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Lower Rents


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2008 Jan 17, 12:12am   28,949 views  318 comments

by Patrick   ➕follow (55)   💰tip   ignore  

for rent

Given the record level of empty housing, rents seem to be falling in most parts of the country.

But my own rent went up for the first time in 5 years recently. Though it's still lower than it was when I first moved in during the dot-com bubble. I got a good rent reduction after the crash.

Rents should respond basically to employment and salary levels, but I don't see employment or salaries improving much around me in the SF Bay Area.

Any idea what's going on? Sometimes I suspect that the press writes about rising rent, and then landlords actually do raise it just because they think they can.

Patrick

#housing

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1   Claire   2008 Jan 17, 1:01am  

Maybe your landlord has realized that the rate of inflattion is starting to take a bit out of his pocket and one way to increase his money supply is to increase your rent.

2   Claire   2008 Jan 17, 1:02am  

inflattion=inflation

sorry haven't ingested enough caffeine yet :-)

3   e   2008 Jan 17, 1:20am  

Rents should responds basically to employment and salary levels, but I don’t see employment or salaries improving much around me in the SF Bay Area.

I did. Last year I saw a few friends get 10-25-30+% total compensation bumps at their own companies, or after switching companies or getting counters.

Now, one could argue that they were underpaid before - that was probably the case for some. But still, I definitely saw an uptick in salaries across the board amongst my circle of tech friends.

This same circle also reports hiring woes - it's tough to find good talent.

4   FormerAptBroker   2008 Jan 17, 1:23am  

Patrick wrote:

> Rents should responds basically to employment and salary
> levels, but I don’t see employment or salaries improving much
> around me in the SF Bay Area.

Rents are tied to “supply and demand” not “employment and salary levels”. In parts of AZ with lots of apartments people with big salaries pay very little for apartments, but in places like Ketchum, ID with very few apartments hotel maids will pay a lot and be forced to live four to a room on their low salries…

5   e   2008 Jan 17, 1:23am  

Oh, also, the population in the Valley truly is increasing. I forget if it was the WSJ or the NYT, but one of them pointed out that 2006 was the year the population bleed stopped, and that 2007 would be the uptick.

6   Malcolm   2008 Jan 17, 1:26am  

Patrick, you happen to live in a very nice, culturally rich, but isolated neighborhood. There will always be a shortage of units and so, unfortunately for you, the rents will always be based on the maximum people can afford instead of the general market which is a little more competitive based on larger supplies competing by cost to fill units.

7   DinOR   2008 Jan 17, 1:27am  

Our youngest daughter (and her new husband) are finding first hand that since the credit crunch hit, it can be difficult to deal w/ LL's? After weeks of actively looking for a new place she learned a valuable lesson:

Many of the C/L posts she'd seen "For Rent" also turn up in the "For Sale" section as well!? Several of the calls she made resulted in the "owner" offering to sell it outright! "Can you tak over our payments?" She asked why and I said "How much time do you have?"

Who was it that said they went to Open Houses just for the wine and then got the realtor on the side and asked if the sellers would consider renting it out? Long and short was the guy was NEVER flatly refused! This person said they never waste their time looking through the paper etc. as it's a waste of time. Oh and I told her don't be afraid to ask if they're current on their payments!

Housing starts as bad as they've been since 1991! And that's sayin' something.

8   Malcolm   2008 Jan 17, 1:37am  

Funny "How much time do you have?"

I hope she listens to what you have to tell her. She could easily become a victim herself if she is not careful. Some of the FBs are desperate enough to say or do anything including running away from the situation with the first, last, and deposit. It's already happened a couple of times that we've all read about.

I wonder if we will see a trend reverse. As a landlord I used to get a credit check fee from applicants, maybe prospective tenants will have it waived as an offset to going down to the county office to see if any NOD letters have been sent to their prospective landlords.

This is easily the biggest economic event to happen in my lifetime. 1971-present. EASILY

9   jchennav   2008 Jan 17, 1:37am  

If you live in a large apartment complex, the rent often goes up when the building owners change management companies.

10   rob-in-sunnyvale   2008 Jan 17, 1:39am  

We've lived in in apt complex near Sunnyvale near Cherry Chase (great elem. school) and Sunnyvale Middle (also very good) for over 2 years and have seen our rent increase $150, or 10.5%. This of course is way down from the dotbomb prices but still way too high IMO.

The cost of a 3/2 rental house around here averages ~$2500/mo and houses are still listed for ~$900K -- bit of a disconnect here by FB'd wishful sellers me thinks. Some houses are still selling around here but I'm unsure where to check to see purchase prices. Can anyone point me in the right direction?

Rob

11   PAR   2008 Jan 17, 1:40am  

The job market in the Valley is as strong as it's been since 2001. I just switched jobs, chose between two competing offers and got my base bumped by 25%. Even after the switch, I routinely get a recruiter phone call at least once a week. We have also been trying to fill about six open headcount spots since August and four of them remain open.

