Housing investors, rentals for whom, and what kills you?

The International Business Times has a feature this morning on a survey from Move.com that suggests that investors are going to be dominating the housing market for the next 2 years.  Some of the commentary suggests that this is where the speculators have gone:

–Nearly 60 percent of investors say they’re new to real estate investing. About 33 percent are considering their first investment purchase and 8.5 percent are in the process of buying and selling their first investment property. Of those surveyed, only 36.5 percent had experience in more than one property transaction.

via Investors to Dominate Housing Market for Next 2 Years.

I have to tell you: my experience with this in Los Angeles County for my own long-term home search has been irritating.  There are a lot of cash investors swooping in to buy things near the university where I work.  One of my colleagues and I decided that we were going to live within walking distance of the distance. And after 4 failed offers (one property had 20 offers on it in the first week), I am giving up and living farther away. So is he; he and his partner are giving up on walking and moving looking at Silverlake and Echo Park.

In the West Adams  case, who those rentals are for is clear. In other parts of the region, I wonder whom these investors believe are going to rent their houses?  Traditional buyers locked out of new financing because they don’t have enough cash to buy; banks demanding 25 percent on $500+ houses make for a pretty high class barrier to traditional home buying? People who have been foreclosed on?

At least a dozen people have sent me the slate.com hysteria fest about how your commute is killing you.  It causes you to divorce. DOOM.  I’m not linking to it since it already has pages of links, and I refuse to participate in the hysteria.


Because being unemployed and having no commute is a health issue, too.

Of course you could be spending your time doing better, healthier things than in a commute. Why is this even news? I understand why the original study took the approach that it did, but why the hype? This is like saying every minute you spend eating bacon is a minute you could be spending exercising. Ya think? NO KIDDING? For reals? The opportunity costs of community have always been the issue. That’s why some of us–despite all of the critiques leveled at the civil engineering idea of minimizing travel time,  despite all the flouncing around about how efficiency is an empty goal for planning, despite all the people who want to “slow” cities down–still say that travel time is a key measure of service quality and we should pay attention to it. Travel time isn’t the only measure, for sure, but damn it, time matters. And it matters a lot to people on the lower income scale no matter how many I-bankers swish around and say “my time is money.”

But with all my travails in the California housing market–I have been looking for months–you have to wonder how much discretion anybody other than people with big, big money have on where they live relative to where they work and where their kids go to school.


3 thoughts on “Housing investors, rentals for whom, and what kills you?

  1. You could always rent. How’s the rental market within walking distance?

    There have been some rumblings of trying to make renting a socially acceptable (and I presume tax efficient) option. Not sure if tax policy will ever change, but…

    What do you think of more renting and less home ownership? In theory it’s great, but what would it mean for neighborhood stability and maintenance of properties?

  2. I’m tired of renting, personally. I feel a little like if I don’t buy now in California, I never will. I want a garden, and I want some stability. I’ve moved 12 times in the last 10 years. It’s time to put down some roots. And my landlord tried to sell out from under me a year ago, presenting me with many sleepless nights. I’m tired of answering to a landlord, even though she’s been pretty good–and I really do understand why she wanted to sell this unit given when she bought it.

    And I like having animals, which is a hassle when you rent.

    I think more renting would be good for the US housing market, as it might bring about more diversity of supply in the rental market. There are just plain a lot of really lousy apartments out there in the US, and in some locations, that’s pretty much all that’s out there because the rental market has a disadvantage on the high end for people living for home ownership opportunities.

    I also always interesting to me that people so ready to lecture others on the financial smarts of renting rather than buying all own their own homes. It seems clear to me that there are preferences that don’t always align with the straight up financial calculations and we should acknowledge that pride of ownership, security, not having to deal with a landlord, etc enters into a utility function, too.

  3. I’ve always preferred to own, but it’s a financial calculation for me. The tax benefits of ownership are too great.

    I certainly wasn’t attempting to lecture anyone on the smarts of renting or encouraging renting. The economist in me thinks that the tax benefits of home ownership are distorting the market and should be eliminated (not politically feasible) or at least that renting should be put on an equal playing field.

    The recent Treasury Department report on the home mortgage credit market hints at trying to change the concept of the American Dream of home ownership and trying to make renting a viable option.

    When discussing the possibility difficulty in obtaining home mortgage financing in the future unless one can place 20% down, my students raised objections about renting. I think the objections are probably valid- neighborhood stability, the inclination of landlords not to maintain rental properties, etc.

    As a real estate investor myself (I’ve purchased two condos in Blacksburg recently due to a sharp decline in market price- apparently due to the difficulty in obtaining financing) and a landlord, I can’t argue with what they say. However, I see a big opportunity now to buy cheap and rent to people who can’t obtain credit. So, at least from my viewpoint, that’s who investors are renting too. Investors have cash (over 40% of sales are cash now; over 50% in Vegas) and renters don’t.

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