A little perspective

[sdsundevil]

http://www.signonsandiego.com/news/business/20061212-9999-1b12rent.html

Guess what? Rents are rising. And they will continue to rise as people stay away from the housing market.

In my opinion, this provides stability to the housing market. There’s no way home prices will drop 30-50% as some predict on here. Rent v. Own will crossover before that.

As I’ve said before, rents don’t decrease. Renters have little leverage since it costs far more money to move than pay $50/month more on a renewed lease.

I agree that a correction is in effect and was inevitable. I just don’t see it lasting too long or having as big of an impact as most doomsayers on this site predict.

If there are a large number of defaults on loans, that will mean those people will have to rent. It’s my opinion that there are less places to rent since so many apartment complexes have gone condo in the past 5 years. This should add to the rent increase pressures. Eventually, owning will become the more economically viable option. Such is the cycle of real estate.

Just something to consider as we enter a tumultuous time in the real estate market.

[4runner]

Can you point to a house or condo that is for sale that can be rented for more that 50% of the carry on a traditional mortgage?

My wife and I supposedly have a LTV on our condo of under 40%. If we were to rent it, we’d make about 3% of the carry/month.

It looks like there is plenty of room for a 50% drop…

[blahblahblah]

My rent’s not going up. I just signed a new year lease for the same as my last lease.

[PerryChase]

And rents will drop sharply when the thousands of condos downtown come online next year and have to be rented out. They will bring the whole apartment rental market down.

Owners will also have to rent out their properties once they realize they can’t sell them.

Remember, the rent information is reported by the SD County Apartment Association. Those are most comprised of apartment complexes that advertize in For Rent Magazine. Only idiots would rent from those places. Someone looking for a nice place for rent, at a great price, would have some patience and would look for individually owned properties. There are great deals out there — SFRs and condos.

[no_such_reality]

Hello 2019.

Okay, math time…

$1241 average rent with an 3.8% increase.

Median condo price in Central SD $419,000.

Condo Payment = $2512
Condo Property Tax = ~$400.
Condo Association = ~$200.
Total = $3112
less tax savings = ~$2000/mo

Ratio of after tax owning to rent $2000/1241 = 1.61

Years til parity 1.038^(years) = 1.61
yields 13 years.

So, if rents keep appreciating at the current rate, my rent will be on par with owning provided I don’t get an association increase or spend any money on maintenace in about the 2019.

Provided the condo glut doesn’t depress rents.

Woe is me.

Of course, maybe you prefer the Apartment Owners Association Poll claiming 5.8%, great parity is reached in 2014.

[studenteconomist]

PerryChase, where do you supposed that I look for an apartment? I have to move out of my current place next month, and other then the For rent magazines, only Craig’s list comes to mind. What are some other websites for finding apartments in San Diego. Since I haven’t yet found a job (I just graduated with my PhD in science and my MBA), I am looking at max $1500 for a 2-bedroom. I would like to find a great deal you say are out there.
Thanks,
P.S. Anyone in the biotech industry looking to hire a business analyst with a PhD/MBA with some biotech experience should contact me immediately.

No longer studenteconomist, no looking-for-employment-economist.

[PerryChase]

studenteconomist, I know something about the rental market since I’ve volunteered to find a nice place for my younger bro and his gf to live.

1) Whatever you do don’t get “desperate” and sign a lease because you just have live someplace. Try to find alternate arrangement of sign or month-to-month or 6 month lease.

2) graigslist is a great place to start. post a rent wanted ad and see if you get any responses. I recently posted on another thread about a good 1800sf house at Aviara for rent at $2100/mo.

3) word of mouth is the best way to find a rental. Having a good agent helps.

4) Don’t rent in rental only apartment complexes. Those are relatively crappy places to live. Look for condo/townhouse/sfr developments.

5) Look at the development/neighborhoods you like; review some for-sale listings and contact the listing agents. Tell them you don’t want to buy yet, but you’re looking for a rental in that area. They’ll be happy to help you, or refer you to someone who will can. Once the agents find out that you’re a newly minted “doctor” they’ll be all over you. They may pressure you to buy, but don’t insist that you want to rent.

6) Use your “doctor” status as a bargaining chip. Landland want good tenants and PhDs make better tenants than high-school graduates. Last week I was selling a bookself on craigslist and a woman left a message for me saying that she worked at Scripps and she wanted me to hold the shelves for her. I called her back and she works in the billing department. I sold the bookself to another person who came first with cash. Anyway, people play up their “status” all the time. You worked hard for your PhD so use it to get a good deal. One hundred dollars off the rent perhaps?

6) If a project is not completed yet, talk to the onsite sales agents and tell them that you’re wanting to rent. They might know an owner who wants to rent.

9) If you’re feeling ambitious. Write to the sellers directly and ask if they are willing to rent their homes.

9) Tell everyone even the grocery store clerk that you want to rent. Ask them to call you if they hear of something.

10) Consider sharing a home with a housemate. You could rent at 4-bedroom house for $3000 and your lifestyle would be much better than if you rented an apartment for $1500. I know it’s not easy to find a compatible housemate. But if you know someone, then all the better.

