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ParticipantWe in the trade refer to the relationship between rents and sale prices as a factor rather than a percentage.
Instead of:
Rent / Sale Price = %
We normally use:
Sale Price / Rent = Gross Rent Multiplier (which is a factor)
Your apparent point remains the same: between 1950 – 1980 or so the ratio of rents/sale prices increased from about .4% to about .50%. Between 1980 – 2000 or so the trendline itself – which is comprised ot the highs and lows – stayed generally constant at about the .50% range, and only during the bubble did it exceed that.
Your chart also demonstrates why Rich uses the 50-year trendline rather than a 100-year trendline. A (real) new paradigm did crop up after WWII, based on a couple factors.
ParticipantWe in the trade refer to the relationship between rents and sale prices as a factor rather than a percentage.
Instead of:
Rent / Sale Price = %
We normally use:
Sale Price / Rent = Gross Rent Multiplier (which is a factor)
Your apparent point remains the same: between 1950 – 1980 or so the ratio of rents/sale prices increased from about .4% to about .50%. Between 1980 – 2000 or so the trendline itself – which is comprised ot the highs and lows – stayed generally constant at about the .50% range, and only during the bubble did it exceed that.
Your chart also demonstrates why Rich uses the 50-year trendline rather than a 100-year trendline. A (real) new paradigm did crop up after WWII, based on a couple factors.
ParticipantWe in the trade refer to the relationship between rents and sale prices as a factor rather than a percentage.
Instead of:
Rent / Sale Price = %
We normally use:
Sale Price / Rent = Gross Rent Multiplier (which is a factor)
Your apparent point remains the same: between 1950 – 1980 or so the ratio of rents/sale prices increased from about .4% to about .50%. Between 1980 – 2000 or so the trendline itself – which is comprised ot the highs and lows – stayed generally constant at about the .50% range, and only during the bubble did it exceed that.
Your chart also demonstrates why Rich uses the 50-year trendline rather than a 100-year trendline. A (real) new paradigm did crop up after WWII, based on a couple factors.
ParticipantWe in the trade refer to the relationship between rents and sale prices as a factor rather than a percentage.
Instead of:
Rent / Sale Price = %
We normally use:
Sale Price / Rent = Gross Rent Multiplier (which is a factor)
Your apparent point remains the same: between 1950 – 1980 or so the ratio of rents/sale prices increased from about .4% to about .50%. Between 1980 – 2000 or so the trendline itself – which is comprised ot the highs and lows – stayed generally constant at about the .50% range, and only during the bubble did it exceed that.
Your chart also demonstrates why Rich uses the 50-year trendline rather than a 100-year trendline. A (real) new paradigm did crop up after WWII, based on a couple factors.
ParticipantIt’s true that my last post included the “30% – 40%” figure, but in all fairness I did express the (personal) opinion that I was thinking more along the lines of 10% or so.
As far as rental houses being a substitute for rental apartments I’d ask you to look at it not in terms of owning the asset – which is where the upside potential for profit comes in – but in terms of renting it. Rental tenants, unlike buyers and sellers, consider rents strictly as a housing expense. There is no profit incentive or potential upside in it for them. A rental tenant makes their payment and gets their housing covered for that month. That’s it.
So yeah, if a rental tenant in 4S gets their income squeezed they might consider moving to Mira Mesa to replace the MM tenant that ended up downsizing to an apartment in North Park. Thus, a connection – indirect though it may be – can be drawn between the North Park apartment market and the Carmel Valley SFR rental market.
Like I said, it’s all connected. Some connections are just more direct than others.
ParticipantIt’s true that my last post included the “30% – 40%” figure, but in all fairness I did express the (personal) opinion that I was thinking more along the lines of 10% or so.
As far as rental houses being a substitute for rental apartments I’d ask you to look at it not in terms of owning the asset – which is where the upside potential for profit comes in – but in terms of renting it. Rental tenants, unlike buyers and sellers, consider rents strictly as a housing expense. There is no profit incentive or potential upside in it for them. A rental tenant makes their payment and gets their housing covered for that month. That’s it.
So yeah, if a rental tenant in 4S gets their income squeezed they might consider moving to Mira Mesa to replace the MM tenant that ended up downsizing to an apartment in North Park. Thus, a connection – indirect though it may be – can be drawn between the North Park apartment market and the Carmel Valley SFR rental market.
