NC SFR Rental Market is Tough

[rockclimber]

Howdy folks,

We had a nice little discussion a few months ago about what this would all do to the SFR rental market. I’d like to post some first hand data.

After moving back to SD, and heavily searching for a good 2000+ sf SFR in RB,Poway,Carmel Mountain for the last month…

* For a decent place, expect to pay $1.2-$1.375/sqft/month (In the $2000-$2700 per month range). This, I think, is a significant rise over what some of you experienced a year or so ago.

* If you can spend $2800 – $3500/month you can get closer to $1/sqft/mo.

* A half hour “open house” on a good priced very nice 2200sqft RB house was held at 8am on Sat. morning… 6 couples were there to view and the first people through the door (just ahead of us) handed the agent cash for the credit check and took an application… we thought this was wierd, but they got the place, not us! This is one example of several occurances of “renters frenzy.”

* Rumor: A neighbor from our old Scripps Ranch neighborhood where we owned until last summer said there was a bidding war for a rental that came up on the street.

* Not that you care, but we finally did find a nice place in a great Poway neighborhood for $1.2/sqft./mo. We got really lucky and had to compromise for a 3 bedroom instead of 4 which we wanted.

Take it for what it’s worth… The NC rental market is pretty hot right now. I imagine there’s a seasonal effect, but I watched the number of listing for rentals on Craigslist go from 60+ down to 25 in a month (unfortunately just as I arrived in town.)

Gee powayseller, maybe we’ll bump into each other at Henrey’s and not even know it!

Cheers

[Jim Brubaker]

In San Marcos, I’ve noticed some higher rents, but the places remain vacant for two to three months. If you have the unit vacant for 2 months at say $2,000 ($4,000), and figure the rental return for 12 months that comes out to an effective rate of $1,666 per month. That about what we rent for 2400 sq ft.

The landlord can charge whatever he wants for rent. But when I comes time to do the books, the rental rate per month is determined by the money recieved in a year divided by 12.

As a landlord, raising the rental rate does not necessarily increase you income. It can reduce it.

I find it hard to come to the conclusion that rental rates are going up.

[powayseller]

Hey rockclimber, are you coming to the dinner get-together planned in July? I look forward to meeting you. I live near Henry’s.

I signed a 2-year lease on a townhouse at $1/sq ft (2200 sq ft, $2200). Plus I paid $1800 for half the A/C installation. I have a foreclosure clause in my contract, to get prorated reimbursement for the A/C in case of foreclosure. My landlord paid in around $475K for the place, so I doubt my rent covers the mortgage payment. I am sure he took out any equity available for his other real estate ventures, but he’s been in the RE biz for 20 years, so he has some stability. I hope.

I checked SFH rentals recently, and found many higher-priced homes in better neighborhoods. I assume they are either investors or people who moved and kept their homes in hopes of getting continued appreciation. Soon enough, both groups will realize the prices are dropping. Then: will they sell to get out what they can, or hold on until prices come back up?

Anyway, I realize I have a good deal with this rental. I am grateful for the 2 year lease.

[rockclimber]

After some of the thoughtful discussion on this site, I decided to stay far away from any property where the landlord might not be covering his mortgage.

What dinner? (Sorry, I’ve been busy with an international move for the last month…)

[Anonymous]

I don’t have any doubt that rents on decent single family houses will rise over the next couple of years – and potentially quite quickly. If you were moving to San Diego now (and people are – even if there’s net outmigration), wouldn’t you rather pay more in rent than buy into this market? Rents have bottomed out!

[an]

I don’t see how rent can rise alot without income rising along with it. Sure, it’s cheaper to rent those million dollar house for $3000-3500/month, but how many people can afford that. Also, if you do spend that much on rent, wouldn’t you consider buying a 600-700k house for similar mortgage? to afford $3k/month in rent, your monthly income would have to be $6k/month to make sense. That put you in the mid 100k/yr salary. That’s alot more than the $60k-70k median income.

[powayseller]

Another article today on rental prices increasing.

[Bugs]

As we were saying before, the rental market can be even more volatile than the sales market and even minor changes in inventory can result in a significant changes in rental rates.

I wonder if an increasing rental market can condition potential buyers to reconcile themselves with paying a larger percentage of their income on housing on a permanent basis. Like Hawaii, where people will get 2nd jobs just to make ends meet rather than leave town.

If so, that would help reconcile the disparity between rents and sale prices, thereby reducing the degree of correction needed.

[powayseller]

As long as inventory (and DOM) are high, there will be downward pressure on prices. Could sales pick up because rents are rising? Rents would have to rise a lot. Now, rents are about half of a mortgage payment. SD wages just cannot support the larger rents either. I think a rental priced too high for our median wage, will remain vacant. We just don’t have the high-paying jobs of New York, Boston, or San Francisco.

[Wickedheart]

“The landlord can charge whatever he wants for rent. But when I comes time to do the books, the rental rate per month is determined by the money recieved in a year divided by 12.

As a landlord, raising the rental rate does not necessarily increase you income. It can reduce it.”

That’s very true but you know what, some landlords just don’t get that. The house just around the corner has had 5 different tenants in the last 2 years. The problem IMO is the rent is way too high. 3 bedroom, only 1 bathroom and a measly 1020 sq ft,plus there is no garage and yet they are asking 1595 a month. I live in a nice “pocket” neighborhood and I have real nice neighbors however it’s still City Heights.

I have been hunting for a house to rent and I’ve found that asking prices were pretty darn high. I feel extremely lucky to have found a nice big 3 bedroom 1380 sq ft house in Serra Mesa for 1700. The thought of paying 1700 a month for a small overpriced wreck was depressing me. I’m glad the house hunting is over. I sick of adorable, cute, charming and all the other cute adjectives people use for small, cramped and claustrophobic……………argh

[Author]

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