Long story short, the amount of foreclosures is creating renters from former homeowners and there is more demand for affordable housing.
While it is true that there is a huge amount of inventory, this inventory is for sale and not for rent. Unless there is a mechanism in place for quickly converting foreclosures to rental properties, I do not believe that rental prices will go down. In fact, the amount of foreclosures create even more renters, and are competing with the current rental pool for affordable rental properties. This is something I’ve been saying for some time now, but there are some piggs here who vehemently disagree with me.
It’s nice for buyers that there are a lot of empty properties being held by banks, but unless the banks can convince real estate investors to buy them and convert them to rentals, and to do this on a large enough scale, the rents are staying where they are. Considering the reluctance of many banks to lend money and the inability of real estate investors to make money at these prices, I can’t see rents going down. Many see real estate inventory the same as rental inventory and that’s simply inaccurate.
The rental prices in San Bernardino and Riverside are going down, but that I think is more a result of the lack of economic activity there than the inventory.
IMHO, there will be a situation where there will be huge numbers of empty bank-owned properties and rentals being overwhelmed with demand.
I think there will be two events which will lower rents – a prolonged and deep recession for San Diego (which would place more pressure on affordable rental units) and when you see renters becoming homeowners again.
Your best bet to get a below market rent would be not to deal with property management and large apartments, but instead probably those small homeowners/landlords who are more “fearful” and are more likely to lower your rent to below $1900 just to get a good tenant in there. There are a few out there, but they get snatched up quickly.
