Why rents are going up?

[KingKong]

I see two main reasons why rents are going up.

1. supply and demand.
The condo conversions has reduced the supply of rental properties. When a conversion is done, it needs to evacuate tenants before it could remodel and sell. Now it takes a while to sell those condos.
On the demand side, there is no population increase so there has not any demand increases. Although there are rational people who sold their house and because renters, the number is too small to count 🙂
So I would say that supply and demand are pretty much balanced.

2. Higher quality of rental properties
Have you ever heard of rental properties with granite counters five years ago? No.
Recent apartments and condo conversions all showcase high-end ketchen and some other luxuries. You pay more for these luxuries. This is the real reason why rents are going up.

As a result, I think the rents will rise but with limited upside potential.

[PerryChase]

Here’s another thread discussing rent.

http://piggington.com/node/127

[TheBreeze]

Are rents really going up? Do we have actual proof of this? Here in UTC, it doesn’t seem that apartment rents are going up (not sure about houses). Craigslist shows several places with reduced rents or with rent rebates. In fact, it appears that there is a lot of competition for renters in this area.

As near as I can tell, there appear to be three groups competing with each other for apartment renters with another group coming online soon. The first group is the apartment complex owners. Many of these guys appear to be offering rent rebates in a desperate attempt to prop up the market value of their apartments. For example, a complex might have a two-bedroom listed for $1600 with a one-month rebate on a one-year lease. I’m assuming this rebate allows the complex to report the market rental value of the apartment as $1600, when in actuality it is only $1467.

The next group is the owners of the complexes that became failed condo conversions — places like The Venetian, The Verano, and Villa Vicenza/Nobel Court. The owners of these complexes jumped on the condo conversion craze at the top of the market. They assumed that they would be able to flip the entire complex one unit at a time to greater fools. Wrong. Now these guys are having to rent out the units that didn’t sell. I wasn’t in the market for a rental before these condos were converted, so I’m not sure what the rent was back then. However, I would be surprised if the rent has gone up enough to account for inflation and the value of the upgrades. An example of would-be converters now being forced to rent out can be found here.

The next group is the greater fools who bought the individual converted units as an “investment.” Many of these people had planned to flip, but are now forced to rent out their unit so that they can pay a small part (maybe half if they’re lucky) of their mortgage + taxes + HOA fees + other ownership costs. These poor fools are competing for renters not only with other apartment complexes, but many times with the condo converter they bought their unit from. That would really suck. If you are trying to rent out your failed flipper unit at the Verano, you are forced to come in under the rental price that the Verano condo converters themselves are advertising for similar units.

The next group is coming online now: La Jolla Crossroads. These are new apartment complexes that are currently being built right next to I-5. I’m not sure how many units are coming online there, but it looks like a ton. This added supply will further act to decrease rents in the UTC area. I believe the next batch of these units is coming on the market in April with more to come after that.

So, at least in the UTC area, I don’t see prices for apartment rentals going up. Not only is there a lot of new capacity coming on the market, many of the failed flips/conversions are coming back on the rental market and should continue to drive rents down.

[4plexowner]

The supply of US dollars is currently being increased at an annual rate of 11.5%.

Until rental rates increase by MORE than 11.5%, rents are not going up – it is the US dollar that is going down.

[blahblahblah]

I keep hearing people say that rents are going up, but I haven’t seen it in my case or with any of my friends. It may be due to many FBs trying to cover more of their carrying costs on their “investments” by increasing their asking rent. If you’re looking for a place to rent now, it would be a good idea to look around carefully before signing anything, there are probably still some deals to be had from good landlords that have owned their properties for a while. Also, we’ve noted before on this board that the rental market is pretty tight below $2K/month, but once you go over that you can get a lot for your money.

[no_such_reality]

Mainline apartments were going up because of high occupancy. The rent “average” which is a polling of mainline large apartment complexes also report increases.