Like I said, it’s all connected. Some connections are just more direct than others.
ParticipantIt’s true that my last post included the “30% – 40%” figure, but in all fairness I did express the (personal) opinion that I was thinking more along the lines of 10% or so.
As far as rental houses being a substitute for rental apartments I’d ask you to look at it not in terms of owning the asset – which is where the upside potential for profit comes in – but in terms of renting it. Rental tenants, unlike buyers and sellers, consider rents strictly as a housing expense. There is no profit incentive or potential upside in it for them. A rental tenant makes their payment and gets their housing covered for that month. That’s it.
So yeah, if a rental tenant in 4S gets their income squeezed they might consider moving to Mira Mesa to replace the MM tenant that ended up downsizing to an apartment in North Park. Thus, a connection – indirect though it may be – can be drawn between the North Park apartment market and the Carmel Valley SFR rental market.
Like I said, it’s all connected. Some connections are just more direct than others.
ParticipantIt’s true that my last post included the “30% – 40%” figure, but in all fairness I did express the (personal) opinion that I was thinking more along the lines of 10% or so.
As far as rental houses being a substitute for rental apartments I’d ask you to look at it not in terms of owning the asset – which is where the upside potential for profit comes in – but in terms of renting it. Rental tenants, unlike buyers and sellers, consider rents strictly as a housing expense. There is no profit incentive or potential upside in it for them. A rental tenant makes their payment and gets their housing covered for that month. That’s it.
So yeah, if a rental tenant in 4S gets their income squeezed they might consider moving to Mira Mesa to replace the MM tenant that ended up downsizing to an apartment in North Park. Thus, a connection – indirect though it may be – can be drawn between the North Park apartment market and the Carmel Valley SFR rental market.
Like I said, it’s all connected. Some connections are just more direct than others.
ParticipantIt’s true that my last post included the “30% – 40%” figure, but in all fairness I did express the (personal) opinion that I was thinking more along the lines of 10% or so.
As far as rental houses being a substitute for rental apartments I’d ask you to look at it not in terms of owning the asset – which is where the upside potential for profit comes in – but in terms of renting it. Rental tenants, unlike buyers and sellers, consider rents strictly as a housing expense. There is no profit incentive or potential upside in it for them. A rental tenant makes their payment and gets their housing covered for that month. That’s it.
So yeah, if a rental tenant in 4S gets their income squeezed they might consider moving to Mira Mesa to replace the MM tenant that ended up downsizing to an apartment in North Park. Thus, a connection – indirect though it may be – can be drawn between the North Park apartment market and the Carmel Valley SFR rental market.
Like I said, it’s all connected. Some connections are just more direct than others.
ParticipantRents are already soft and dropping on the apartment side, depending on where you look. Rental houses are just another substitute for rental apartments.
I’m already seeing a few apartment markets where the rents have retreated to 2004 levels after having peaked in 2005-2006. The rents are dropping because the vacancy rates have been increasing. The rental market for houses has been lagging that of the apartments, but that won’t last forever.
Downtown still has a lot of vacant condos and more are in the pipeline. Some are already turning to rentals and they’re sucking tenants from the west side of the mid-cities areas, which in turn are sucking tenants from the east side. Etc, etc.
It’s all connected. Now I don’t think that rents are subject to 30% or 40% drops but I also don’t think that 20% drops are completely out of the question. At this point I’m thinking rental decreases in the single family side of at least 10% are more likely than not.
Of course, that’s going to pull down the parity level for home prices, too, making it that much farther they’ll have to drop to compare to the rental rates.
OTOH, I could be completely wrong about all this and we might be looking at the “new paradigm”, where the old rules don’t apply. If so, we could be looking at a “soft landing” and a resulting “new normal” for the rental market. After all, San Diego is special and “everyone wants to live here”.
ParticipantRents are already soft and dropping on the apartment side, depending on where you look. Rental houses are just another substitute for rental apartments.
I’m already seeing a few apartment markets where the rents have retreated to 2004 levels after having peaked in 2005-2006. The rents are dropping because the vacancy rates have been increasing. The rental market for houses has been lagging that of the apartments, but that won’t last forever.
