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Cupertino, CA
Maxim_ershov:
One reason rents are going up in Cupertino, imo, is because some LLs bought their rental property with an Option ARM or some other sort of funny money loan and those loans are resetting to a higher rate.
Or, the LLs *residence* was purchased with an ARM etc and that loan(s) are resetting higher.
Or could be that the LLs business needs liquidity and the banks aren't really lending to small or medium-sized businesses these days and so the LL raises rents as a cash raiser.
EX: My LL in Cupertino has seen her Los Altos home drop about $700,000 (94022) since mid-June of '09 to now. Her husband is a doctor, and in order to keep his business with a liquidity flow, they have to get that money somewhere since the banks have tightened up on lending requirements and business sustainability.
So, if a LL has to raise the rent in this economy its because the cash flow isn't what they have gotten in the past for other businesses they own or they have helocs coming due or ARMs that are resetting.
~Misstrial
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Misstrial--
LL can try to raise rents to match their mortgage payments, but ultimately it's the market that determines how much the apartment is worth. If a LL asks too much, it will sit vacant.
Now--just because there is an ad on Craigslist doesn't mean the apartment is actually getting rented for that $$. But, if true rents are going up, it's not because ARMs are resetting--it's because the market is changing.
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Lafayette, CA
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CrazyMan says
Gamer systems are a tad more expensive than your average office desktop.
It's my hidden vice.
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Cupertino, CA
tatupu70 - We agree re raising rents - "what the market will bear" works in reverse too despite NAR hocum that it only increases.
And you are correct re ads on CL or anywhere else - some tenants offer lower rent or the LL does, just depends. Some LLs are willing to exchange lower rent for an excellent tenant with stellar credit history and no UDs.
I rec Bay Rentals simply because some good landlords want a filter to weed out renters with a recent foreclosure/bankruptcy.
http://www.bayrentals.com
This is how we got our current rental in Cupertino (Monta Vista) @ $1700/mo lease for a 2/2 w/a 2-car garage/ 1141 square ft.
Not sure about the markets changing part - many new renters these days have impaired credit and if they can get a rental, many LLs are asking for huge security deposits or the entire lease amount for 1 year upfront -
- although some homeowners who plan on letting their residence go to default are downsizing and going from Menlo Park to Cupertino and are seeking out rentals before their property goes into default. These are the folks who I suspect would be driving up rents.
~Misstrial
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dear sirs,
the rental ASKING numbers are for the EMPTY rents. The amount they are asking for those empty places is LOWER than it was last year, but they are empty now becasue the folks that used to live in them rented the LOWER priced rentals. The lower priced rentals are no longer advertised since they are rented. Trust me, the price of apples and oranges has went down. THe apples are all that is left because smart people rented the oranges. Soon, apples will cost the same as oranges.
My gut says it is all coming down, and this next leg should be much more rapid and steep. It be held back until after Nov and then turned loose .. you know ... maybe a little "payback" from Lord Barry for tossing out every bum in the swamp ... just let Cal-e-forn-e-ah slide off into the ocean. And then look around and say, "geeze, I thought all of these conservos were going to fix stuff!!" What I'm getting at is this, the market is only being pumped up by phoney money. WHen the politicos are done pumping it in, the true pain begins. I look for a cut or ending to the Section 8 welfare program as a indicator of the bottom.
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It's fascinating people would not just go to the residential reits site and find out what is happening in the rental market. They are EQR, AVB, ESS, CPT, AIV, BRE, HME, ACC. They manage about 500K residential units on aggregate and knows exactly what is happening. Every other comment comes down to what is happening in rents.
From following the residential REIT's, occupancy rates have stabilzied early this year and rents are being pushed up in both classes, new and renewal. This has been going on for six to eight months. Renewals are going up around 5% and possibly stronger in markets such as San Francisco, New York.
Then there is the macro factors which should be a real concern for renters. There are very little new supply in the market and even less in the pipeline. If people are less concerned about losing their jobs and household starts to unbundle, rentals have nowhere to go but up. Job Growth will take it to another gear.
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@Misstrial
"I rec Bay Rentals simply because some good landlords want a filter to weed out renters with a recent foreclosure/bankruptcy.
http://www.bayrentals.com"
Do you really find the price of this service to be worth it? $50.00 is a lot for 30 days use. I'd worry that I'd be able to find the same places on Craigslist for free. What is it that makes this service better than craigslist?
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Cupertino, CA
axmcmillan:
There are rentals on there that are not on CL.
Further, Bay Rentals does the paperwork, ie the credit reports for you.
That way, some random person on CL is not getting your SS# and other personal info.
Helps to avoid the scammers and people intent on letting their rental go to foreclosure while making off with your security deposit.
A number of good landlords are scared at what has become of the rental market with the influx of impaired credit history people.
They are used to dealing with renters who usually have at least 2 years of recent rental history.
Bay Rentals acts as a medium between the renter and landlord that makes the process less like crawling the infiltration course.
~Misstrial
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Hoard cash. Live in your car if you have to. Be ready for the housing prices we were used to in the 1970s to return - because those are the kinds of wages households are bringing in now.