However, like others pointed out, what’s actually happening may be quite different. In OC, the rents have gone up according to the average, however, that is only after IAC others have added major new developments on the high end.

Like for like units may not. In my townhome complex, I’ve been eyeing another place, the exact same floorplan that is up for rent.

The owner wants 15% more than I’m currently paying in rent. The listing and signs went up early October. The tenant moved out on the last weekend of Oct. It is still empty. The owner has repainted, added new carpeting and looks (through window since it’s empty) like possibly a new stove.

Since he’s two months empty and going, he’s at least 4% below my current landlords rental rate due to vacancy and quickly heading towards 15%.

[LookoutBelow]

Rents are not going up……..Do better research

 

Mine has gone DOWN 

[PerryChase]

Here’s an article in the Washington Post on what’s happening in the DC area. We can expect the same phenomenon to occur in San Diego by this time next year.

We’ll see what happens when the government has no choice but to cut the runaway spending. The DC area will get hammered.

————-
http://www.washingtonpost.com/wp-dyn/content/article/2007/01/04/AR2007010401794.html

Cold Sales Give Renters a Break
Vacancies, Prices Affected as Owners Lease What They Can’t Unload

By Dina ElBoghdady
Washington Post Staff Writer
Friday, January 5, 2007; Page D01

As home sellers grew more frustrated with the slow local real estate market in recent months, they abandoned their for-sale signs and put their homes up for rent. That has increased choices and cooled prices for tenants in one of the tightest and most expensive parts of the country.

“This is the first sign that the cooling housing market is having an impact on the rental market,” said Gregory H. Leisch, chief executive of Delta Associates, an Alexandria research firm that is scheduled to release a report today showing more vacancies in the region’s apartment complexes.

[PerryChase]

Apparently rents are going down according to the Union Buffoon (as jg puts it; and I agree).

http://www.signonsandiego.com/news/business/20070607-9999-1b7rents.html

Six months ago, a county survey found vacancy rates had fallen to 3.1 percent . . . How quickly things change
By Emmet Pierce
UNION-TRIBUNE STAFF WRITER

June 7, 2007

Apartment vacancies in San Diego County are rising as average rental rates have declined, the San Diego County Apartment Association reported in a study released today.

[PerryChase]

Apparently rents are going down according to the Union Buffoon (as jg puts it; and I agree).

http://www.signonsandiego.com/news/business/20070607-9999-1b7rents.html

Six months ago, a county survey found vacancy rates had fallen to 3.1 percent . . . How quickly things change
By Emmet Pierce
UNION-TRIBUNE STAFF WRITER

June 7, 2007

Apartment vacancies in San Diego County are rising as average rental rates have declined, the San Diego County Apartment Association reported in a study released today.

[sdrealtor]

More anecdotal information but single family rentals dont seem to be declining and good ones are very difficult to find in good areas.

[sdrealtor]

More anecdotal information but single family rentals dont seem to be declining and good ones are very difficult to find in good areas.

[Anonymous]

I hope that my father-in-law decides to sell his Crown Point apartment complex soon, ’cause rents and occupancy rates are going nowhere but down with the exodus from the county, condos coming on line, employment moving down, etc. The value of, and price for, rental properties will be going nowhere but down for a long, long time.

[Anonymous]

I hope that my father-in-law decides to sell his Crown Point apartment complex soon, ’cause rents and occupancy rates are going nowhere but down with the exodus from the county, condos coming on line, employment moving down, etc. The value of, and price for, rental properties will be going nowhere but down for a long, long time.

[no_such_reality]

More anecdotal information but single family rentals dont seem to be declining and good ones are very difficult to find in good areas.

If it’s like OC, those too will fall. Vacancy hasn’t caught up with supply. I did another run through open houses last weekend, still seeing 80% sitting empty rates.

As the empties and REOs come back to the rental market, vacancy will rise and rents will sag.

[Author]

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