Will rents create a price floor despite the mini rental bubble?

[Bugs]

I agree with gdcox that the analysis of the rental market is tough due to the lack of published studies by outside observers.

I actually perform rent surveys in many of my assignments, although most of those involve commercial properties. However, I’ve been watching the residential rental market, too, by which I mean the apartment market. I only follow the rents for detached homes on an incidental basis.

What I can say is that apartment rents are weak, regardless of what you may be reading in the newspapers. Compared to apartment rents, the rental structure for detached homes seems to be somewhat overpriced.

To a dedicated renter (someone who can/will only purchase if there is no risk of downside) there is no reason to pay twice as much rent for a home as for an apartment or condo of similar size. A detached home is worth more rent, no doubt, but at most that premium is only going to add another 30% to the rent, all other things being equal.

If I can rent a 2bd apartment for $1000 in North Park (and I can, all day long), then based on the historical trends a 2bd house on its own lot would only be $300 more than that. Except right now it’s not – at present it’s more like $500 or $600 extra.

A household earning $68,000/year can comfortably spend (at 30%) about $20,400/year in housing. That’s $1700/month. Renters have no incentive to spend more than 30% of their income on housing if they can at all avoid it. There aren’t very many 3bd homes in the county that you can rent at $1700/month; and certainly none in any neighborhood you’d feel safe in walking to the local 7-11 after dark.

A $75,000 annual household income puts you into the top 30% of households in the county – that equals less than $1900/month rent potential.

I think there’s some room for rents to come down. I don’t know about there being 30% extra, but I’d imagine 10% is a sure thing.

[niy38]

have ever rent been going down historically ? unless
great depression?

[niy38]

have ever rent been going down historically ? unless
great depression?

[niy38]

have ever rent been going down historically ? unless
great depression?

[niy38]

have ever rent been going down historically ? unless
great depression?

[niy38]

have ever rent been going down historically ? unless
great depression?

[DWCAP]

I have been trying to understand rents for a while now. First,(my understanding is) most stuff you read in the newspaper is gathered from the very large apartment complexes. If you live in a place with only a few apartments (4-10) or in a private rental condo/SFR I dont know if anyone is accuratly tracking your rents. I kinda get the feeling that things are all over the board.

Personally, my rent hasnt done anything in nearly 3 years, but I watch craigslist and I am screwed if my LL ever figures out the market is so much higher. I really hope they care more about one time rent and no hassels than a few $100/month. On the other hand there are plenty of LL’s on here that will tell you all the good reasons rents need to go up (I am a renter, and so as a consequence, never see any).

In my totally uneducated, stab in the dark, analysis I think 3 things are happening.

1) Demand for rentals is up as people loose houses but those houses are not placed on the market. This is especially true in the SFR market, as families search for a semblance of past structure. Apparently watching your toddler play on rented grass is more satisifying then watching them play on park grass, even if your own personal grass is always best. (this gets to bug’s discrepency between SFR’s and apts)

2) High housing prices are keeping would be landlords from providing more supply. This is especially true since SD (and OC) seems to have gone on a building binge of homes that traditionally would have fallen in the higher ends of the market, and now the more affordable areas are reaping the benifits.

3) LL’s NEED more rent. I have a family member who bought a rental at the height of the market. (I all but held him a knife point not to) The rent he gets was about $750 cash negative. Now he can afford it no prob, but doesnt want to. So with every renewal he ups it $50-$100 or more, whatever the market will bear, to get to breaking even. He can afford it, just think about all those that in all reality, cant. Talk about motivation to increase rents.

People, especailly those quoted in the papers in the biz, like to think of it as a fair/equal market. It isnt. Housing is a necessity and while one can trade up and down, they cant substitute out. The LL’s are also far more organized and have an active control of rent. Renters only have a passive control as they can basically vote with their feet, or pay up. Sometimes I feel renters should just get use to increases, cause the only thing that will decease rents over any time is a population fall. And that will only happen if the economy sucks, and people start loosing jobs. Who really wants that for years on end????

Bugs, Id love to hear alittle bit more about the biz rents stuff. I think that would be an amazing indicator of near future health of the SD area economy. If biz’s start voting with their feet, and take the jobs with them,,,,,,,,,, watch out below.

[DWCAP]

I have been trying to understand rents for a while now. First,(my understanding is) most stuff you read in the newspaper is gathered from the very large apartment complexes. If you live in a place with only a few apartments (4-10) or in a private rental condo/SFR I dont know if anyone is accuratly tracking your rents. I kinda get the feeling that things are all over the board.

Personally, my rent hasnt done anything in nearly 3 years, but I watch craigslist and I am screwed if my LL ever figures out the market is so much higher. I really hope they care more about one time rent and no hassels than a few $100/month. On the other hand there are plenty of LL’s on here that will tell you all the good reasons rents need to go up (I am a renter, and so as a consequence, never see any).

In my totally uneducated, stab in the dark, analysis I think 3 things are happening.