And plant potatoes.
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The reality it the rental market is great, you have twice the number of renters in the market with all the foreclosures, can't qualify and jsut waiting. First step is get the H out of the Bay area, a place like CO offers a better lifestyle at half the cost, I know I used to live in SF. You can buy a minimansion on a golf course for same price as 2 bd rent in SF
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Start of the school year? New fiscal year for the mega agency that seems to own everything in SF? Just from anecdotal experience, looks like someone tacked on $50 - $100 to all the rents downtown (i'm look'n at you art academy..).
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47 male
Lafayette, CA
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APOCALYPSEFUCK says
Yeah, wages are back to what they were in the 1970s.
This lunacy has GOT to mean we're post bottom.
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Deigning to respond to a post like that is one thing, but citing it as a contrarian market indicator is going too far.
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iwog says
Yep You got ripped off alright. $3000 in 1992 gets you $300 Today!
.... WOW down 90%. No one forsaw the Taiwanese dumping cheap netbooks on the US market and consumers actually paying $300 instead of $1500.
The onging story in of Deflation from cheaper overseas mfg competing with US companies continues into its 25 year.
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deflation has many definitions, but it usually has something to do with the money and credit supply. If paper clips get absurdly cheap because somebody invents a machine that can crank out 1 per second instead of having to bend them by hand, that's not deflation. Most of the cost reductions in technology, at least the hardware end, are manufacturing innovations, just like the paper clip.
I paid $1000 for a computer 3 years ago that I could probably buy for a few hundred now. Did I get ripped off? Hell, no. I've gotten immeasurable value from it, and it's essential to my business.
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Scotia, CA
cab says
Sorry cab, took me a bit to get back to this discussion.
Yes, in May and early June the students are leaving for the summer. I left San Francisco a year ago, but I rented there for many years and almost daily kept a watch on rental prices. The "best" (that is, most unique, less corporate) places to rent--like MILs and one-of-a-kind flats, places with yards and reasonable pet policies--aren't listed on the more corporate sites, since they're not high-density buildings attractive to REITs. There are huge numbers of unique, one-of-a-kind rentals through the Richmond and the Sunset that would never show up on those listing sites. For most people craigslist is still the first place to go to find a place to live. And the number of rentals as well as the price fluctuate throughout the year pretty predictably. That's my experience, anyway.
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Lafayette, CA
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thomas.wong1986 says
The new i7 costs $1000 all by itself. The top of the line processor in 1992 (486?) cost about $1000. I have no idea what you're talking about, but it's not relevant to my point.
Deflation is not a "way of life" in the South Bay. Prices are rising there just like everywhere else. I was just making the point that most logical people don't consider a 486 CPU costing $5 in 2010 to be deflation.
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ptiemann says
Exactly. Salary increases 46% but the home values increased 3 times. Quite a lot of disconnect.
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Reston, VA
Similar thing happening in the NoVA metro. Prices spiked by about 20 percent. IWOG shouldn't be doing a victory dance though. Even in the most subsidized market of the country (you can't beat taxpayer money!), there is a huge buyer sideline and sellers going into foreclosure, slowly but surely. See the recent article link from the washpost on the links page.
A realtor told me she's doing lots of rentals and few sales so the spike is real and justified. However... a few things. We see on walkarounds in our condo complex empty units that buyers/investors have fixed up in the hopes of selling. They clearly made a mistake and don't realize it yet. So they'll either have to put them on the market as rentals later OR sell them at a loss. Some sellers are still living in la-la land thinking that the $8K tax credit burst in June hasn't really ended yet so they aren't ready to put their unit on the rental market. All of these contribute to a real shortage of rentals AND a higher demand from sideline-waiting buyers.
Regarding apples and oranges. Indeed, I see units priced way out in the stratosphere and they tend to sit on the market for months and then... go off the radar while the lower priced units move quickly. What happened to them? I rarely see a price reduction so I wonder if someone came up with an offer at a reasonable price and the landlord accepted OR if they took it off and maybe just went into foreclosure.
In any case, a standoff market between buyers and sellers is NOT indicative that the"bottom" has been passed as IWOG seems to want to believe. Just the opposite actually. Buyers, at worst, face a year or so of higher rents. Not a fun prospect, but livable. SELLERS, on the other hand, face foreclosure and riding the dragon on down. Sellers can only be convinced that they "have to buy before prices go back up! Hurry" when there's a shortage of product which everyone now knows is not the case.
Finally, there is one option available: Rent commercially. I HATE commercial rentals since they tend to have, well, regular renters with credit problems or bad habits (blasting stereos, etc.) but overall, they tend to be pretty cheap and you can get a promotion on a 2 year lease which should outlast the crisis.
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@PolishKnight
Condos are in really bad shape right now due to very stiff competition from low end SFR. I am observing few zip codes I am interested and see more activity in 500K or less SFR. All those that were priced 800K+ at peak are languishing for months with a asking for 650K+. 1 million+ SFR seems like a complete dead zone.
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ptiemann says
More than doubled? That looks pretty distorted too.
