. I think the housing market will reset before too long and everyone will lose their equity.
As I said, the biggest issue is down payment money. When I bought a home out here 10 years ago, its was pretty easy to save $80,000 for a down payment on a $400,000 dollar home. Now that home is $800,000. A young family will find it difficult to save $160,000. When the available land for cheaper housing is bought by corporations building cheap housing for rentals, it leaves the consumer with no alternative but to rent. What ever happened to rent to own? That’s what these real estate landlords should do.
There are mortgages available with much lower down payments. The problem is that many families can't get mortgages. When they can, they outbid the investor buyers. Wherever builders have neighborhoods for sale, it is the homeowners who set the retail price. The investors tend to require a discount to buy. It's the federal mortgage regulators that are forcing those families to spend more on rent than they would spend on a mortgage.
Hi Kevin, is there an updated source for this graph you created a while ago? It was the ratio of owner occupied real estate including vacant land and mobile homes at market value divided by imputed rental of owner occupied housing. It looks like one or both of the data sources was discontinued.
It looks like it cuts off at January 2022, and I can’t see more recent data. If some of the underlying data has been discontinued, are there other FRED datasets that you track as a proxy to this?
I have a subscription to this stodgy, British magazine that comes weekly and covers a broad range of topics. They recently ran a piece on how mortgage access needs to be improved in this country--citing the dearth of loans to midfield credit scores as a hangover of policies from the Great Recession. Amazing stuff.
So, one of my points of contention is that you seem to think that defending build-to-rent is the hill we need to die on in order to even start climbing our way out of the crisis.
Is this an accurate characterization? I’m trying to be fair here, since you’re a pretty honest interlocutor.
But in general, it feels like that particular hill is not the one we need to die on. Rather, it’s the previous ones - legalizing SRO, stuff like that.
Also, fixed rate mortgages IMO aren’t as much of a threat as the other factors that screw up the market. The implied alternative — variable rates — has already proven itself disastrous. You theoretically get the benefit of not fucking up the incentive to move, but in reality you just end up with underwater mortgages and a disposable income crunch any time inflation forces interest rates up.
I mean, can you imagine the horror of the Biden inflation PLUS a mortgage crisis?
Yes. There are problems with some of those mortgages. I think I linked to my suggested mortgage product that I think brings many of the benefits of both in the post. I agree with you that floating rates with balloon payments, etc. have issues.
On the build-to-rent issue, it isn't the hill I would choose to die on. It's just the hill that the next battle will be fought on because a plurality of the public and policymakers will be aimed at making things worse rather than making things better. Absolutely, loosening mortgage access, building codes, and zoning restrictions are much better issues to tackle. But, while those issues are being mired in debate, obstructions to build-to-rent would be devastating.
I’m far from a “Heighten The Contradictions”-style Leninist, but I kinda feel like one of the challenges of modern Abundance thinking is how to strike the correct balance between Mamdanist “just tell the rubes what they want to hear and do the right thing on the back end so they get the thing they actually want” thinking, and “push for the correct policy because people aren’t THAT stupid” thinking.
My baseline instinct is to leave dumb issues like blocking B2R alone and just get a single-minded focus on the other stuff that actually matters. Blocking B2R is bad and dumb, but maybe we need to let the public touch the stove on it so that we can be ready to offer them the better solution when they get burned as we know they will.
I just don’t see that as my role. I write about things I discover and things I think are important. The median low-information or low-intelligence reader of my writing might go away defensive or indignant. I can’t concern myself with that. I’m concerned mostly with trying to convey what I know.
In my area, north of Seattle, I see the big problem is build to rent communities. The rent is higher than a mortgage and people are stuck in identical low end homes. New inventory is all over and is not selling quickly. Most new homes are about $1 million so that drives up the resale prices as well. The biggest issue to buyers is down payment money. And build to rent homes take away income that could be used for saving towards a down payment. I think the housing market will reset before too long and everyone will lose their equity.
Why don't the tenants go buy a home if the rent is higher than a mortgage?
As I said, the biggest issue is down payment money. When I bought a home out here 10 years ago, its was pretty easy to save $80,000 for a down payment on a $400,000 dollar home. Now that home is $800,000. A young family will find it difficult to save $160,000. When the available land for cheaper housing is bought by corporations building cheap housing for rentals, it leaves the consumer with no alternative but to rent. What ever happened to rent to own? That’s what these real estate landlords should do.
There are mortgages available with much lower down payments. The problem is that many families can't get mortgages. When they can, they outbid the investor buyers. Wherever builders have neighborhoods for sale, it is the homeowners who set the retail price. The investors tend to require a discount to buy. It's the federal mortgage regulators that are forcing those families to spend more on rent than they would spend on a mortgage.
Hi Kevin, is there an updated source for this graph you created a while ago? It was the ratio of owner occupied real estate including vacant land and mobile homes at market value divided by imputed rental of owner occupied housing. It looks like one or both of the data sources was discontinued.
https://fred.stlouisfed.org/graph/?g=1YJ2
Huh. That's weird. I think they just changed the code for Fred. Try HOOREVLMHMV. Here it is. I think it's the same data.
https://fred.stlouisfed.org/graph/?g=1O1YV
It looks like it cuts off at January 2022, and I can’t see more recent data. If some of the underlying data has been discontinued, are there other FRED datasets that you track as a proxy to this?
Goodness. The PCE number has changed too.
Try this for the imputed rent statistic: DOWNRC1A027NBEA
That is annual and gets you through 2024, I think.