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

[bjensen]

I understand that rents are set by supply and demand.

However, I can’t help but wonder if what happened in the mortgage market didn’t increase demand in Southern California over the past 8 years.

The only thing I can think is that there were enough rational and honest people that preferred to rent vs. buy even if they were able to buy to fill in the spots opened up by people who had no business buying homes and then some. I know a lot of people my age put off purchases as they graduated college even though they could technically “afford” (i.e. qualify) for a mortgage.

I don’t have any data to back any of this up. I don’t know what demand was 8 years ago. But I do know that there were sharp increases that outstripped the increase of local incomes for Orange County.

I just don’t know if I trust history to tell me that rents don’t go down, and if they do, they only go down slightly. It wasn’t a few years ago the mantra was that house prices never go down as well. So much for that theory.

BobS, do you believe that barring a strong recession that there is no chance of decreased rents going forward? Would you then consider real estate fairly priced when rent is equal to the mortgage on a property?

Who here would buy a personal residence when rent equals the cost of a mortgage for a similar property? Who would hold out for further price reductions?

[bob007]

how much is rent in san diego ?

[bob007]

how much is rent in san diego ?

[bob007]

how much is rent in san diego ?

[bob007]

how much is rent in san diego ?

[bob007]

how much is rent in san diego ?

[EconProf]

BobS
Bjensen, the difficult thing about predicting future rents is that a multitude of factors will influence them. That is why it is unwise to predict rents based on one of those factors you may believe in.
On the demand side demographic factors such as # of people, their ages, family formation, their incomes, etc. can increase or decrease demand. The supply side is easier to predict because the for-rent housing stock is largely a given. Over time it changes at the margin due to new building, demolitions, condo conversions (or the reverse, back into the rental stock), vacancies due to foreclosures, etc.
If you can predict what each of these demand factors and supply factors will do in the future, then you will know exactly where rents will go. Everybody can have an opinion.
Final note: because many of these factors work at cross-currents, they cancel each other out. Thus rental changes over time tend to be slow and gradual, barring some huge event like a massive recession or local industry leaving (or coming in).

[EconProf]

BobS
Bjensen, the difficult thing about predicting future rents is that a multitude of factors will influence them. That is why it is unwise to predict rents based on one of those factors you may believe in.
On the demand side demographic factors such as # of people, their ages, family formation, their incomes, etc. can increase or decrease demand. The supply side is easier to predict because the for-rent housing stock is largely a given. Over time it changes at the margin due to new building, demolitions, condo conversions (or the reverse, back into the rental stock), vacancies due to foreclosures, etc.
If you can predict what each of these demand factors and supply factors will do in the future, then you will know exactly where rents will go. Everybody can have an opinion.
Final note: because many of these factors work at cross-currents, they cancel each other out. Thus rental changes over time tend to be slow and gradual, barring some huge event like a massive recession or local industry leaving (or coming in).

[EconProf]

BobS
Bjensen, the difficult thing about predicting future rents is that a multitude of factors will influence them. That is why it is unwise to predict rents based on one of those factors you may believe in.
On the demand side demographic factors such as # of people, their ages, family formation, their incomes, etc. can increase or decrease demand. The supply side is easier to predict because the for-rent housing stock is largely a given. Over time it changes at the margin due to new building, demolitions, condo conversions (or the reverse, back into the rental stock), vacancies due to foreclosures, etc.
If you can predict what each of these demand factors and supply factors will do in the future, then you will know exactly where rents will go. Everybody can have an opinion.
Final note: because many of these factors work at cross-currents, they cancel each other out. Thus rental changes over time tend to be slow and gradual, barring some huge event like a massive recession or local industry leaving (or coming in).

[EconProf]

BobS
Bjensen, the difficult thing about predicting future rents is that a multitude of factors will influence them. That is why it is unwise to predict rents based on one of those factors you may believe in.
On the demand side demographic factors such as # of people, their ages, family formation, their incomes, etc. can increase or decrease demand. The supply side is easier to predict because the for-rent housing stock is largely a given. Over time it changes at the margin due to new building, demolitions, condo conversions (or the reverse, back into the rental stock), vacancies due to foreclosures, etc.
If you can predict what each of these demand factors and supply factors will do in the future, then you will know exactly where rents will go. Everybody can have an opinion.
Final note: because many of these factors work at cross-currents, they cancel each other out. Thus rental changes over time tend to be slow and gradual, barring some huge event like a massive recession or local industry leaving (or coming in).

[EconProf]

BobS
Bjensen, the difficult thing about predicting future rents is that a multitude of factors will influence them. That is why it is unwise to predict rents based on one of those factors you may believe in.
On the demand side demographic factors such as # of people, their ages, family formation, their incomes, etc. can increase or decrease demand. The supply side is easier to predict because the for-rent housing stock is largely a given. Over time it changes at the margin due to new building, demolitions, condo conversions (or the reverse, back into the rental stock), vacancies due to foreclosures, etc.
If you can predict what each of these demand factors and supply factors will do in the future, then you will know exactly where rents will go. Everybody can have an opinion.
Final note: because many of these factors work at cross-currents, they cancel each other out. Thus rental changes over time tend to be slow and gradual, barring some huge event like a massive recession or local industry leaving (or coming in).

[bjensen]

BobS,

Sounds reasonable to me.

[bjensen]

BobS,

Sounds reasonable to me.

[bjensen]

BobS,

Sounds reasonable to me.

[bjensen]

BobS,

Sounds reasonable to me.

[Author]

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