One thing I've noticed in San Francisco is that a preponderance of new restaurants are on the upscale side (more investment in decor, better service, better ingredients, etc) and are more expensive than older restaurants . But to compare those prices would be comparing apples and oranges. The restaurants I've been going to for 15 years are not a whole lot more than they were in the late 90's. E.g chinese/thai dish was $6 and now it's $9. Groceries are up less than %50.
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MarkInSF says
This whole bread and butter talk just doesn't makes sense as they cover small fraction of income. I'd agree if it were mortgage/health insurance cost compared with salaries then and now.
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Baltimore, MD
Bap33 says
I agree with the above statement.
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46 male
Menlo Park, CA
xlr8 says
Back to January for SF, LA, Seattle, and Phoenix. Just beginning of August for San Diego.
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Landlords are smart. They figured they can squat for 30 months and not get foreclosed. Can tenants live for 30 months homeless?
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bubblesitter says
I wouldn't even agree that medical costs have more than doubled. BLS puts the number at about 60% since 1998.
Health insurance is more expensive partly because drugs/equipment/procedures are getting more expensive, but but mostly because we are using far more of them than we did 12 years ago. Aging population, way more testing - often tests which didn't even exist 15 years ago, more drugs - again, many that didn't even exist 15 years ago. MRI machines per capita have more than doubled since 2000.
To say medical costs have more than doubled is akin to saying LCD TV costs have soared, since people spend far more on LCD TV's than they did 12 years ago.
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When despair sets in, people will just start burning their properties and selling them to the insurance companies. An explosion of arson is about to sweep America, part from despair and desperation and part from insensate rage at a banking and financial system designed to enslave Americans. Hahahahahahahahaha! Let the burning begin! Hahahahahahahahahaha!
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APOCALYPSEFUCK says
But when a home gets burnt down, the owner does not cash out. Do the insurance companies not decide whether they want to replace or rebuild?
Which brings up another interesting thought. What happens to a severely underwater owner that burns down their home? The insurance will probably want to replace the home. Will they really just build a similar home to put on the banks' books?
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Redwood City, CA
Burning down doesn't really help when the house is under water.
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Sure it does when you take the settlement and walk away from the note and the property.
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APOCALYPSEFUCK says
That's not how it works....
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I know. Depends on the principle left on the note and the insurance coverage and insurer's determination. It could work out to money in the pocket of an underwater investor who faces 1) certain foreclosure or 2) no chance of flipping in his lifetime. Banks might like it, too, if they get their notes paid.
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Reston, VA
"Landlords are smart. They figured they can squat for 30 months and not get foreclosed. Can tenants live for 30 months homeless?"
I'm sure that there's another article that addresses this, but can a landlord try to market a rental for a property that has been foreclosed upon without disclosing it to the buyer? Or can he even do something like this legally to begin with?
In any case, what renter would want to pay top dollar for a property that can be seized by the bank at any moment?
bubblesitter says: "Condos are in really bad shape right now due to very stiff competition from low end SFR. "
Do you mean they're in bad shape in that they are now priced higher for purchase, rental, or the opposite? (Prices for purchase going down?) I have just noticed some more price reductions for condos in my area (and this is NOT helping them move any faster although there are investors/flippers biting.)
It's amazing, really, that there are still people who didn't learn anything from the last bubble. When a market has a lot of people sitting on the sidelines and prices have just moved down a LITTLE bit, that's not a sign of a bottom but rather a BEGINNING of a downward slide.
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PolishKnight says
What I meant was they priced very low to buy.
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Reston, VA
I've been looking at listings and I think they're MORE REASONABLE than in years past, but not really "low". IMO, they are still overpriced at about halfway through the bubble. Certainly they're more affordable than $600K SFH's.
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SF ace says
Macro factors? The macro factors are that baby boomers are beginning to retire in droves, many of them with no savings. They will be downsizing by choice or because their house is the only they they own that's worth anything. No, the Macro factors point to house prices being flat for decades.
The reason rents are rising in tight markets is because people are losing or walking away from their homes yet still need a place to live. Banks are not selling these properties so they sit vacant, pushing down supply. There's plenty of supply, it's just being withheld.
And what job growth are you talking about? Bernanke has said we need 100k new jobs per month to keep the unemployment rate stable. We're still bouncing along the bottom.
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47 male
Lafayette, CA
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And now come the excuses.......................
Rents weren't supposed to climb. They were supposed to drop like a rock. How many threads have been devoted to that premise over the last two years?
Higher rents = more investors = more home sales = higher prices.
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iwog says
FANTASITC! But the bigger question is....
So many are tied to RE as their career and life savings....
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ptiemann says
No i dont expect a former SV Engineer to understand once a consumer purchases a netbook, they forgo buying a "top of the line", opportunity cost, forces the competing producer to lower their cost in kind. Under the hood the netbooks have the same components, but cheaper labor from Taiwan. I seen this played out several times over for the past 25 years.
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thomas.wong1986 says
This has absolutely nothing to do with what you said. Please explain how a top of the line Intel CPU, which I purchased for $1000, is "made cheaper" from Taiwan.