Red HOTTTTT Market!!

[sdrealtor]

A friend of mine put a rental on Craigs List last week. He had 15 calls when he got in the next morning and his phone range all day. It rented was rented out by 10 am with a half dozen back up offers by the end of the day.

[(former)FormerSanDiegan]

perhaps he should have priced it higher

[sdrealtor]

He thought he did!

[(former)FormerSanDiegan]

What part of town ? SFR or condo ? Rental rate ?

[FutureSDguy]

Hi, I’m new here. I’m seriously considering moving to Carlsbad (deep anxious breath), and have been lurking for a while. Buying a house in late 2007 or 2008 is sort of my gameplan right now.

Now… Renting… is it going to get bad? I have 2000sqft worth of junk to move from Washington. 🙂 I’m hoping that the rental market will be gentle enough for my wife and me to justify not buying a house for a while. I recently convinced her to overcome her psychological opposition to renting, and now there appears to be a significant financial factor here. Are rents going up to a price point that reflects the current (albeit downtrending) RE market? Can the rental market actually put pressure *against* correction in the RE market?

Brian

[(former)FormerSanDiegan]

Brian –

“Can the rental market actually put pressure *against* correction in the RE market?”

Absolutely. Doesn’t everyone compare the cost of renting versus buying when deciding to go from being a renter to a homeowner ?

Rent rates are also a proxy for wages. If wages go up and rents go up, it will soften the home price decline in nominal (not inflation-adjusted) dollars.

Now as for predicing rental rate trends, they have recently accelerated, but who knows where they go next ? Depends on employment, growth vs recession, local economy.

[Carlsbadliving]

Brian,

I don’t imagine rental rates continuing to climb too much higher. First off we aren’t seeing a huge influx of migration coming into San Diego. Second off we aren’t going to see a giant number of people moving from homeowners to renters, simply because they can’t sell their houses fast enough. I think there are plenty of owners out there right now wishing they could rent but are stuck with that house on the market. I think that any frenzy in the rental market will settle down soon enough.

What part of Washington are you moving from? My wife and I actually moved from Seattle three years and may be returning within the next year. What do you hear about the market up there?

And why Carlsbad?

[sdcellar]

It must have been a good deal because the properties we’ve been looking at aren’t moving that quickly.

That said, we’re looking at newer properties that are higher priced than older ones.

I’m sure it’s mostly due to the fact that they have to ask for more to minimize negative cash flow, so the price is higher than the HOTTTTTer market will bear.

We’ve passed on every one we’ve seen (and they linger on the rental market), buy I’m sure we’ll find one that’s a good value to us.

[sdrealtor]

Brian,
I live and work in one of the nicest parts of Carlsbad. It is wonderful here. Prices should be much more palatible in a year or two. There are lots of single family homes that are rented around here in all neighborhoods (good and bad). You might be surprised to find such nice homes for rent in great neighborhoods but lots of people have moved away and kept their homes. Sure there are recent speculators but there is a nice inventory of long time rental properties. Its a phenomena that I never saw anywhere lese I lived in the country.

Rents for a nice 2,000 sq ft house probably run around 2300 to 2500. There are some for more and some for less. The problem isnt necessarily rental rates its more about finding one that you like. The good ones go quick and the vacancies seems to be getting slimmer every day.

SDR

[sdrealtor]

SDC
It was a crappy 2 br place but west of the 5 in coastal north county.

[sdcellar]

sdr–

That makes sense. Crappy or not, seems like there’s fairly steady demand for those kinds of places. You just pay more the nicer they get.

I’d have been interested myself about 20 years ago.

[lendingbubblecontinues]

C’mon sdr-

You know that one anecdotal story does not a clear picture make-

There are several single-family homes in my nice 1980s constructed North County Inland neighborhood that are available for rent and have been for the better part of 6 months to a year in some cases.

There are also close to 20 homes for sale in the same neighborhood, just sitting there, priced to sit, despite multiple reductions in price on many of them.

Think about what the upper limits must be for rental prices for a moment…$3000 to $4000 a month right? After all, most people who can “afford” this rent are going to be buyers, right? sdr- do you know many folks who rent for more than $3000 per month? I believe that the upper limits compress and restrain all market rents beneath them.

This “compression” is why, when San Diego real estate plummets, ALL less desireable locations nationwide should suffer downward pricing pressure. It may take some time as the process takes some time to creep it’s way along, but equilibrium should eventually be reached. How long? Anyone’s guess is as good as mine.

And sdr…I’m not really at odds with you about your anecdotal experience, either, as I provide anecdotal evidence myself that often serves to bolster my own opinion fo what the market is doing.

[sdrealtor]

LBC,
I agree about the compression around $3K for a rental. I think you are right on. As for one anecdotal story, I hear about rentals flying off the shelf everyday if they are in a desireable area and priced at the market. I guess your area must not share the same demand as by the coast because the rental market is sizzling hot here.

Overpriced rentals on the market by speculators that got in too late are just as overpriced as the same type of folks selling homes. With that said, a day doesnt pass that I dont hear a colleague say how hot the rental market is. Over 20 calls in one day is astounding!

BTW, I just checked the MLS. There isnt ONE single family home for rent in South Carlsbad under $2500 and four between 2500 and 3000.

[lendingbubblecontinues]

I agree…over 20 calls is quite impressive.

Sdr-Any insight into whether frustrated sellers ever entertain offers to rent the home for a year, rather than offers to buy?

What would be the best way, if it does happen, to go about making such an offer…through an RE agent or direct to the seller’s agent?

[sdrealtor]

LBC,
It really depends on their individual situation and the season. If I’m a seller and I have a vacant house I can put someone in until Spring it might make sense. The challenge is that tenant occupied properties are tough to show to buyers because of tenants rights. They also tend to be bad housekeepers because they arent motivated for the house to sell and them to have to move.

I would go directly to owner if you could. The agent doesnt want them to rent it particularly after spending alot of time, energy and money marketing a property. You didnt hear that here:)

SDR

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