As a renter, I find the behavior of lenders, loan owners, and politicians galling. Lenders and loan owners inflated a massive housing bubble and priced me out of home ownership for over a decade. To make matters worse, politicians decided my tax dollars should go toward bailing out both parties and subsidizing this atrocious behavior. Politicians are compelling me to pay money to the very people whose avarice made it impractical for me to obtain a family home. True homeowners, responsible buyers with equity, should also be incensed by this foolishness, but since the housing bubble folly served to increase the value of their holdings, homeowners have said very little. In fact, most homeowners applaud the efforts to prop up the housing market, although they are also upset about principal reduction because it’s a benefit they won’t receive.
Renters get screwed because they have no voice. Homeowners have the NAr in their corner, and with banking interests also promoting policies which increase home mortgage debt, its not surprising the 65% of the population that owns a home has strong support in Washington. What this country needs is a renter’s union, a voice advocating issues and positions important to renters. Welcome to Renter Nation.
Have you noticed? America is becoming a Renter Nation! There are now more than 100 million residential renters and we are proud to rent our homes.
You can even register to vote on Renter Nation because it’s time we spoke up and made our collective voices heard. We have the power to make a big difference in the way policies and decisions that affect us are made in Washington, DC, our state capitals and our city, town and village halls. Working together we can unleash that power!
If an advocacy group like this were to become popular, there are many political issues it could support:
- Eliminate the home mortgage interest deduction.
- Bring back capital gains taxes on the sale of a primary residence.
- Oppose all bailouts of private mortgage contracts for both bankers and loan owners.
- Extend rent support payments as an unemployment benefit through section 8. Loan owners got to squat while renters got to sleep in their cars.
- I am an American Renter.
- I am proud to rent my home.
- I am a responsible citizen and member of my community and will not be disrespected because I rent.
- I vow to no longer accept being treated as the step-child of American society or the American economy because I rent.
- I support efforts to create national and state tax policies that bring parity and fairness to renters.
- I support efforts to make rental housing more affordable to all Americans.
- I support efforts to ensure that our rights as renters are strengthened and protected.
- I respect the rights of all to enjoy safe, clean and habitable rental housing.
I was always offended by the dismissive treatment I received by loan owners during the bubble. Most could not fathom why anyone would rent when loan ownership was so rewarding. Most assumed it was because I was somehow unworthy of loan ownership. Since anyone with a pulse could obtain a loan, qualification was never an issue. I believed renting was the wiser choice during the bubble. It turns out I was right.
By STEVE YODER, The Fiscal Times — June 7, 2012
If Americans took away one lesson from the housing crash, it’s that a house is not always a Treasury bond. In the latest Fannie Mae survey on attitudes toward housing, only 56 percent of respondents say they consider a home a safe investment—that’s down from 83 percent in 2003.
That’s a great start. There was a time when a house was a save, low-yield investment. Prior to the first California housing bubble of the 1970s, prices were low relative to incomes, and house prices were not very volatile. Lenders changed all that when they inflated the first bubble. We have been inflated and deflating bubbles ever since.
As thousands of foreclosed homeowners have transitioned to apartment living, renting has acquired a certain cool. The number of renters has jumped 16 percent since 2004 to almost 106 million, according to Census figures. …
Though renters’ numbers have surged, their political clout hasn’t. Homeowners receive numerous tax benefits unavailable to renters, including the mortgage interest deduction, home sale deductions, property tax deductions, and tax-free capital gains. Of the federal housing subsidies in 2009, 79 percent went to homeowners and 21 percent to renters, according to the National Multi-Housing Council. In Washington, the major players on national housing policy are groups like the National Association of Realtors, the National Association of Homebuilders, and the Mortgage Bankers Association, which go to bat for homeowners, not renters.
Sixty-year-old Bill Deegan says he’s out to change that. A two-time town councilman and former host of the radio show “Renter Nation” on Phoenix station KFNX, Deegan launched a free-membership organization last month, also called Renter Nation, that aims to advocate for renters. The group’s motto is “by, for, and about America’s residential renters,” …
Renter Nation is a great idea. I suggest every renter who reads this should go to the site and register.