11) You’ll have to do some work. Take your time and something nice will come up. Then you can relax in your nice rental home and laugh of the recent buyers who are scrapping by to pay their outsize mortgages.

I had fun looking for a place for my bro. It’s better than going shopping. I just did it on my wireless laptop while watching TV after dinner.

[powayseller]

sdsundevil, this is all part of the housing cycle, as I’m learning. In FL, the rents are dropping like crazy, as people who cannot sell their homes and banks with foreclosed properties are putting those homes on the rental market. FL is several quarters ahead of us in this downturn.

Rents here will flatten out or decline slightly next year, as the carrying costs of the 30% of vacant homes on the market becomes too high. Thousands of downtown condos will add to the rental pool.

Rents in SD have never gone into a bubble. They can’t. If rents get too high, people either leave town or double or triple up. Housing prices only got high because of exotic lending, but notice that housing payments cannot exceed 50% of income. People have stretched to pay 50% of income on a mortgage believing in appreciation, but they will not stretch that much for a rental.

So while your theory is interesting, it is pure folly. I suggest you google what is going on in Florida with their rents, and report back.

[brian_in_la]

I almost feel like I am piling on here…but for heavens sake…you don't even need an argument against this…just GOOGLE.  

I personally am not counting on a rent decrease, and I am also not claiming that we are certain to have a 50% nominal decline in housing prices.   But to say that rents never decline is the most easily refuted statement, it was almost not worth the effort.   

I make no predictions about what will happen with rents.  But, in general slow/negative growth seems to be linked to flat/declining rents.  Real Estate Bubble deflation seems to be linked to flat/declining rents.   Add it up. 

A brief historical tour, via 10 minutes of GOOGLE.

New York – 1993Apartment Rentals Tightening By NICK RAVO

Published: February 7, 1993

NYT

“Indeed, the market continues to be very soft, and rents last year dropped in many parts of the city, particularly in areas where gentrification never fully took hold and for such apartments as studios, small one-bedrooms, fourth-floor walk-ups and units in buildings without doormen.

But the rent declines were not, for the most part, as steep as they were in previous years. Overall, rents in New York have dropped about 15 percent since the real estate recession began in 1988, about half as much as the sale prices of co-ops and condominiums. …Rents, according to the National Cooperative Bank, showed the greatest decrease — 14.8 percent — in Lower Manhattan. On the Upper West Side the drop was 4.2 percent and on the Upper East Side, 2.7 percent.”

 San Francisco – 2003 

http://www.edab.org/newsletter/Quarterly/4thQuarter2003Files/RealEstate.html

 

“…rental rates for apartments have fallen by nearly 30% for most of the Bay Area. Here the East Bay has been hit as hard as its two neighbors, hardly a surprise given the commuting patterns of the region.”

 West Coast, Midwestern Cites – 2004 

FURTHER OCCUPANCY DECLINES SIGNAL CONTINUING SOFTNESS.   http://www.realfacts.com/news7.html

 

“Over the last four quarters the greatest year-over-year rent declines were in San Jose, 5.4%; Tulsa, 2.8%; Oakland, 2.4%; Austin 2.4%; Portland, 2.0%; and San Francisco, 1.6%. For both the quarter and year-over-year, three of five of the biggest rent declines were in northern California markets„San Jose, Oakland and San Francisco” April 23, 2004 

Boston, etc. – 2005“Rental markets have soured as well. Rents in most cities have been either flat or down in 2005. In Boston, a net loss of about 180,000 jobs in the past few years drove rents down about 10 percent in 2005, according to the U.S. Department of Housing and Development (HUD).”http://money.cnn.com/2005/12/07/real_estate/buying_selling/small_landlord_guide/index.htm

[powayseller]

While rents have continued to rise in many big cities on the coasts, including New York and Los Angeles, they are falling in more than 80 percent of metropolitan areas across the country. – New York Times, Nov 2006

Rents are DOWN 20% in San Francisco since 2000. I’m now encouraged that rents in San Diego will fall a lot in the next few years.

[brian_in_la]

Hey Powawayseller – can you post the link on that article…

My rent has gone up a total of 12% since 2000, which I have been very happy with. If rents flat-lined, I’d be pleased. A decrease would be heavenly.

SF was insane in 2000 – my friends at start-ups/consulting firms, etc. said it was like ghosttown for a while after the dot.com thing blew up. People doing graphic design, etc. for the web companies were literally moving back in with their parents. My friend was a month away from moving back in with his parents in Bufalo. Luckily, he picked up a free-lance gig and hung on. He negotiated lower rent and his landlord was delighted to comply!

[bubble_contagion]

My personal experience is that rents went up this year about the same as last year(4%). If you the read the article two research firms say that rents increased by less than 4% and the other research firm by 5.8%.

The U-T is really trying hard to spin the news so they look better for RE. This hilarious article cites that prices will not drop that much by quoting students that are not even from San Diego.

From the article:

“Bridget Mendez, 23, of Los Angeles was the most optimistic. She based her outlook on what she found in the South Bay market.

“When you drive the area, you see a lot of young buyers, new townhouses, definitely a lot of potential for the future,” Mendez said. ”

Another “researcher” uses Dataquick numbers and the other believes prices will start going up again by 2017 and hopes he will make enough money by then to afford a home.

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