Well said, CA Renter. While I personally would not use the term “bubble” (as to me that connotes a speculative element), I think rents can overshoot sustainable levels(and probably have).
I think #2 in the first list is especially important. If one landlord tries to get higher rent because his carrying costs are higher, he’s out of luck. But if the carrying costs for the entire city go up in aggregate, then asking rents will go up in aggregate too.
Rents declined during the last downturn — this surely was exacerbated by the job losses but the decline in landlord carrying costs might have been a factor too. For the various reasons outlined in other posts, I suspect that rents will stagnate or decline in inflation-adjusted terms.