The Fiscal Times (TFT): How did Renter Nation start?
Bill Deegan (BD): I was in my car one day in early 2009 listening to a story about proposed bailouts for existing homeowners and tax credits for new owners. And I’d been reading about people who stay in their homes literally for years without making a mortgage payment before foreclosure. Being a renter, I know that if you don’t pay, you’re often out in a month. I thought this isn’t right, this isn’t fair, so I decided that I was going to call whoever advocates for renters nationally and give them my two cents. Lo and behold, I discovered that there was no such group. So I decided to start one myself.
He is correct. It isn’t fair that loan owners get such favored treatment. I wonder if he ever read the IHB or the OCHN?
TFT: What do you want to accomplish?
BD: We want to empower renters. Our website gives practical information like how you get your security deposit back and what to do about noisy neighbors. You can shop for an apartment and download coupons. We have a blog where people can keep up on issues that affect renters. And there’s Rentertainment, where we and our users post videos, photos, and other entertaining stuff related to renting. It’s a for-profit site, but we also plan to use a portion of the revenues to organize for changes in housing policy.
TFT: You have a kind of manifesto on your site called “I’m proud to rent.” What are you getting at there?
BD: I think it’s ingrained in our culture that renters are second-class citizens. And that’s reflected in our national policies, especially the mortgage interest tax deduction. The National Multi-Housing Council notes that of the federal housing subsidies in 2009, 79 percent went to homeowners and 21 percent to renters. So I think we’re being shortchanged—we’re about 38 percent now of the population but getting only 21 percent of the resources. I think renters have been silent too long, and it’s time we spoke up.
TFT: What’s wrong with promoting homeownership?
BD: We’ve got nothing against homeownership. It’s fine for some people. Just don’t ask me as a renter to subsidize it. I think a home should just be viewed as a place to live, and if it happens to appreciate in value, good for you. …
As a renter paying fair-market value for my property, I am getting subsidized by no one. I am the odd man out subsidizing everyone else. I subsidize loan owners through the home mortgage interest deduction. I subsidize low-income home owners through low-income housing tax credits. I subsidize other renters through the section 8 program. The government gives me nothing for renting at fair-market value; in fact, section 8 renters actually drive up the rental rates I would be paying by bidding up the prices of all rentals in the marketplace. My tax subsidies are actively working against me.
TFT: But those who support homeownership cite studies indicating that neighborhoods with more homeowners have less crime and better citizen involvement, for example.
BD: I’d point you to research last year by Grace Bucchianeri of the Wharton School of Business called The American Dream or The American Delusion—she notes that if you look at studies that have controlled for income, housing quality, and other factors, homeowners are no happier than renters, and she doesn’t see evidence that homeowners are better citizens.
Studies that show neighborhoods of renters have higher crime put the cart before the horse. It’s not because neighborhoods are full of renters that they have crime. It’s because they have crime that the neighborhood only has renters. Crime drives away homeowners, and renters are all that remain.
TFT: The National Association of Realtors just had 10,000 of their members come to Washington to promote homeownership. Other than fiscal watchdog groups, there doesn’t seem to be a lot of vocal support for your side of the housing debate. What’s your political strategy?
BD: Having been a politician, I know that leaders respond to a constituency that votes. That’s why we’ve affiliated with MTV’s Rock the Vote, so [renters] can register. We want to make renters aware that if they want something in their community that is beneficial to renters, they have to vote.
We also want to mobilize by working with what we estimate are 30,000-plus local, state, and regional tenants associations. We’d love to join with them to organize a million-renter march, for example. We would like to be sitting at the housing policy discussion tables in Washington and our state capitals.
If he wants to be really effective, he needs to develop a platform of issues and get buy-in from the people who join the group.
TFT: What else needs changing?
BD: There are thirteen cities here in Arizona alone that have renter’s taxes, which to me is a discriminatory tax. There are communities in this country like Madison, Mississippi and West St. Paul, Minnesota that put caps on the number of renters who can live there. I view this almost as a civil rights issue. You substitute black or Hispanic for renter and it’s just purely discriminatory. These are the kind of things that we’re going to be working on.
