OT - Dow plunges 1,175 - worst point decline in history

[verticaldoug]

Originally Posted by rice rocket

Crappy NYT headline.

Airfares affect such a small portion of the population, a 3% drop shouldn't even register on the CPI.


Edit:

https://www.bls.gov/cpi/factsheets/airline-fares.htm

0.481% of the market basket, so net impact of -0.01%?

https://www.bls.gov/news.release/cpi.t01.htm



This chart has the weights for various components of the index as of Dec 2022 this release.

Energy is 7.8% of the index and down 4.5%. So a total contribution of -0.35% of the -0.1% decline.

Airlines are 0.63% of the index and down 3.1%. So total contribution was -0.02%. Energy effect was 17.5x larger.

Non-alcoholic beverages had a bigger negative effect on prices than airlines.

Journalists remain numerically challenged.


*NOTE* RICE ROCKET number is the weight in DEC 2021, the current weight in the basket is 0.63 Dec 2022

The fed really needs to see Rent/Rent Equivalent in Core CPI decline. It is still at 0.8% which is too high.

[buddybikes]

Grocery shopping yesterday, I truly think things have gone up 30 or more% since this time last year unless you want junky Hamburg or pork. This in addition into consideration of package shrinkage. Working families must be really getting hit, my wife keeps telling me to shut up when I complain we can afford what we want.

[bronk]

Originally Posted by froze

...As a landlord I can tell you that rent increases last year and this year were necessary for landlords to stay in business due to inflation.

I'm a small landlord also (I have 4 townhouses in the Chicago western suburbs) but I take a different approach. When my tenants sign the initial lease and move in, I tell them I will never raise the rent -- no matter how long they stay. And I don't. This approach benefits both of us -- the tenant has peace of mind that the rent will never go up and they tend to stay for many years reducing my turnover costs.

YMMV

[Spaghetti Legs]

Originally Posted by verticaldoug

The fed really needs to see Rent/Rent Equivalent in Core CPI decline. It is still at 0.8% which is too high.

Just listened to a bit on Marketplace that the rental market is slowing and spot rental prices are down. The interviewee lamented that the only place the rental market looks strong is the CPI but it lags the real market by a few months.

[Ken Robb]

Originally Posted by bronk

I'm a small landlord also (I have 4 townhouses in the Chicago western suburbs) but I take a different approach. When my tenants sign the initial lease and move in, I tell them I will never raise the rent -- no matter how long they stay. And I don't. This approach benefits both of us -- the tenant has peace of mind that the rent will never go up and they tend to stay for many years reducing my turnover costs.

YMMV

How do you handle management from so far from the units?

[skitlets]

Originally Posted by bronk

I'm a small landlord also (I have 4 townhouses in the Chicago western suburbs) but I take a different approach. When my tenants sign the initial lease and move in, I tell them I will never raise the rent -- no matter how long they stay. And I don't. This approach benefits both of us -- the tenant has peace of mind that the rent will never go up and they tend to stay for many years reducing my turnover costs.

YMMV

While I fundamentally believe that housing shouldn't be an investment or profit maker for anyone, we don't live in that world. Kudos to you for being an honest landlord.

[Ken Robb]

Originally Posted by skitlets

While I fundamentally believe that housing shouldn't be an investment or profit maker for anyone, we don't live in that world. Kudos to you for being an honest landlord.

How else would we provide housing?

[verticaldoug]

Originally Posted by steveandbarb1

Grocery shopping yesterday, I truly think things have gone up 30 or more% since this time last year unless you want junky Hamburg or pork. This in addition into consideration of package shrinkage. Working families must be really getting hit, my wife keeps telling me to shut up when I complain we can afford what we want.

If you use BLS data, FOOD is up 16% since Jan 21-Dec 22.


If you look at Dairy from Jan 20 till Dec 22, 28%

and Grade A eggs are the winners up 300% over the period.

You can get even more granular in the BLS database since they have data by region and urban center so you can look at price changes in Phoenix vs Los Angeles vs NYC vs Minneapolis.... almost endless

[skitlets]

Originally Posted by Ken Robb

How else would we provide housing?

Re-imagine how it's currently provided. Just like health care in most of the developed world is not run for profit, perhaps we could do the same for housing.

There's also ways to reduce the harm of private housing ownership. Canada is looking to (or already has?) banned foreign housing ownership. Mega-owners like Blackrock could be banned. Limit the number of rentals a person can own to 1 or 2.

There's a whole world of possibilities and I'm generally of the belief not to let perfect be the enemy of good.

[oldguy00]

Originally Posted by bronk

I'm a small landlord also (I have 4 townhouses in the Chicago western suburbs) but I take a different approach. When my tenants sign the initial lease and move in, I tell them I will never raise the rent -- no matter how long they stay. And I don't. This approach benefits both of us -- the tenant has peace of mind that the rent will never go up and they tend to stay for many years reducing my turnover costs.