Downtown still has a lot of vacant condos and more are in the pipeline. Some are already turning to rentals and they’re sucking tenants from the west side of the mid-cities areas, which in turn are sucking tenants from the east side. Etc, etc.
It’s all connected. Now I don’t think that rents are subject to 30% or 40% drops but I also don’t think that 20% drops are completely out of the question. At this point I’m thinking rental decreases in the single family side of at least 10% are more likely than not.
Of course, that’s going to pull down the parity level for home prices, too, making it that much farther they’ll have to drop to compare to the rental rates.
OTOH, I could be completely wrong about all this and we might be looking at the “new paradigm”, where the old rules don’t apply. If so, we could be looking at a “soft landing” and a resulting “new normal” for the rental market. After all, San Diego is special and “everyone wants to live here”.
ParticipantRents are already soft and dropping on the apartment side, depending on where you look. Rental houses are just another substitute for rental apartments.
I’m already seeing a few apartment markets where the rents have retreated to 2004 levels after having peaked in 2005-2006. The rents are dropping because the vacancy rates have been increasing. The rental market for houses has been lagging that of the apartments, but that won’t last forever.
Downtown still has a lot of vacant condos and more are in the pipeline. Some are already turning to rentals and they’re sucking tenants from the west side of the mid-cities areas, which in turn are sucking tenants from the east side. Etc, etc.
It’s all connected. Now I don’t think that rents are subject to 30% or 40% drops but I also don’t think that 20% drops are completely out of the question. At this point I’m thinking rental decreases in the single family side of at least 10% are more likely than not.
Of course, that’s going to pull down the parity level for home prices, too, making it that much farther they’ll have to drop to compare to the rental rates.
OTOH, I could be completely wrong about all this and we might be looking at the “new paradigm”, where the old rules don’t apply. If so, we could be looking at a “soft landing” and a resulting “new normal” for the rental market. After all, San Diego is special and “everyone wants to live here”.
ParticipantRents are already soft and dropping on the apartment side, depending on where you look. Rental houses are just another substitute for rental apartments.
I’m already seeing a few apartment markets where the rents have retreated to 2004 levels after having peaked in 2005-2006. The rents are dropping because the vacancy rates have been increasing. The rental market for houses has been lagging that of the apartments, but that won’t last forever.
Downtown still has a lot of vacant condos and more are in the pipeline. Some are already turning to rentals and they’re sucking tenants from the west side of the mid-cities areas, which in turn are sucking tenants from the east side. Etc, etc.
It’s all connected. Now I don’t think that rents are subject to 30% or 40% drops but I also don’t think that 20% drops are completely out of the question. At this point I’m thinking rental decreases in the single family side of at least 10% are more likely than not.
Of course, that’s going to pull down the parity level for home prices, too, making it that much farther they’ll have to drop to compare to the rental rates.
OTOH, I could be completely wrong about all this and we might be looking at the “new paradigm”, where the old rules don’t apply. If so, we could be looking at a “soft landing” and a resulting “new normal” for the rental market. After all, San Diego is special and “everyone wants to live here”.
ParticipantRents are already soft and dropping on the apartment side, depending on where you look. Rental houses are just another substitute for rental apartments.
I’m already seeing a few apartment markets where the rents have retreated to 2004 levels after having peaked in 2005-2006. The rents are dropping because the vacancy rates have been increasing. The rental market for houses has been lagging that of the apartments, but that won’t last forever.
Downtown still has a lot of vacant condos and more are in the pipeline. Some are already turning to rentals and they’re sucking tenants from the west side of the mid-cities areas, which in turn are sucking tenants from the east side. Etc, etc.
It’s all connected. Now I don’t think that rents are subject to 30% or 40% drops but I also don’t think that 20% drops are completely out of the question. At this point I’m thinking rental decreases in the single family side of at least 10% are more likely than not.
Of course, that’s going to pull down the parity level for home prices, too, making it that much farther they’ll have to drop to compare to the rental rates.
OTOH, I could be completely wrong about all this and we might be looking at the “new paradigm”, where the old rules don’t apply. If so, we could be looking at a “soft landing” and a resulting “new normal” for the rental market. After all, San Diego is special and “everyone wants to live here”.
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