I'm curious about whether this little boom will last, given the broader problems in the economy. (Countrywide is one of my customers, so think about that for a minute.) But you can't dismiss the fact that employment is strong again in the Valley and, as such, rents are jumping a bit.

With all the problems in the Jumbo mortgage market today, that means fewer buyers and more competition for rental properties.

12   Malcolm   2008 Jan 17, 1:46am  

Zillow is as good a place as any to see the sales prices, otherwise some county tax sites will let you look up recent sales. That is often in the "appeal your tax" section of the site and then you can pull up the comparable properties close to an entered address. I like zillow just because it is so easy to use, and for what you want it will work well.

BTW Rob, just so you know, you are getting a steal on your rent. On a 30 year fixed loan, the payment on your house would be $6,000 per month. Just smile politely if people ask whether you rent or own your house.

13   Malcolm   2008 Jan 17, 1:50am  

A weakening dollar with inflation in China could keep employment good. On the otherhand the housing ATM crunch could outweigh that stuff especially if we have a gloabl meltdown. Unemployment has risen to 5% which is historically a pretty good rate. I believe though that we have entered a modern depression and fear 15-25% unemployment if things really get bad.

14   Peter P   2008 Jan 17, 2:10am  

but in places like Ketchum, ID

I guess it is the same thing in Aspen and Jackson Hole, right?

15   DinOR   2008 Jan 17, 2:11am  

"easily become a victim herself"

I hear with my BAD ear! We'd discussed even prior to the rash of "Rent2Own" listings the equal need to check the LL's credit! Perhaps it's b/c we're so elated she isn't in the same situation as her older sister (and the in-laws trying to pawn off their McDon'twanter)?

I think the big difference is when one looks at what's available in our local rental inventory (a lot of it IS scary) and will likely always be a rental. Much of the RTO/LTO stuff is nearly new, in much better shape (and in much better neighborhoods!) So even if they don't opt to have a portion of their rent applied toward "ownership" I tend to think the LL will view them as his salvation, not just another PITA renter?

16   Peter P   2008 Jan 17, 2:12am  

Question:

I have a feeling that Tahoe is mostly for the jet-less "rich" from Bay Area while Sun Valley, Aspen, and Jackson Hole are for the real rich. Am I right?

17   Malcolm   2008 Jan 17, 2:18am  

I want to visit Tahoe just for fun. Is it worth the drive?

18   DinOR   2008 Jan 17, 2:20am  

Peter P,

Correct. Lake County, OR and Modoc County, CA are for the 4WD crowd.

And what's w/ the 4 hotel maids sharing an apartment (and why does that turn me on?)

Dennis Miller was commenting on the "Cherry Pit" (sex club down in TX) and said; "If 1970's fake mahagony paneling is part of your "fantasy"... you need an UPGRADE!" Oh that Dennis.

19   Peter P   2008 Jan 17, 2:24am  

I want to visit Tahoe just for fun. Is it worth the drive?

No.

I hate Tahoe.

20   PAR   2008 Jan 17, 2:28am  

"Job growth in most regions within the state has slowed since 2006 -- the only exception is the San Francisco Bay Area," said Keitaro Matsuda, senior economist with Union Bank of California in San Francisco. He cited the tech sector's strength as a key factor contributing to the Bay Area's 1.9 percent payroll employment growth, based on figures from the Bureau of Labor Statistics that have not been seasonally adjusted. That pace of payroll growth in 2007 was flat from the previous year -- but not getting worse now constitutes the state's best showing. The Central Valley, Los Angeles and San Diego regions saw dramatic declines from 2006 levels.

State figures show that the greater Bay Area comprises eight of the state's 12 counties with unemployment rates below 5 percent as of November, with the local counties of Marin (3.8 percent) and San Mateo (4.0 percent) posting California's lowest jobless rates. San Francisco (at 4.4 percent) wasn't far behind.

21   Peter P   2008 Jan 17, 2:29am  

What was the unemployment rate in Jan 2000?

22   PAR   2008 Jan 17, 2:34am  

~2%

23   lunarpark   2008 Jan 17, 3:11am  

http://www.dqnews.com/RRBay0108.shtm

Bay Area home sales drag along bottom, median price back to 2005 level

24   DennisN   2008 Jan 17, 3:19am  

running away from the situation with the first, last, and deposit

Hmm, this sounds like a deal to me. Get a 103% loan to buy a house, rent it out to more than one set of renters with some excuse that "you can't move in until 3 weeks from now", and then split town with the 3% + multiple first/last/deposits. The renters won't know they've been double-timed until they both show up to move in the same day.

By the way, what IS Casey Serin doing these days? :)

People who can't afford Ketchum live in Hailey. People who can't even afford Hailey live in Bellevue. Same with Jackson Hole. People who can't afford to live there commute from Driggs ID.