YMMV

We were similar. We didn't necessarily say that up front, but if the tenant was a good one, we made a point of not raising the rent for them ever. If you think of the money you'll lose if you miss any months rent just in the process of someone moving out, finding someone new, etc etc etc.. its worth it just to keep the good renter.
This method served us very well for 15 years of renting out 3 properties.

[unterhausen]

I'm trying to understand how inflation affects landlords and failing. Inflation has been no more than 7% and people are raising rents much more than that.

The problem in real estate right now is too much investment money chasing not enough housing units, and people that would have bought a house not that long ago can't afford it now.

[BdaGhisallo]

Originally Posted by unterhausen

I'm trying to understand how inflation affects landlords and failing. Inflation has been no more than 7% and people are raising rents much more than that.

The problem in real estate right now is too much investment money chasing not enough housing units, and people that would have bought a house not that long ago can't afford it now.

For one, if landlords have to do any maintenance on properties they own, the cost of everything needed to perform that has increased. Overall inflation may be in the neighborhood of the 7% figure you cite, but what is the rate of inflation for goods and services needed to maintain a property?

[bronk]

Originally Posted by Ken Robb

How do you handle management from so far from the units?

I looked at hiring a management company before we moved away from Chicago but they wanted $200/month/unit so I declined. I now live 1000 miles away and do all my own rental management. Here's the formula that has worked so far...

(1) Put effort into finding a good tenant from the start who will pay their rent on time and take care of the property.
(2) Own only townhouses or condos -- all of the external (roof, external paint, driveway, grass/landscaping, snow removal) is covered by the HOA. I would never own a stand alone house and try to manage it from a distance -- too many big things can go wrong.
(3) Work with tenants to resolve their own small issues. For example, I had one tenant call me and say the toilet flush handle had broken. I bought and new one through amazon delivered directly to their townhouse and sent them a youtube video on how to replace it. I compensated them $50 for doing the job and saving me an expensive call out.
(4) When a more serious issue arises, don't hesitate to call a contractor.
(5) Make annual visits and do routine maintenance. Before the trip, ask the tenants for a list of issues. Then, walk through each unit and check for leaks, drips, weird sounds from appliances, anything broken and repair it.
(6) During the annual visits, do preventative maintenance on the more expensive items. I've replaced sump pumps, water heaters and combustion air blowers preemptively to ensure they don't give me expensive headaches down the road.

So far, so good. Hope this doesn't jinx me.

[KonaSS]

Originally Posted by bronk

I looked at hiring a management company before we moved away from Chicago but they wanted $200/month/unit so I declined. I now live 1000 miles away and do all my own rental management. Here's the formula that has worked so far...

(1) Put effort into finding a good tenant from the start who will pay their rent on time and take care of the property.
(2) Own only townhouses or condos -- all of the external (roof, external paint, driveway, grass/landscaping, snow removal) is covered by the HOA. I would never own a stand alone house and try to manage it from a distance -- too many big things can go wrong.
(3) Work with tenants to resolve their own small issues. For example, I had one tenant call me and say the toilet flush handle had broken. I bought and new one through amazon delivered directly to their townhouse and sent them a youtube video on how to replace it. I compensated them $50 for doing the job and saving me an expensive call out.
(4) When a more serious issue arises, don't hesitate to call a contractor.
(5) Make annual visits and do routine maintenance. Before the trip, ask the tenants for a list of issues. Then, walk through each unit and check for leaks, drips, weird sounds from appliances, anything broken and repair it.
(6) During the annual visits, do preventative maintenance on the more expensive items. I've replaced sump pumps, water heaters and combustion air blowers preemptively to ensure they don't give me expensive headaches down the road.

So far, so good. Hope this doesn't jinx me.

Reasonable, fair, attentive management serving reasonable customers - the world would be a much better place if all dealings were like this!!!!!

[Ken Robb]

Originally Posted by unterhausen

I'm trying to understand how inflation affects landlords and failing. Inflation has been no more than 7% and people are raising rents much more than that.

The problem in real estate right now is too much investment money chasing not enough housing units, and people that would have bought a house not that long ago can't afford it now.

This is a good plan as long as a landlord plans to keep the property. The catch is when it's time to sell the value of the property is largely based on scheduled/realized rents so two identical buildings will be valued very differently if one has rents that are higher than the other. Some areas have percentage limits on rent increases so if a landlord doesn't increase his rents for several years he may never be able to catch up to market rates. IRS rules on depreciation encourage landlords to sell/exchange their properties every few years to regain higher depreciation rates. It's a complicated subject and the rules vary quite a bit from one state or community to another.

I must add that single family and or condominium residences' market values are not as closely tied to their rental income as apartment buildings because they may be bought by folks who want to live in them who don't care what they may have been rented for.