1) Demand for rentals is up as people loose houses but those houses are not placed on the market. This is especially true in the SFR market, as families search for a semblance of past structure. Apparently watching your toddler play on rented grass is more satisifying then watching them play on park grass, even if your own personal grass is always best. (this gets to bug’s discrepency between SFR’s and apts)

2) High housing prices are keeping would be landlords from providing more supply. This is especially true since SD (and OC) seems to have gone on a building binge of homes that traditionally would have fallen in the higher ends of the market, and now the more affordable areas are reaping the benifits.

3) LL’s NEED more rent. I have a family member who bought a rental at the height of the market. (I all but held him a knife point not to) The rent he gets was about $750 cash negative. Now he can afford it no prob, but doesnt want to. So with every renewal he ups it $50-$100 or more, whatever the market will bear, to get to breaking even. He can afford it, just think about all those that in all reality, cant. Talk about motivation to increase rents.

People, especailly those quoted in the papers in the biz, like to think of it as a fair/equal market. It isnt. Housing is a necessity and while one can trade up and down, they cant substitute out. The LL’s are also far more organized and have an active control of rent. Renters only have a passive control as they can basically vote with their feet, or pay up. Sometimes I feel renters should just get use to increases, cause the only thing that will decease rents over any time is a population fall. And that will only happen if the economy sucks, and people start loosing jobs. Who really wants that for years on end????

Bugs, Id love to hear alittle bit more about the biz rents stuff. I think that would be an amazing indicator of near future health of the SD area economy. If biz’s start voting with their feet, and take the jobs with them,,,,,,,,,, watch out below.

[DWCAP]

I have been trying to understand rents for a while now. First,(my understanding is) most stuff you read in the newspaper is gathered from the very large apartment complexes. If you live in a place with only a few apartments (4-10) or in a private rental condo/SFR I dont know if anyone is accuratly tracking your rents. I kinda get the feeling that things are all over the board.

Personally, my rent hasnt done anything in nearly 3 years, but I watch craigslist and I am screwed if my LL ever figures out the market is so much higher. I really hope they care more about one time rent and no hassels than a few $100/month. On the other hand there are plenty of LL’s on here that will tell you all the good reasons rents need to go up (I am a renter, and so as a consequence, never see any).

In my totally uneducated, stab in the dark, analysis I think 3 things are happening.

1) Demand for rentals is up as people loose houses but those houses are not placed on the market. This is especially true in the SFR market, as families search for a semblance of past structure. Apparently watching your toddler play on rented grass is more satisifying then watching them play on park grass, even if your own personal grass is always best. (this gets to bug’s discrepency between SFR’s and apts)

2) High housing prices are keeping would be landlords from providing more supply. This is especially true since SD (and OC) seems to have gone on a building binge of homes that traditionally would have fallen in the higher ends of the market, and now the more affordable areas are reaping the benifits.

3) LL’s NEED more rent. I have a family member who bought a rental at the height of the market. (I all but held him a knife point not to) The rent he gets was about $750 cash negative. Now he can afford it no prob, but doesnt want to. So with every renewal he ups it $50-$100 or more, whatever the market will bear, to get to breaking even. He can afford it, just think about all those that in all reality, cant. Talk about motivation to increase rents.

People, especailly those quoted in the papers in the biz, like to think of it as a fair/equal market. It isnt. Housing is a necessity and while one can trade up and down, they cant substitute out. The LL’s are also far more organized and have an active control of rent. Renters only have a passive control as they can basically vote with their feet, or pay up. Sometimes I feel renters should just get use to increases, cause the only thing that will decease rents over any time is a population fall. And that will only happen if the economy sucks, and people start loosing jobs. Who really wants that for years on end????

Bugs, Id love to hear alittle bit more about the biz rents stuff. I think that would be an amazing indicator of near future health of the SD area economy. If biz’s start voting with their feet, and take the jobs with them,,,,,,,,,, watch out below.

[DWCAP]

I have been trying to understand rents for a while now. First,(my understanding is) most stuff you read in the newspaper is gathered from the very large apartment complexes. If you live in a place with only a few apartments (4-10) or in a private rental condo/SFR I dont know if anyone is accuratly tracking your rents. I kinda get the feeling that things are all over the board.

Personally, my rent hasnt done anything in nearly 3 years, but I watch craigslist and I am screwed if my LL ever figures out the market is so much higher. I really hope they care more about one time rent and no hassels than a few $100/month. On the other hand there are plenty of LL’s on here that will tell you all the good reasons rents need to go up (I am a renter, and so as a consequence, never see any).

In my totally uneducated, stab in the dark, analysis I think 3 things are happening.

1) Demand for rentals is up as people loose houses but those houses are not placed on the market. This is especially true in the SFR market, as families search for a semblance of past structure. Apparently watching your toddler play on rented grass is more satisifying then watching them play on park grass, even if your own personal grass is always best. (this gets to bug’s discrepency between SFR’s and apts)

2) High housing prices are keeping would be landlords from providing more supply. This is especially true since SD (and OC) seems to have gone on a building binge of homes that traditionally would have fallen in the higher ends of the market, and now the more affordable areas are reaping the benifits.

