Are rents going up?

[cowboy]

I live in the Carmel Valley area and have been following rents carefully for the past 6-8 months (for homes at least). It appears to me that rents have gone up recently. A 3 bedroom/2.5 Bath house would have gotten $2000-$2500/month 8 months ago and now it appears they grab $2500-$2900.

Here in Carmel Valley there are many condo conversions taking place. Thus, decreasing rental units. Also, I imagine most investors want to sell there home not rent it out. Once again squeezing rental units.

Lately, there are many homes for sale that are being taken off the market and put up for rentals. The last 5 homes I have seen for rent had for sale signs in the window.

[mckirkus]

A lot of people are moving into those condo conversions that were previously renting so I’m not sure how big an effect the conversions are having on rental supply. I rent a fairly nice 4br 3 bath house in PB for $1950/mo. The mortgage if you bought it today would probably be closer to 4-5k a month.

[lindismith]

I’ve been watching the rental market as much as the sales market for the last 2 years, because I want to move, but don’t want to buy if we’re at the top of the market, but don’t want to rent for just 6 months somewhere only to find I should buy if the market drops enough.

I would say the rentals have been going way up for at least 2 years! I have been amazed at what owners are asking and getting in rents! I have to assume it’s only going to get worse: as more people keep moving here, and as foreclosures go up and people become renters again, it seems like that will just drive up the rental market too. If I’m wrong, someone please let me know.

[powayseller]

I can’t comment on whether rents are going up, but can say that rents are about 1/3 the cost of an equivalent mortgage in Poway.
We rented a $950,000 house in a nice Poway neighborhood, while we were building a house, and paid $2500/month. The landlord had just purchased the house as a rental (investment) property, and her mortgage should have been about 3x that amount.
Now we are selling our newly constructed home, and are again looking at rentals in Poway, and am surprised that most houses rent for $1650 – $2250.
We are taking out the equity, and renting for the next 5 years until the market corrects. I think the bubble forecasters are conservative in expecting a 20% – 30% correction, because in any excess, the pendulum first swings the other way before it normalizes. A correction of 40% – 50% is more likely, and if you follow the trendline of median house price/per capita income, and the trendline for housing prices following inflation, you will get to about a 50% correction. It may take 4 – 5 years to get there.

[blahblahblah]

I rent a 2000sf place (built in 2001) with 2 car garage, fireplace, wood floors, granite countertops, nice appliances, etc… in downtown SD for $2395/mo. The management company tried unsuccessfully to rent it for $2700, $2600, and $2500/mo before I moved in.

[RightSide]

Just go to Craigs list:
http://sandiego.craigslist.org/apa/

The number of houses available for rent is staggering…and insanely cheap compared to purchasing. Its totally absurd why anyone would buy instead of rent at this price disparity.

[hs]

Gspan got stock market bubble for us, then housing bubble. Only 15% of the people in southern CA can afford the house now. If rent continues to go up and renters can not afford, where shall people live?
Where is this government leading us to? Ya, Southern has a great climate. We can all camp outside, I guess.

[CharlieG]

Such an interesting relationship between rents and house prices. In Sacramento, apartments/small homes have been moving up while bigger properties have been flat. It seems that those who cannot afford to buy anything will be forced into higher rents, but it is a rare tenant who can afford to buy but is chosing to pay $2,000/month instead.

I have a very nice 4-bedroom house with 3-car garage for $1,500/month (allegedly “worth” $600k now), but you wouldn’t believe the lousy stuff we were shown at the tenant-competitive $1,200 level. We got three times the quality for that extra $300.

[Anonymous]

Rents in UTC for apartment communities are being squeezed upward because of the overabundance of condo conversion inventory vs. available apartments. Several major complexes are competing against each other within just a few blocks of each other. I’ve heard that rents in the area have jumped $100 in many places as the management companies have taken advantage of the situation. A friend there has had rent in a less than great complex jump by more than $200/mo!

I checked the rental vacancy rate for SD a few weeks ago and it was nearly 5%. The last big rent jump in the area was about $100 in 1998 when the vacancy rate was under 2%. Go figure.

[KingKong]

Does this support the view that more people are comming to SD?

Personally I think this is temperary situation cause by the rental housing shortage created by condo-conversions. It takes a while to convert an apartment complex into “new homes”.

Also it reflects the quality of the tenants. Most good tenants have become homeowners by now. So they have to rent it to less qualified renters and so they have to price in more risk premiums.

Does anybody know how long does it take to refurbish a building for conversion? My guess is about half a year. First you have to do the exterior and then interior of each units.

[lindismith]

Condo conversions can last anywhere from 9-24 months, or longer, depending on how fast the paperwork gets approved. On those bigger developments, I’d guess it’s at least 2 years.

[KingKong]

There was a condo conversion near my home and I almost bought it. When they first change the owner and opened the door, they are already approved for the conversion, so all the paperwork has been done. They were selling for 6 month advance. They need to get the renters out for the interior since they did not do any work on the exterior (maybe just a fresh new paint.)

[teatsonabull]

Believe it or not, there are a lot of “good tenants” out there who have not become homeowners “by now”. Lest ye not forget–the median household income in San Diego is NOT amongst the highest in the Nation. Additionally, there are an ever growing number of people unwilling to pay what it would take to buy “condos” (apartments really) at current prices. Finally…higher rents are not due to “risk premiums”…rather over-leveraged speculators who are BARELY staying above water to own said “condos” trying to raise rents. Dead ducks they are!! Every single one of them!! Remember—“DENIAL IS NOT JUST A HOUSING BUBBLE IN SAN DIEGO”

[Anonymous]

Too true.
There are still good renters out there who realize that the price of renting in SD is less than half of owning right now. The rent prices that I have seen the would-be landlords trying to charge for their redecorated condo-apartments to try to cover their mortgages are nothing short of silly sometimes.

The people who I know that are renting in the area choose not to buy. The stories I hear of those buying the units are speculative.

[powayseller]

Rents are lower now. It seems that anyone with a pulse has qualified to purchase a home, and rentals are staying on the market a long time, driving the prices down.
I am speaking of my experience over the last 45 days looking for a rental home in Poway and Rancho Bernardo.

This week I read a study going back over 30 years in SD, and the rents were usually $1.15/sq ft in North Cty Inland. Currently, these are $1/sq ft, sometimes a little more if the lot is really big or it’s an exclusive neighborhood. Some owners are asking more, but their rentals are still vacant. We will be paying $1/sq ft for a 2000 sq ft nice duplex built in 2003. During my search I witnessed reductions on rental prices, and find that a 2900 sq ft brand new house is still vacant after 105 days on market (MLS listing for rent), despite coming down from $3200/month to $2600/month. We almost took it, but decided to cut our costs a little while renting.
I get a kick out of asking the owners why they are renting and not selling. They are all speculating that prices will go up.

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