Rental Market in SD

[fishsticks]

Hello everyone,

Quick question for you all: I heard one commentator describe the housing losses from this credit fiasco as equivalent to several Katrinas. Tens of thousands of people will revert from home owners to renters. In addition, hundreds of thousands of people who would buy will now be locked into renting. Any thoughts on how this will effect rental markets, either in San Diego or nationwide? In other words, will the effect of foreclosures be enough to make a significant dent in rental prices, which, to my mind at least, have been a relative bargain, at least here in SD. Is this a good time to look at apartment REITS? Or do you think that excess condos will quickly be retrofitted as apartments?

-Fishsticks

[bsrsharma]

Your analysis is generally OK. But, by the “Law of conservation of homes”, all those foreclosed homes have to eventually fall into rental space, in the absence of owner occupants. So, though the number of renters will skyrocket, the number of rental properties will also skyrocket. On the whole, the existing excess inventory and the fact that builders will keep on building assures plentiful housing. There may be local hiccups, but on the larger scale it is going to be excess supply chasing demand leading to drop in rents.

[bsrsharma]

Your analysis is generally OK. But, by the “Law of conservation of homes”, all those foreclosed homes have to eventually fall into rental space, in the absence of owner occupants. So, though the number of renters will skyrocket, the number of rental properties will also skyrocket. On the whole, the existing excess inventory and the fact that builders will keep on building assures plentiful housing. There may be local hiccups, but on the larger scale it is going to be excess supply chasing demand leading to drop in rents.

[bsrsharma]

Your analysis is generally OK. But, by the “Law of conservation of homes”, all those foreclosed homes have to eventually fall into rental space, in the absence of owner occupants. So, though the number of renters will skyrocket, the number of rental properties will also skyrocket. On the whole, the existing excess inventory and the fact that builders will keep on building assures plentiful housing. There may be local hiccups, but on the larger scale it is going to be excess supply chasing demand leading to drop in rents.

[stansd]

Bsharma,

We never seem to agree:)

Agree on the law of conservation of homes. That said, I see inventory rising as part of the bust. The vacancy rate is already up, and the foreclosure avalanche will also increase vacancies as they wind through the auction/sales pipeline. You’ll also wind up with folks who have lost their homes and are “desperate renters.” I think there will be excess demand chasing supply leading to a rise in rents.

Credit will become a real issue in the rental market as those who were forclosed on, who were short selling, or who moved after a large dent in any equity they had seek shelter.

The disparity between rents and mortgages will narrow from both ends-prices coming down, rents moving up. I don’t see rents skyrocketing, but I do believe they’ll move up.

Stan

[stansd]

Bsharma,

We never seem to agree:)

Agree on the law of conservation of homes. That said, I see inventory rising as part of the bust. The vacancy rate is already up, and the foreclosure avalanche will also increase vacancies as they wind through the auction/sales pipeline. You’ll also wind up with folks who have lost their homes and are “desperate renters.” I think there will be excess demand chasing supply leading to a rise in rents.

Credit will become a real issue in the rental market as those who were forclosed on, who were short selling, or who moved after a large dent in any equity they had seek shelter.

The disparity between rents and mortgages will narrow from both ends-prices coming down, rents moving up. I don’t see rents skyrocketing, but I do believe they’ll move up.

Stan

[stansd]

Bsharma,

We never seem to agree:)

Agree on the law of conservation of homes. That said, I see inventory rising as part of the bust. The vacancy rate is already up, and the foreclosure avalanche will also increase vacancies as they wind through the auction/sales pipeline. You’ll also wind up with folks who have lost their homes and are “desperate renters.” I think there will be excess demand chasing supply leading to a rise in rents.

Credit will become a real issue in the rental market as those who were forclosed on, who were short selling, or who moved after a large dent in any equity they had seek shelter.

The disparity between rents and mortgages will narrow from both ends-prices coming down, rents moving up. I don’t see rents skyrocketing, but I do believe they’ll move up.

Stan

[bsrsharma]

Stan,

I like you to disagree – and provide another point of view!

Now, I agree credit will be an issue in rental market. But look at the big picture: millions of families have lost their homes. What are they going to do? They can’t all live in cars or cardboard boxes or under the bridges. The social, if not legal, pressure will be too much to refuse them rentals. Also, what will the owners do with millions of empty homes? The threshold of creditworthiness to qualify for rentals will come down enough to keep most of the empty homes occupied. That will provide housing to most.