3) LL’s NEED more rent. I have a family member who bought a rental at the height of the market. (I all but held him a knife point not to) The rent he gets was about $750 cash negative. Now he can afford it no prob, but doesnt want to. So with every renewal he ups it $50-$100 or more, whatever the market will bear, to get to breaking even. He can afford it, just think about all those that in all reality, cant. Talk about motivation to increase rents.

People, especailly those quoted in the papers in the biz, like to think of it as a fair/equal market. It isnt. Housing is a necessity and while one can trade up and down, they cant substitute out. The LL’s are also far more organized and have an active control of rent. Renters only have a passive control as they can basically vote with their feet, or pay up. Sometimes I feel renters should just get use to increases, cause the only thing that will decease rents over any time is a population fall. And that will only happen if the economy sucks, and people start loosing jobs. Who really wants that for years on end????

Bugs, Id love to hear alittle bit more about the biz rents stuff. I think that would be an amazing indicator of near future health of the SD area economy. If biz’s start voting with their feet, and take the jobs with them,,,,,,,,,, watch out below.

[DWCAP]

I have been trying to understand rents for a while now. First,(my understanding is) most stuff you read in the newspaper is gathered from the very large apartment complexes. If you live in a place with only a few apartments (4-10) or in a private rental condo/SFR I dont know if anyone is accuratly tracking your rents. I kinda get the feeling that things are all over the board.

Personally, my rent hasnt done anything in nearly 3 years, but I watch craigslist and I am screwed if my LL ever figures out the market is so much higher. I really hope they care more about one time rent and no hassels than a few $100/month. On the other hand there are plenty of LL’s on here that will tell you all the good reasons rents need to go up (I am a renter, and so as a consequence, never see any).

In my totally uneducated, stab in the dark, analysis I think 3 things are happening.

1) Demand for rentals is up as people loose houses but those houses are not placed on the market. This is especially true in the SFR market, as families search for a semblance of past structure. Apparently watching your toddler play on rented grass is more satisifying then watching them play on park grass, even if your own personal grass is always best. (this gets to bug’s discrepency between SFR’s and apts)

2) High housing prices are keeping would be landlords from providing more supply. This is especially true since SD (and OC) seems to have gone on a building binge of homes that traditionally would have fallen in the higher ends of the market, and now the more affordable areas are reaping the benifits.

3) LL’s NEED more rent. I have a family member who bought a rental at the height of the market. (I all but held him a knife point not to) The rent he gets was about $750 cash negative. Now he can afford it no prob, but doesnt want to. So with every renewal he ups it $50-$100 or more, whatever the market will bear, to get to breaking even. He can afford it, just think about all those that in all reality, cant. Talk about motivation to increase rents.

People, especailly those quoted in the papers in the biz, like to think of it as a fair/equal market. It isnt. Housing is a necessity and while one can trade up and down, they cant substitute out. The LL’s are also far more organized and have an active control of rent. Renters only have a passive control as they can basically vote with their feet, or pay up. Sometimes I feel renters should just get use to increases, cause the only thing that will decease rents over any time is a population fall. And that will only happen if the economy sucks, and people start loosing jobs. Who really wants that for years on end????

Bugs, Id love to hear alittle bit more about the biz rents stuff. I think that would be an amazing indicator of near future health of the SD area economy. If biz’s start voting with their feet, and take the jobs with them,,,,,,,,,, watch out below.

[Bugs]

It’s not that businesses are going elsewhere – they’re just dying. Lots of small businesses have gone under in the last 18 months or so.

Vacancies are up for certain property types, and actual rents are coming down.

Personally, I think the commercial real estate markets will unwind faster than the residential markets did. A business has to be turning a profit to justify spending the rent.

[Bugs]

It’s not that businesses are going elsewhere – they’re just dying. Lots of small businesses have gone under in the last 18 months or so.

Vacancies are up for certain property types, and actual rents are coming down.

Personally, I think the commercial real estate markets will unwind faster than the residential markets did. A business has to be turning a profit to justify spending the rent.

[Bugs]

It’s not that businesses are going elsewhere – they’re just dying. Lots of small businesses have gone under in the last 18 months or so.

Vacancies are up for certain property types, and actual rents are coming down.

Personally, I think the commercial real estate markets will unwind faster than the residential markets did. A business has to be turning a profit to justify spending the rent.

[Bugs]

It’s not that businesses are going elsewhere – they’re just dying. Lots of small businesses have gone under in the last 18 months or so.

Vacancies are up for certain property types, and actual rents are coming down.

Personally, I think the commercial real estate markets will unwind faster than the residential markets did. A business has to be turning a profit to justify spending the rent.

[Author]

Posts