San Diego Housing Bubble News and Analysis

I was reading in this article (posted by huckleberry) that at the peak of the recent bubble, 40% of homes bought were investment homes. That's point 1.

Point 2 is, since many people (with no money) were using 0-down to buy multiple properties, this caused an artificial demand which in turn helped home prices to go up.

Point 3 is I haven't heard of any bailouts which help owners keep investment homes. I'll bet a lot of them have to be let go. Foreclosed.

I think owners may try to jack up the rent in hopes of breaking even with their mortgage payments, then slowly ratchet down the prices until they finally can't cash flow and must walk.

Question 1: Has anyone heard of any type of bailout or loan re-modification to prevent foreclosures on an investment (rental) property?

Question 2: Does anyone know any solid numbers on how many investment (rental) properties are out there, and how many of those are in distress?

Hawaii in particular is very susceptible to the tourism market. Its the dominant industry there (apart from the government.) My aunt and uncle live on Oahu and have mentioned several times that housing costs are coming down, but they were referring to ownership. I'd imagine that the rental market there tracks pretty well with the tourism industry and that can't be booming right now.
Josh

Rental markets are dependent on local conditions, so I cannot comment on the Hawaiian situation, but my recent experience in San Diego suggests it is weak here.
I had remarkably low response to my aggressive marketing of a University Heights/Normal Heights house. Quickly lowered the rent & have a likely tenant as I believe in quickly adjusting to market realities. Noticed a lot of competing houses languishing on the market for a long time.
Prospective landlords should lower their revenue expectations in recognition of the deflationary environment we are in, at least for high/middle range houses.

There are so many variables that it's difficult to predict what will happen in any rental market.

What if the bubble investors stop making payments, but still rent their properties while awaiting foreclosure, and at a steep discount? That would mean downward pressure on rents in the area.

Investors plan on buying up huge numbers of these foreclosures (both former investment properties and buyer residences) in the next several years. How will tens of thousands of new rental properties affect the market? More downward pressure.

How will a HUGE flood of former "owners", now foreclosed upon and needing to rent, affect the market? Upward pressure.

I don't know which has more influence, so I have no idea. I do know that the houses we've been looking at to rent in north county have been overwhelmed with prospective tenants, most of them foreclosure victims.

These factors actually sum up to nearly zero. Homeowners moving out because of foreclosures pretty much cancel out the houses scooped up by investors to rent them out.

What matters is the total number of housing units produced and the total number of net new households formed. Since housing production is pretty much stymied, that leaves us with net household formation.

It may be a seasonal thing, but I have been closely following rentals in NorCal and the volume is growing while the prices are coming down. This has been evident in the last 3 months.
Foreclosures and unemployment will probably cause the "substitution effect" to come into play as demand destruction is starting to gain speed. In other words, people may go from homes to apartments or start sharing homes and apartments as a substitute for what they were doing before the problems happened. This will probably cause downward pressure on the rental markets as this trend continues.

I have been to Oahu three times in the last two months for a client. I can't tell you that rental market appears to be hurting first hand but the economy is not in good shape over there. I have talked with many homeowners/business owners at the airport that were traveling there to deal with foreclosures of homes they could not find renters on Oahu and Maui. While eating at my favorite local vegan/raw food place/store (Down to Earth) I was looking at the local paper for rentals and the paper was full of 1 beds and 2 bedrooms for 1600 - 1800 a month. Recently last Friday local fish markets Uncles over at pier 38 are closing around 3pm now with signs in the windows that make reference to the economy being the main reason. We ate at a couple nice places and the parking lots and restaurants were very empty. I was assuming it is because of the season but the local news says tourist spending is down 20 percent compared to last year.

I have noticed a few places lowering rents alittle in the areas I watch here in SD. Nothing really great, and certainly not on the nicer places, but A few. I have a feeling the rental market is kinda like the stock market right now. All over the place on a whim.

I have a friend who just rented a nice 3BR in carmel mountain for 2,600, and could have gotten 2,800 if he wasn't so picky on tenants.

Those are huge numbers for around here. Tells me the rental market is still plenty strong. I expected he'd rent it closer to 2,300.

Stan

Bump this! I wanna know if anyone has heard of any bailouts or loan modifications for investment (rental homes, 2nd or 3rd homes) properties!

Ditto the bump to vacation rental homes, same as Nostra's question, but there has been some talk of new tax laws affecting this type of investment.

They lied on the loan app and said it's their primary residence. What's gonna keep them from lying to get a bailout?

Rent reduction is hitting the high end of San Diego too:

http://sandiego.craigslist.org/nsd/apa/9...

It is still high but with a flood of condo rentals, the compete for downside might have begun.