Rents going up

[little lady]

So what are you saying don’t rent, be homeless?

[sdrebear]

My prediction is that rents will have a temporary spike during this transition in the real estate market then level out again. Rents will not rise nearly enough in the short term to prop up the housing bubble unless there is a massive influx of people to this area.

My opinion is based on two general lines of thought. First is that “housing is housing is housing”. What I mean is that there are a certain number of roofs in (say) San Diego. There are a certain number of people who want to live under those roofs. The flow between owner occupied homes and rented homes is pretty much a zero sum game (internally). Any real “shortage” in rental housing is caused just like it is for owner occupied homes – outside people relocating to the area. I don’t see too much of that right now so I think the internal pressures on rents will ease up rather quickly.

Without outside pressure on the rental supply, then those who are selling homes just to rent are really a non-factor. Meaning that “someone” had to buy their house from within the area therefore freeing up yet another property for either rent or owner occupation (who in that case gave up yet another local property somewhere… eventually down the road it likely reverts back to a rental somewhere).

There is however a “flow”, much like cash flow. The money is coming, but right now things are tight. When the boom happened, I remember many people scared that so many of their renters were leaving to become homeowners. Then the pressure was relieved some when so many apartments got “converted”. Now, everything is “converted” and more renters are starting to flow back. Well, this “flow” is leaving many homes (condos, etc) unoccupied (as we’ve seen the RE inventory rocket up). Many of those will be returned to the “rental” market and soften the load from the renters who have already returned to that market. It’s just an issue of timing really.

My second point as to why rents will (in my opinion) not rise enough to support this housing bubble to any degree is that renters have absolutely zero incentive to overpay for their home. There is no future upside for them, no future equity to be gained, therefore no reason to pay more than what they feel is relatively reasonable. The only incentive they have is not wanting to leave the area all together. That is a strong incentive, but that incentive is really already built into the rental market and has been for many years. We pay WAY more rent than most other parts of the country (save for NYC and other choice areas).

So, going above and beyond this (just to support someone else’s mistaken speculation on an asset) and other normal inflation factors will only serve to push more people out of the market entirely and reduce pressure on the rental market.

So, to sum up – Short term price spikes (relatively small) as rental supply remains low and potential renters increase then an easing as the properties these new renters left behind begin filtering back to the rental market (along with hundreds of unsold “conversion” inventory and new condo/home projects) to support the shifting demand.

[little lady]

How high will it spike? Will it mirror the realestate sales market? It sounds like someone is predicting a softlanding for rents.

[Anonymous]

Real rents (deflated prices) are already flat/declining: in San Diego, the CPI is up 3.9%, first half of ’06 compared to first half of ’05. That’s just above the 3.8% increase in rent.

Real rents will go down as employment continues to go down and folks continue to outmigrate from the county.

Nominal rents, along with nominal prices for other things, may go up, and strongly up, before coming down, but that’s a different subject.

[little lady]

They are not down anywhere I have been looking, they have definitely gone up, quite a bit. My bestfriend has recently gotten a legal separation. So we have been looking everywhere. The rents they are asking so high she thought she’d might as well look into a condo conversion,since the talk is “buyers market”, “glut of homes”, etc. They had few people looking, which I thought was strange. I thought it would be like a morque. She got disappointed after saying to herself, the payment on the condo might be almost the same, (after tax benefit and such)but the freakin’, HOA’s made her start back at square one. She couldn’t find anything “cheap”(HA what a joke) that was available right away. She ended up paying way more than she had hoped, just to get out of the situation she was in. By that I mean arguments with her husband.

[surveyor]

As a landlord, I usually raise rents by 3-5% per year. Any more than that here will cause most people to move to another location. A smart landlord will not try to raise the rent by too much unless the market rent in the area is about 20-30% higher than what they are charging.

As a landlord, it’s better to keep a tenant rather than try to squeeze every dime out of him/her. It usually costs about $2000-$3000 to advertise and prepare a unit for a new tenant. Certainly if I was a tenant, I would negotiate any rent raises down by noting that fact.

I wouldn’t worry too much about rents. It is highly dependent on salaries, yes, and of course subject to demand and supply, but the pure fact about it is that most landlords are desparate to keep their unit leased and most landlords undercut each other all the time. In terms of economics, rents are a pretty efficient system.

My two cents.

[little lady]

I call B.S. on this one. Do you have actual facts that support this? I question why you would tell tenants to “neqociate any rent raises”? Where are your properties at? I would like to negociate on a place for my bestfriend. She has excellent credit and makes more than the median income. She DID get a month to month, so that if she needs to move that won’t be a problem. There was no advertisements on many of the places that we went to. There were no vacancies either.

[socalarm]

q and g look similar, c and t sound similar.
but don’t be fooled by appearances.
my two cents.

[no_such_reality]

706 1 bedrooms under $1000.

227 1 bedrooms under $800.

A quick search of Craigslist shows 706 1+ bedroom places for rent under $1000.

Is the problem your friend can’t find a place or is the real problem she can’t find a place in the small neighborhood area she wants?

Rents in general are all over the map with wishlist pricing from the owners.

2 Bedrooms show the same split

617 Under $1300.
187 Under $1000.

If your friend is looking short term on top of it, it’ll be even more expensive, and finally, if she is short on time, she’ll get squeezed and need to take one of the over-priced places that is remaining empty instead of taking on the places that is turnover at a reasonable rate.

[Carlsbadliving]

It’s certainly possible to negotiate rents.

Our landlord wanted to raise our rent $150 a month. We told him we thought that was too steep and we might be forced to leave if it went through. He only raised it $100. For him it wasn’t worth the risk of losing a tenant for even one month for only $50 extra (that’s only $600 for a 1 year lease).

[little lady]

She looked at ads all over, but wanted to stay close(not exactly in the same city,maybe too close to husband,people she doesn’t wanna run in to) to where her kids grew up(they may join her/long story), needs MORE than 1 bed, doesn’t want a cardboard box…went from homeowning(still owns but who knows what will happen to the house) to renting, doesn’t want a cardboard box, and I contend that we HAD SIGNIFIGANT trouble finding anything we thought was worth the money they asked for and nothing near 700$ in the areas we looked at. We also looked at trying to find a small cottage somewhere, since a friend of mines daughter had had one that she rented for a year or so @895$,her daughter has moved recently, upping her rent,for a slightly larger house(1100 sq ft) but this place has a pool, for 1975$.

[no_such_reality]

okay, what rough area is she looking at? La Jolla? 🙂

Doesn’t want a cardboard box, define this. What would she consider a cardboard box? What defines cardboard box? Is she really looking for the equivalent of The Village at the Spectrum?

What’s the Bed/bath she needs? 2/1? 3/2?

What and where did she rent and how much did she pay?

[little lady]

No such reality is right…….define why you are being so ridiculous. You are just arguing and you cause you can’t accept reality.

[little lady]

No such reality is right…….define why you are being so ridiculous. You are just arguing and you cause you can’t accept reality.

[little lady]

No such reality is right…….define why you are being so ridiculous. You are just arguing and you cause you can’t accept reality.

[Author]

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