whos gonna post the bbg article on rent vs. buy ??

The article speaks about two interesting set of dynamics at play feeding inventory, but I am skeptical over one point. When everyone jumps to the same conclusion and rents, prices should go up markedly at some point.

The supply of luxury rentals is being fed by owners who
don’t want to sell at today’s prices, said Jonathan Miller,
president of Miller Samuel. “Rather than wait, they rent it
out,” he said in a telephone interview. “It’s a win-win for
the disaffected seller and the nervous buyer.”
Adding to units on the rental market are developers of
nsold condominiums built during the property boom and condo
nvestors waiting for sale prices to recover further, said
ordon Golub, executive vice president and director of rentals
t brokerage Citi Habitats in New York. There are about 6,000
nsold condos of all prices in Manhattan, according to Miller.

no you fktard. if the 6000 shadow inventory were actually for rent, rents would be down even more. Just like if they dumped it on sales, it would be the catalyst for a 2nd leg down.

PPL way smarter than you know if they sold now they'd get their azz handed to them, so they'd rather roll the dice for another year... NOT A FKING healthy market IMHO, for sale of RENT... and guess what the worser the sale mkt, more ppl rent their unit, the weaker the rents, the worse the sale comps... HOW do you like that vicious cycle? FLMAoz

Miller thinks the shift to rental is temporary. This could be a future source of huge pent up purchase demand.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aOuAnhCXUzEU&pos=7

So on RS's model, when a group of people shift to rentals because sales prices make no sense, the effect is to make rents rise, thus making the sales price more sensible. Then, the same people will shift back to sales, making sales prices rise still higher.

If we could generalize this system, we'd be able to stop using carbon-based fuels altogether -- just turn off the lights in one room and use the saved energy to fuel two others.

Of course, it's an island so construction and renovation is impossible, and it is the center of the world so market forces only work one direction, and the stock market is high and the tax giveaways are flowing so the rich are happy to give their ill-gotten gains away, and empty units are irrelevant because sellers/investors/landlords will never accept losses. And a good snow storm does wonders for the tulip crop.

The article talks about the desire to stay in cash(i.e optionality). But over time many of these people get a case of[The Economic Term is] "Shpilkes in the Tuchus" , decide they don't have this huge need of optionality, get tired of renting, and.. well you know the story.

Just think of the proverbial dog chasing his tail.

"Buying cost 53 times renting in the third quarter, compared with 38 times a year earlier and 58 times in March 2009."

HAHAHAHAHAHA!

stevejhx, i wouldnt read too much into those number. in order for that to be true, prices would have to have increased by 40%, rents decreased by 40%, or a combination of the two. do you think that took place?

argue the minutae as you wish--it's simply much cheaper to rent

fg, love the turning lights analogy re a more ridiculous than usual rs post

further, the "future source of huge pent up purchase demand" rs cites comprises people who just signed one and two year leases?? and they'll all come out of the woodwork to buy at the end of their leases??

wow

I didn't say I believed that number, ekart. 30x I believe, not 53x. Much will depend on the supply - if it's all JuiceMan properties, then the number would probably be 100x. If it's LICCdope properties, well, you can't divide by zero.

Seems to me a lot hinges upon what interest rates do.

With 10-year TIPS real yields at 1%, a condo's net yield of 3% doesn't look so bad. (It is probably similar to a real yield as rents will largely rise with inflation.)

But if TIPS revert to more normal levels such condo yields would look increasingly unattractive and would need to adjust (probably through lower purchase prices).

Hard to imagine real yields will stay at such depressed levels.

topper ...it's amusing to read books that suggest buying tips...and then give examples using yields backin the day when the real yield was as high as 5%..i'd love to see that again, but doesn't seem to be on the horizon

Don't think TIPS ever hit 5% but they did hit 4% early on.

Expect the unexpected, buyerbuyer. Who would have guessed the five-year TIPS would have traded at a negative real yield?! Who would have expected 30-year mortgages at 4% 10 years ago?! Or that home prices could actually decline?

We live in interesting times.

>We live in interesting times.

Be diversified.

Shocking that steve bit on this one.

your sensitivity to this, juicy, makes sense---if you sold now, you'd be well underwater after consideration of transaction costs, (RE broker, mansion tax paid, mtg recording tax, legal, all times 2)--then there's that youve had equity tied up where stox have basically doubled, and then there's that your monthlies to carry this fine investment have been higher than had you rented--i know you get a puny tax deduction, and i know youre going to stay in your place til they toe-tag you; but mark to market (liquidation value) is a small loss at best--so i'm empathic here--it's gotta be tough and these rent buy threads really get under your skin--

uggs are basically yogurt machines

WB, there ARE no transaction cost. You can't count them, it's not fair. And then you have to count your principal payment twice, once when you pay it, and once for good measure. Then, you apply the Juice Factor, which is the real-estate equivalent of the fudge factor, to get the answer that you want to get.

And then deduct the tax benefit.

HAHAHAHAHA!