We want to change the culture—not only how society views renting, but how renters feel about themselves. There’s nothing wrong with renting—it’s a good thing. It gives you flexibility, which is especially important when unemployment is high like right now. I know homeowners who got job offers in other cities but can’t move because they’re stuck in underwater mortgages.
Renting has many advantages. Just ask a loan owner how they feel about their ball and chain.
TFT: One of the problems with being a renter is the lack of control—you can’t paint without permission, you can’t change the kitchen, and you could lose your home whenever the landlord sells. Could there be a new model of renting?
BD: It’s a good point. Landlords could make accommodations, say, longer-term leases—so that instead of signing a one-year lease, maybe you go with a five-year lease and then you as the renter have some latitude in terms of design. But local laws would have to be changed to allow that model.
There is no good solution to that problem. Landlords will always have the right to do what they want with the property including evicting tenants for whatever reason they wish. Most landlords won’t evict a paying tenant; after all, landlords want a stable rental income stream. If renters want more security about where they live and the ability to control their own destiny, they should become homeowners.
An early Ponzi implosion becomes long-term shadow inventory
The former owners of today’s featured property were Ponzis who imploded early on in the bust. Their Notice of Default was recorded in early September 2008. The bank let them squat for about two years before taking the property back at a foreclosure auction on 5/5/2010. Rather then liquidate, the bank decided to hold it for better pricing… LOL! Two years later, prices are down at least 10%, and now the bank is finally capitulating and selling this property for what they can get. The longer they hold out the more they lose. That’s what finally drives lenders to capitulate.
- Our Ponzi owners bought this property on 6/24/2003 for $435,000. They used a $348,000 first mortgage, a $43,450 second mortgage, and a $43,550 down payment.
- On 7/2/2004 they obtained a $150,000 HELOC.
- On 11/30/2004 they refinanced with a $530,250 Option ARM with a 1% teaser rate.
- On 5/6/2006 they obtained another $150,000 HELOC.
Assuming they maxed out their HELOC, the total property debt was $680,250 plus negative amortization. Total mortgage equity withdrawal was $288,800.
My guess is that renting isn’t quite so lucrative.
Buena Park Overview
Median home price is $327,000. Based on a rental parity value of $468,000, this market is under valued.
Monthly payment affordability has been improving over the last 10 month(s). Momentum suggests improving affordability.
Resale prices on a $/SF basis increased from $233/SF to $233/SF.
Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months.
Median rental rates increased $25 last month from $1,916 to $1,941.
Rents have been rising for 8 month(s). Price momentum suggests rising rents over the next three months.
Market rating = 7
$549,900 …….. Asking Price
$435,000 ………. Purchase Price
6/24/2003 ………. Purchase Date
$114,900 ………. Gross Gain (Loss)
($34,800) ………… Commissions and Costs at 8%
$80,100 ………. Net Gain (Loss)
26.4% ………. Gross Percent Change
18.4% ………. Net Percent Change
2.6% ………… Annual Appreciation
Cost of Home Ownership
$549,900 …….. Asking Price
$109,980 ………… 20% Down Conventional
3.74% …………. Mortgage Interest Rate
30 ……………… Number of Years
$439,920 …….. Mortgage
$102,538 ………. Income Requirement
$2,035 ………… Monthly Mortgage Payment
$477 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$137 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
$2,649 ………. Monthly Cash Outlays
($323) ………. Tax Savings
($664) ………. Equity Hidden in Payment
$137 ………….. Lost Income to Down Payment
$157 ………….. Maintenance and Replacement Reserves
$1,956 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$6,999 ………… Furnishing and Move In at 1% + $1,500
$6,999 ………… Closing Costs at 1% + $1,500
$4,399 ………… Interest Points
$109,980 ………… Down Payment
$128,377 ………. Total Cash Costs
$29,900 ………. Emergency Cash Reserves
$158,277 ………. Total Savings Needed
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