The Bottom is Near

[Mexico Resident]

Rents are skyrocketing. REITs are doing a booming business. Has anybody noticed the slew of recent stories where different experts claim the bottom of the housing slump is near? It seems the reports are usually one dimensional. No consideration of WHERE prices are. No consideration of market psychology. And no overall view of the market based on fundamentals.

[barnaby33]

When I read your topic title, I thought it was missing a word. I feel it should have read,”The Bottom is Near, Repent!

Josh

[no_such_reality]

Rents aren’t skyrocketing. They’re barely outpacing inflation.

[santeeman]

Rents are not SKYROCKETING in the SAN DIEGO area yet, but will they? The areas in this article are outpacing inflation.
http://www.realfacts.com/10252006.html
October 25, 2006
"RENTS CONTINUE TO GROW AS FIVE MARKETS REACH "HOT" STATUS Results of third quarter data released today by RealFacts reveal overall continued rent growth, with five markets standing out at above 7%. Leading the way at 10.4% annual rent growth was the San Jose MSA, the first appearance of double digit rent growth in San Jose since the first quarter of 2001 when it registered 34.9% annual growth. The Los Angles, Phoenix, Oxnard-Thousand Oaks and San Francisco MSAs all registered annul rent growth between 7.2% and 7.6%. Showing continuing strength were the Las Vegas, Riverside-San Bernardino, and Seattle MSAs, all between 5.8% and 6.3%. Portland OR broke the 5% barrier this quarter at 5.6% annual rent growth. Three MSAs are poised to break the 5% barrier, with Reno at 4.8%, Salt Lake City at 4.6% and Tucson at 4.7%. Together, the 12 MSAs registering over 4.6% annual rent growth represent 79% of the units in the eight western and southwestern states, confirming the depth and breadth of the strong rent growth in these two regions. Overall, eighteen of the 29 major MSAs tracked are now over 3% annual rent growth, up from 13 MSAs last quarter, and double the 9 MSAs over 3% one year ago. This quarter the complete RealFacts database registered 4% annual rent growth, a 0.3% increase from the second quarter, and up from 2.7% annual rent growth a year ago."

[blahblahblah]

Rents may go up here and there across SD, but there are a lot of landlords in very comfortable positions here. Those who purchased their properties after the early 90s downturn and before the bubble have a LOT of pricing flexibility. The “weak hands” who got into the game late using toxic mortgages will try raising their rents, but their tenants should be able to relocate to a property owned by a “strong hand” landlord to save money. Of course, if we move out on the demand curve due to population growth, that will apply upward price pressure across the board. But just because 10% of the landlords are “weak hands” that must raise rents to cover costs doesn’t mean that all rents are going up. As a personal anecdote, my landlord (who I happen to know is a “strong hand”) just offered me another year at the same rate I’m paying now. Barring a big increase in population, I just don’t see rent increases outpacing inflation.

[JES]

The main justification I hear for the bottom being near is that inventories are starting to go lower again. Greenspan said this the other day. I fail to see why something that is seasonal can be used to justify an end to the downturn. Sure, builders are discounting heavily and selling some inventory, but this is just one of many issues we face.

[mixxalot]

I dont really see the rents increasing a lot here in San Diego either. I just renewed my lease in Point Loma for another 8 months for $1089/month for a 1 bedroom about a mile from the beach which is what I was paying last year.

Compared to a 4k monthly mortgage for an overpriced 1 bedroom cottage in Point Loma, I’d call that a bargain and wait for market to drop even further here in San Diego. It still is way overpriced to buy property here.

[barnaby33]

Where in Point Loma would a 1 bedroom be enough to run 4k, let alone the average? That seems like a bit of overstatement.

Josh

[gold_dredger_phd]

My rent went up by 25%. I’ve been there for two years. They don’t care how many of their tenants leave. The market they want now is the two income professional household that can’t afford a house in that neighborhood. The homes there have asking prices of between $800K to 1.5 million.

[mixxalot]

Ok perhaps I made a gross estimate.

1 bedroom condos in Point Loma are selling for 250-400k.

That would be about 2k a month which still is a lot more than my 1k rent each month.

[barnaby33]

That sounds alot better. I just wanted to know if there was a section of point loma where the streets were really paved in gold.

Josh

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