Rebuttal to Moody’s Tad Philipp’s Negative Side to the Housing Market…
Rebuttal to Moody’s Tad Philipp’s Negative Side to the Housing Market Recovery Observations & Jacob Gaffney’s Sensationalizing Headline on Housing wire.com
First I would like to point out I am not a big fan of Sensationalistic Headlines. The example here is “Moody’s analyst cites housing recovery at risk to rental market”
“…Moody’s director of CMBS is sounding a warning: Apartment constructions accelerating despite signs that the renter numbers are likely to start decreasing”
This to me is sensationalism. What areas are we talking about? I can safely say that the Large Urban Markets of New York City, Boston, Chicago, Beverly Hills and the Greater Los Angeles to name a few will not be affected by this.
The Answer is simple mathematics: if you are living in Beverly Hills, Century City, West Los Angeles, Santa Monica, Marina Del Rey to name a few locations in the Greater Los Angeles, you are accustomed to a great life style, great location, but your budget does not permit you to buy into this location.
The Average two bedroom two bathroom condominium is around $650,000.(and I am being conservative by lumping in Culver City, West Los Angeles and Century City Statistics) Let us do the numbers. Now those Lenders have tightened their requirements. You need at least 10-20% down payment. How many young adults have $65,000-$130,000 in their savings account? Let me assure you this is a normal requirement if you are considering buying a Condominium in the areas I mentioned, on top you need to have good credit i.e.: FICO Score to reap the benefit of a good interest rate. Then you also need to have solid income to support the Mortgage Payment. How many young adults as Philipp notes can have this type of Income, Savings and Financial Stability to step into purchasing a Condominium in these markets? (On a side note average means 50 per cent is above this price point)
Now to complicate matters the average single family house in the same pocket is around $1,200,000.00 not wanting to sound repetitive do the numbers. It is clear that buying a single family home is even harder in the same neighborhoods.
I have always been a proponent of Real Estate being LOCAL and even local is not clear. It is even more local when we look at MICRO MARKETS, just like you can go to Sonoma and buy a bottle of wine for $20 and the same type of wine (i.e.: grapes they make it from) and across the street there is another winery that makes $80-$150 bottle of wines from the same grapes Real Estate is the same way. Hence my point is Mr. Philipp is generalizing for the nation, but he is not taking into consideration the Urban Pockets where his generalization does not hold water!(I wonder what his motivation is?)
Then has Mr. Philipp taken into consideration: the issue of the areas where builders are building rental units is it an area that is a destination place where the influx of people is higher than the people who are exiting the area?Is the Trend more people moving in or not? This all has a cause and effect on buying or leasing!
I would have preferred if Mr. Philipp would have focused on specific areas and not sensationalized his observations by generalizing. Now in all fairness he did cover his Sensationalistic Post with the CYA of “…current construction starts represent catching –up for the low level of start immediately after the crisis…” so he not only is sensationalistic but he also talks from both sides of his mouth….Anyway that is just my take. Feel free to disagree with meJ
For you convenience I am enclosing the link that Jacob Gaffney has written by sensationalizing Mr. Philipp’s comments ( http://bit.ly/11kh8lJ )
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