Irvine Housing Blog

Whether its a govt owned entity or a private en devour, the lending institution should seek to maximize their profit and minimize their losses.  If renting is more profitable for them, then they should pursue that even if it holds prices where they are.

That is an attractive cost of ownership. I paid almost as much to rent a 40 year old 4-bedroom in Tustin.

Too bad I don’t have the 20% :(

Rental parity as long as you have almost 150K to put down on it…rental partiy and that massive down need to be included in the same sentence from here on out.

Let’s say someone got a 5-yr 6% loan for 10% of the price.  That is $1300/mo, or a 50% increase in monthly cost relative to the $2674 monthly cost of ownership.  5-yr treasuries are at 1.5%.

At shorter lengths, the payment is less dependent on interest rate.  Going from 6% to 9% is only $100/mo difference on this 5-yr note.

However, the $116k/yr earner who’s at a front-end DTI of 36%, with the extra $1300 on the ‘down-payment-loan’ is now at 50% front-end DTI.

For people with higher incomes and lower savings (young professionals), I would think there would be a great market for this type of loan.

I’d much less object to Larry getting GSE loans than GSE loans being used by hedge funds to buy properties.  How many loans could someone get? 

Can LLC’s get GSE loans?  How do they prove income?

I’m a little confused here.

When the government intervenes to help the homeowner, it’s not okay and they should just let things fall where they may.

But if the government can interfere to help the investor, it should be encouraged?

If the cost of owning in somewhere like Las Vegas is 30% lower than renting, why do the investors need more help? The positive cash-flow isn’t enough?

Just let prices continue to fall and more renters will become owners or investors.

Agree. This sounds like a job for our hero, Market Forces, and his magical supply and demand curve price intersector.

Most of the misallocation of resources in real estate resulted from government loose-credit policies and the shady re-packaging of mortgage loans. In either case, the insulation of actors from the full cost of their choices resulted in widespread misinvestment.

The occupant ownership rate went too high. If we follow a policy of easier credit for prospective landlords, then there could be too large an investor presence in rental real estate. I could see taking such action in the service of some real threat to society, but the only consequence of inaction here seems to be lower prices, which are a good thing from any angle.

And, as you say, extremely low prices will have much the same effect as a loose credit program for investors, but with the added benefit of dropping housing prices for buyers as well. Unlike IR’s proposal, this would not tilt the table in favor of investors.

This is the most puzzling piece I have seen on this blog. In the wake of years of pounding home the message that real estate should be left to market forces, we have a statement in favor of loosening credit terms for investor/landlords.

Then again, I have never met a person whose belief system was consistent.

To put it less nicely, this smacks of class prejudice. Why are investors necessarily a better choice for above-market credit terms than owner-occupants?

Three borrowers, one has the $134k DP, but income of $116k for the 36% DTI.  Two other borrowers get 10% second loans.  The first has a 10yr term, keeping total 36% DTI has an income of $140k, the other with a 5yr term 36% DTI, has an income of $160k.  Which borrower represents the least risk?

Agree 100%

From what I’ve been reading and the prices I’ve seen, Phoenix looks like a good spot to be investing now, too.

Anybody know anything about the Phoenix market?

IR,

Will your Las Vegas RPF be leveraged or unleveraged?

Most own to rental formulation assumes someone is allow living or renting the unit.  For a landlord, the occupancy rate is usually set at 95% for the long run, but the short-term of a few years that might be way high.  The maintance cost is usually set way too low for most places in the US.  May apply to some mild weather area but once you get freezing weather, the cost goes way up.  High AC maintance is also an issue/cost and with humidity, rot is also an issue/cost.

“In a perfectly timed refinance, this couple took out a $600,000 loan on 9/16/2006, and followed it with a $227,000 HELOC on 3/27/2007.

If they maxed out the HELOC, they obtained full resale value without having to sell or leave their house.”

That’s one hard-working house.

I miss IHR’s use of that phrase in the old days.

“... the current price makes this property at or below rental parity. I challenge anyone to find a comparable rental for less than $2,700.”

As I’ve mentioned repeatedly on IHB, “comparable rent” is a misleading statistic for personal residence.

Apt. rentals start at $900/month and can substitute for a house just fine for personal residence.

What that means is that house rents are not a floor for house prices until house prices pancake down to apt. rental rates.

Hispanic, Asian homeownership increases
http://www.ocregister.com/news/homeownership-310147-hispanic-county.html

I hate to point out the obvious, but won’t adding more rentals cause rents to drop? This will, in turn, cause renting to be more desirable relative to owning. Won’t house prices then fall further to re-balance the price-to-rent ratio?

This idea of renting out foreclosures is just one more example of the law of unintended consequences from governmental interference in markets. The law of supply and demand can be ignored, but its effects can not. With rising numbers of rentals, there will be pressure to decrease vacancy rates and their pernicious effects on carrying costs.

The only way to get something rented is to find a market value. Once all the high-credit-score, gainfully employed renters are taken, the low-credit-score unemployment-check-renters will be all that’s left. Clearly, expanding the rental pool in search of any warm body may cause rents to fall…

Sometimes the rent is just too damn high—- regardless of whether the rent is paid to a landlord or a bank! The housing industry has long taken too large a slice of the economic pie. Retirement savings were neglected during the baby boom generation thanks to illusory promises of private and public pensions. Gen X knows that Social Security and company pensions won’t be there for them when they retire. Consequently, their housing budget is a fraction of what the baby boomers had to waste on large rotting boxes. To the housing industry, I say: Good luck and Good night! Turn out the lights, the party is over!

The only thing you didn’t factor in is the $40,000 it would take to make this home ready to rent. It is in rough shape inside and needs a lot of work.