[bsrsharma]

Stan,

I like you to disagree – and provide another point of view!

Now, I agree credit will be an issue in rental market. But look at the big picture: millions of families have lost their homes. What are they going to do? They can’t all live in cars or cardboard boxes or under the bridges. The social, if not legal, pressure will be too much to refuse them rentals. Also, what will the owners do with millions of empty homes? The threshold of creditworthiness to qualify for rentals will come down enough to keep most of the empty homes occupied. That will provide housing to most.

[bsrsharma]

Stan,

I like you to disagree – and provide another point of view!

Now, I agree credit will be an issue in rental market. But look at the big picture: millions of families have lost their homes. What are they going to do? They can’t all live in cars or cardboard boxes or under the bridges. The social, if not legal, pressure will be too much to refuse them rentals. Also, what will the owners do with millions of empty homes? The threshold of creditworthiness to qualify for rentals will come down enough to keep most of the empty homes occupied. That will provide housing to most.

[SD Realtor]

bsr I kind of agree with Stan a little here. One thing that doesn’t quite jive with your logic to me is that all these foreclosed homes will “eventually” fall into rental space. I am puzzled for a few reasons. One, buying income property is harder to finance then owner occupied. At the moment there are VERY few properties that pencil out as rentals even in the best of credit environments. Now we are in a much more aggressive credit crunch making it even harder for rentals to pencil out. Also in order for housing on teh whole to find price reductions all the foreclosures coming on the market need to sit awhile and then face massive price cuts. So when you say the foreclosed homes eventually fall into rental space, things kind of don’t align to me and the argument gets blurry. Is it, massive foreclosures that sit for awhile, flood the inventory and bring pricing down, or is it massive foreclosures don’t reduce to much because they are bought up and become rentals?

IMO I think most prudent investors who buy income property will wait until these properties pencil out substantially better then they do now.

Just my guess…

SD Realtor

[SD Realtor]

bsr I kind of agree with Stan a little here. One thing that doesn’t quite jive with your logic to me is that all these foreclosed homes will “eventually” fall into rental space. I am puzzled for a few reasons. One, buying income property is harder to finance then owner occupied. At the moment there are VERY few properties that pencil out as rentals even in the best of credit environments. Now we are in a much more aggressive credit crunch making it even harder for rentals to pencil out. Also in order for housing on teh whole to find price reductions all the foreclosures coming on the market need to sit awhile and then face massive price cuts. So when you say the foreclosed homes eventually fall into rental space, things kind of don’t align to me and the argument gets blurry. Is it, massive foreclosures that sit for awhile, flood the inventory and bring pricing down, or is it massive foreclosures don’t reduce to much because they are bought up and become rentals?

IMO I think most prudent investors who buy income property will wait until these properties pencil out substantially better then they do now.

Just my guess…

SD Realtor

[SD Realtor]

bsr I kind of agree with Stan a little here. One thing that doesn’t quite jive with your logic to me is that all these foreclosed homes will “eventually” fall into rental space. I am puzzled for a few reasons. One, buying income property is harder to finance then owner occupied. At the moment there are VERY few properties that pencil out as rentals even in the best of credit environments. Now we are in a much more aggressive credit crunch making it even harder for rentals to pencil out. Also in order for housing on teh whole to find price reductions all the foreclosures coming on the market need to sit awhile and then face massive price cuts. So when you say the foreclosed homes eventually fall into rental space, things kind of don’t align to me and the argument gets blurry. Is it, massive foreclosures that sit for awhile, flood the inventory and bring pricing down, or is it massive foreclosures don’t reduce to much because they are bought up and become rentals?

IMO I think most prudent investors who buy income property will wait until these properties pencil out substantially better then they do now.

Just my guess…

SD Realtor

[JerseyGrl]

I have been wondering about how this will play out; former home owners turning into renters. If they go bankrupt/foreclosed on their credit goes to crap, right? Everytime we’ve rented a new house the landlord runs a credit check. Will it be difficult for people with ruined credit to rent a property? How will owners of rental property/property managers view the new crop of wannabe renters with bad credit?

[JerseyGrl]

I have been wondering about how this will play out; former home owners turning into renters. If they go bankrupt/foreclosed on their credit goes to crap, right? Everytime we’ve rented a new house the landlord runs a credit check. Will it be difficult for people with ruined credit to rent a property? How will owners of rental property/property managers view the new crop of wannabe renters with bad credit?

[Author]

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