Here's the latest on rents from http://www.calculatedriskblog.com/:
Apartment rents declined throughout the U.S. West and South in the third quarter as rising unemployment made it harder for landlords to raise their rates...Falling rents is great for renters, but it means falling apartment values, more losses for lenders and CMBS investors, more pressure on home prices. Here's the link: Rents Are TankingThe market this summer has been driven by the first-time buyer tax credit buyers and investors buying foreclosures. Falling apartment rents will force housing landlords to drop their rents, thereby reducing the price that an "investor/speculator" will be willing to pay for investment properties.
As for the tax credit buyers, it is very likely that most first time buyers who were considering buying a home have already taken advantage of the tax incentive (similar to the cash for clunkers program, in which the majority of the sales occurred early on in the program). This dynamic is where the superficial analysts and headline skimmers believe that the housing market has "bottomed." So, even if Congress extends the taxpayer subsidization of home sales, it is likely that sales from the use of the tax credit will quickly decline.
Combine falling rents with slowing demand at the lower end of the market, and a massive flood of mid/upper tier homes coming to market, and the stage is set for the next leg down in the housing market. Recent data which are "leading indicators" of declining activity in the real estate market include falling architectural billings (calculated risk tracks this metric), declining housing starts and a big drop in mortgage applications.
Anyone who buys a home right now thinking that they are either buying at the bottom of the market OR they can rent it out for a year or two then flip it at a profit is making a huge mistake. Anectdotally, around the middle/upper tier neighborhoods in Denver, I'm seeing a lot more "for sale" AND "for rent" signs popping up, and the higher-end homes already for sale have been sitting on the market for quite some time.
I can't say with any accuracy whatsoever when the housing market will reach a true bottom, but I will stick my neck out and forecast another eventual 30-40% downside in prices in the lower/middle tier segments and at least another 50% drop at the high end. I also believe that a true bottom will be marked by the time when most remaining real estate brokers are out of the business, all of the homebuilder stocks are below $5/share or completely gone, and we stop seeing Wall Streeters and Barbara Corcoran go on national media shows proclaiming that housing prices are great value now.
Finally, if you want to a lot of the data behind my analysis, please follow this link: Mark Hansen Blog