San Diego Housing Market News and Analysis

This is one big reason investors are buying property and renting it out. Rents tend to be sticky. But, rental homes that dont go up in value for a few years start to get tiresome for the landlord to own and manage. And appreciation is the end goal for most. Especially since cash flows tend to be nuetral at best when all expenses are considered over a few years or more.
Add a little depreciation to the mix and it gets uglier, quickly.

I can't find the exact article, which ran in the Union-Tribune (or maybe the North County times) a year or so ago... but it sliced the renting data a different way. Based on surveys in the county, it showed a bar chart which indicated that some huge proportions of those who rent in the county, pay way over 30%; some upwards of 50% of their income on rent. As I recall it was something like 45% paid more than 30%, and 10% or 20% were paying upwards of 50%.

A couple of similar articles which I did find, covering the 2006-2007 timeframe:

http://www.signonsandiego.com/uniontrib/...

http://www.signonsandiego.com/uniontrib/...

http://www.signonsandiego.com/uniontrib/...

From the first article:

In California, where the median home price rose to $535,700 (compared to a national median of $185,200), more than half of both homeowners and renters lived in housing not considered affordable. Twenty-two percent of California homeowners and 27 percent of renters spent more than half their income on housing last year. (Sept 2007)

From the second article:

According to the Center for Housing Policy, a worker would need to earn $23.17 an hour to afford the fair-market rent of $1,205 for a two-bedroom apartment in San Diego County. A year earlier, the comparable rent was $1,065. (Jan 2008)

From the third article:

Tom Scott, executive director of the San Diego Housing Federation, noted that a December report from the National Low Income Housing Coalition estimated that the annual income needed to afford a one-bedroom apartment in San Diego was $39,720. To afford a modest two-bedroom apartment, the annual income needed was $48,200, assuming that 30 percent of income is used for housing costs.

While the overall median household income was placed at $64,900, the median renter household income here was estimated at $39,025.

“For low-income people in service jobs, in grocery stores, the retail clerks, they almost have to have two jobs today to be able to afford a place” to rent,” said Scott. (Jan 2007)

If you look back at Rich's previous articles on this though, you'll find this isn't actually anything new. San Diego has simply been a historically expensive place to live, whether renting or owning. Rich's charts in his previous article show that the median rent to median per capita income in San Diego has been pretty consistently near 50% since the 70's (as far back as his charts go).

I live in UTC and rents are falling quite substantially. Looked at a 2BR in my complex three years ago: $2100. Went with a 1BR at the time, and am looking to move up to the 2BR. Was told by the leasing staff that current when my lease is up, I can expect to pay $1800-1900. A friend of mine had a similar experience at his complex a couple blocks over.

A couple of factors keeping rents from falling much further are:
1. A kind of "pent up demand" from the much-cited doubling up going on now.
2. The low rate of new housing creation in recent years and for the forseeable future.

I'm surprised that the number of construction workers are still above the trend line. They were building 2M houses each year in the peak time, now they are only building 500K houses. So what are the construction workers doing now??

Can we assume that rents are relatively "normal" when healthcare costs, college costs, food costs, and energy are up so much? It seems like the prices of many other things were also rising faster than official inflation, which leaves less money for housing (including rents). The cost of our "wants" are generally down, but the cost of our "needs" have been rising sharply.

Also, past rents were determined when people were more likely to have employer-paid healthcare and defined-benefit pension plans. As we move to a system where more of that burden is placed on the individual, wouldn't it make sense that we have far less money to spend on housing costs and other expenses?

As always, thanks for your reseach and insight, Rich. It's always fun to see whether or not the numbers agree with our gut feelings. Perhaps many of us here have a false sense of what things should cost. As long as others are willing to pay more for something, our personal preferences don't really mean anything, I suppose. We're all forced to go broke together when the least responsible are the ones who affect pricing the most.

Isn't this is the exact same argument as when house prices were supposedly going to remain permanently high?

As house prices continue to fall, jobs continue to decline, incomes will follow & then so will rents. All these knife-catching "investors" are in for a rude awakening not only on house prices but also on rents.

Is this post a joke?

I'm thinking it must be a joke.

I insure around 500 renters each year, www.fast2insure.com, and I see that rent prices have slightly decrease. However, since the price of oil is going up again, commodities will go up, the cost of doing business will go up, and rents will go up.