Rents are up.

[lindismith]

The rents are up in SD – I know because I’ve been looking for a new place to live, and they’ve been rising steadily.

Can anyone tell me how this is happening when the population is decreasing?

Are owners being forced to raise rents because of higher mortgages?

Is the Internet allowing owners to more quickly get a snapshot of higher possible rents, so are they just increasing them?

Is it just seasonal?

[powayseller]

Prices go up when demand exceeds supply. The people leaving are homeowners who are selling. We have 30% vacancy in homes for sale, but what is the vacancy rate in rentals?

More and more people want to rent, pushing up the price.

The rental stock is shrinking, as apartment conversions were made into condos, and rental stock has not been replenished for a long long time.

The CPI which is 40% rents, is going up because rents are rising. As housing becomes unaffordable from rising interest rates, people choose renting over buying. This will exacerbate when lending standards tighten next year.

A few months ago, I was tossing around the idea of locking in a 2 year lease, and I couldn’t figure out whether rents would go up or down. I had a list of arguments on both sides. I ended up signing the 2 year lease. Sounds like it was a lucky decision.

I am wondering if you can quantify your search. How much is the increase? Apartments or houses?

[LA_Renter]

Here is a tool you can use to track rents. Rentslicer.com. They have a trend and graphs page that monitor rents in many cities including San Diego and LA. You are right avg rent is up in both LA and San Diego. This is sheer speculation but it seems that a growing number of people cannot or won’t purchase homes right now which is evident in the data which does increase demand for rentals. There are empty properties on the market that have not found their way to being rentals just yet. The population decrease while true is still minimal.

According to OCRenters bubbletracking 30% of properties are vacant right now. That makes this housing market insane IMO. Home prices are too high for anybody to purchase increasing the renter population meanwhile 30% of homes on the market are sitting vacant. Points to a MAJOR CORRECTION doesn’t it!

By the way the trends and graphs page on rentslicer only goes to April but the current avg rent is on the first page of the city report. So you can still calculate the difference.

[Bugs]

I still question the 30% vacancy figure among the homes for sale. But yeah, some of the rentals are being sold off, and it only takes a few people selling-to-rent to have an effect on the supply/demand. Add to that the number of refis among the remaining rentals and rents would have to come up some. The thing is, the rental increases are limited by income levels in the region – there’s no profit upside for a renter to justify paying too much in rents.

We saw the same thing in the apartment market a couple years back. Apartment rents spiked as a result of increased debt service demands resulting from those agressive sale prices. Most of those apartment rents have since backed off a little as the owners attempt to maintain their occupancy levels.

[lindismith]

“I am wondering if you can quantify your search. How much is the increase?”

A year ago a 1-bedroom apartment in Hillcrest/Mission Hills/North Park/ was about $1000. Now it costs $1200 – $1300. I wish I had actually logged the figures because the increase is so high, I’m beginning to wonder if I remembered it wrong?? But I just confirmed with my siter and brother-in-law, and they agreed.

Interestingly, this morning I called about a rent-to-own house in Mission Hills. The owner is in Hawaii, and previously did a rent-to-own with a millitary couple who gave him a note from the prior sale of their home, and stayed there 5 years. Well, they got transferred to Iraq, so they gave up the house. He claims he gave them back their note, and now he wants to repeat the process. I asked him, “why not sell outright,” and he said, “Well there are 10-15 other homes on the market right now that are comparable properties, so this is a good way for me to unload it because I really don’t want to be a landlord in another state, and it worked before.” He is asking $899K and is willing to finance at 7%. He’s also asking for a 10K security deposit. (!)

I searched for it on Zillow, and the prior sale (to the millitary couple) was never on the books, and in fact he bought it in ’96 for $223K.

I suspect the whole rental market is going to get really wacky for a while.

[lamoneyguy]

There is a house on my street (in South Bay Los Angeles area) that has been on market for about five months. Before listing they redid kitchen, and other cosmetics. They listed for 900k, later reduced to 850k. Zillow has them at 852k. They need to come down to 775k for sale. It is owned by an older couple who moved away for retirement. I would be surprised if it is not fully paid.

After all this time, instead of reducing price again, a “For Rent” sign went up this week. Here was a property that was price reduction resistant, and has opted for renting, presumably because they think they will get their price in 6-12 months. Rents will likely come down or stop increasing, once the vacant homes start getting filled.

[lindismith]

“Rents will likely come down or stop increasing, once the vacant homes start getting filled.”

How long is this time period? Does anyone have any ideas?

[(former)FormerSanDiegan]

I’d like to know where the data are that show that the population of SD is decreasing ?

Perhaps you interpret that the net outmigration to other states equals population decline. It does not. Population decline occurs when total outmigration (between states and internationally) exceeds birth rate.

[lindismith]

We’ve covered this extensively on Piggington. You would have to do a search for past topics to read it. If I have time, I will look and post it for you.

[lindismith]

ok, found it.

Go here for data from Rich

Everyone Wants to Leave Here

And check out this thread: http://piggington.com/demand_for_rental_housing

Interestingly (in the thread above,) Powayseller predicted another 65K people out by June 2006. I wonder what the real number is? She’s usually very accurate in her predictions.

[(former)FormerSanDiegan]

Thanks ! I had seen and focused on on the outmigration since that what really matters for housing prices, but hadn’t seen that the overall numbers which are what matters for overall housing (particularly rentals).

[sdrebear]

Be real careful to watch the number of days these rentals are on the market. I started renting in March and have recently helped a friend rent and quickly noticed some of the exact same rentals from when I was searching with lowered pricing on some. That’s a long time on the market for a rental. There are many people who absolutely can not afford to have their home unrented for more than a couple of months.

I believe many people are new to the rental market for their property (more out of necessity rather than desire) and are either unclear of what reasonable rents are, or simply can’t afford to lower their rent due to such a large servicing cost for their property. They can ask for the rental price all day long, but rents are much more closely tied to salaries than mortgages and as was mentioned previously, there is absolutely no financial incentive to getting into a larger rent payment than you are comfortable with (unless you use your home for very important business meetings, but good luck finding THAT renter!)

I don’t really believe that the rental market can be pushed up anywhere close to covering the mortgage costs of recent sales. There are currently forces on both sides of rents and even if the side pushing up wins, the rate of increase will always be measured.

[bubble_contagion]

[img_assist|nid=827|title=UTC rents|desc=I have been tracking rents of a UTC apartment complex I used to live in. Other apartments complexes in the area track very closely. The data goes back to 4/01 and it is current to 7/06.|link=node|align=left|width=400|height=275]

[powayseller]

My prediction was based on the fact that trends grow before they sizzle out. I figured if 44K people left last year, we would see more leave this year, because the factor that started the outmigration (high housing costs) is still in place.

[privatebanker]

Rental prices lag behind property purchase prices. Example, real estate became very cheap to purchase so the flock flew into buying properties. Now, buying property is getting more and more expensive so the flock is starting to collect in the rental market. We are at a point in the transition stage where rental property owners are either trying to sell or rent out their “investment”. When they rent, they’re trying to rent at a price that would reduce the cash flow bleed. This is a short term solution however and is not sustainable. By reading everyone’s views on this forum, it clearly shows that the average renter is not willing to pay for such a high rent and will either continue looking for a cheaper deal, stay where they are at or move away. Either way, the prices of rents will have to adjust to the renter’s demand not the owner’s need to reduce their cash flow bleed. Rents are as cyclical as property prices and are showing a deviation from the mean at this point. Hang in there, things will change for the better.

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