25   PermaRenter   2008 Jan 17, 4:17am  

Lehman Brothers (LEH - Cramer's Take - Stockpickr - Rating) shares sank more than 5% after the brokerage firm's announcement of an additional 1,300 layoffs in its residential mortgage lending business.

Approximately 1,300 jobs will be eliminated, as Lehman closes three operational centers in California, Florida, and New Jersey, while Aurora's Colorado operations will be consolidated into the Littleton office, the firm said.

26   smitty   2008 Jan 17, 4:46am  

maybe your landlord read your blog and decided to have a little fun with you! I'm living in Minnesota and pay $459 a month for my apartment and I even have a garage and overflow storage too!

this amount reflects a 20% a month discount since I shovel snow-- I was doing this last year anyway since the guy they hired sucked; in the summer, I'll be mowing the lawn.

27   StuckInBA   2008 Jan 17, 5:03am  

I think FAB hit the nail right on head - just supply and demand. Simple, old, plain vanilla economics. The demand is higher today due to various reasons - rise in employment, salaries and more people becoming (or choosing to remain) renters.

The apartment rental companies are faster to move in either direction. They know the conditions on a daily basis. That's their business. If they make a mistake by pricing to too high or too low, they have no qualms about adjusting accordingly. There is no anchor price in their mind.

28   ThomasP   2008 Jan 17, 5:04am  

"He cited the tech sector’s strength as a key factor contributing to the Bay Area’s 1.9 percent payroll employment growth"

Yes HT employment is up along with salaries... but that is outside
of the Bay Area. BA companies are hiring more outside the state.
Even the San Jose Merc made that clear when they posted 4.5 increase
in payroll for 2006. When the media reports the payroll number they
often site the company as a whole but not the ranking within BA only.
Overal PR is down since 2000 and new hirings have moved to cheaper states and global offices.

29   Peter P   2008 Jan 17, 5:06am  

More importantly, current rental price has very little to do with EXPECTED future rental price. Reflexivity is not at work here.

30   StuckInBA   2008 Jan 17, 5:08am  

Talking about slow to react.

One of my saved homes in ZipRealty reduced the price by 20K (from an asking close to 1M). Yeah, what a deal. The howmuchamonth crowd will get excited now - it saves a cool $100 in the monthly mortgage payments.

(Let's just hope that they don't realize that after the "tax advantages" it is really not $100.)

31   ThomasP   2008 Jan 17, 5:16am  

"Rents are tied to “supply and demand” not “employment and salary levels”."

Anyone who lived in Silicon Valley will tell you its employment!
Salary for its part plays very little ( a far second).... some of you young folks may not recall how inexpensive Palo Alto rent was vs Sunnyvale vs Redwood city. Yes it was all the same...

Higher if you lived in Los Gatos and Saratoga and Woodside area...This was back in the mid 80s. That came back in mid 90s breifly and then took off.

Its the weak minded that fell in the overpaying starting late 90s.

However even employment in SV is on shack grounds decade over decade. Always has been! The risks of employments drops has always been here.

I dont see the demand as being a function here. There is no longer a further demand to employee more people in this region. If some employers are going to set up an R&D park, might as well do it outside
of CA. Many infact have in Or. MN. and other states where they get tax bracks the State of CA would never give out.

32   Busted   2008 Jan 17, 5:20am  

GOOG and AAPL are now both 20% off their highs. Naz closes at its lowest since Nov'06, S&P lowest since Oct'06. As I wrote a week ago if you're going to trade this market, you better do so on the short side. Dow is likely to test the 12,000 level tomorrow.

It sure is fun watching everything unravel.

33   Patrick   2008 Jan 17, 5:21am  

Well, if the job market is good enough to let my landlord raise my rent, maybe I can get paid a better contracting rate too. Time to start looking I guess.

Or maybe my landlady _does_ read this blog and she's just playing with me...

Patrick

34   Patrick   2008 Jan 17, 5:24am  

Woah, I haven't looked at my graph of Craigslist Bay Area asking prices, but it's down the most since I started collecting data in April 2006:

35   Peter P   2008 Jan 17, 5:31am  

some of you young folks may not recall how inexpensive Palo Alto rent was vs Sunnyvale vs Redwood city.

Chindian effect?

36   netdance   2008 Jan 17, 5:36am  

Rents have been climbing rapidly for two years now. But a recession's coming, so I'm expecting this next rent increase to be my last for a couple years.

I've gotten 10% increases (on my crap 3br apt) for the last two years, so I've been watching. Started at $1300, though, so it's not as though I'm complaining.

By comparison, in the same period, the 3br SFHs I've been looking at renting have gone from $2000 up to $2400 in the same period, so it's not just me.

37   ThomasP   2008 Jan 17, 5:49am  

"Well, if the job market is good enough to let my landlord"

It does happen. Alpine (EUEYX)had to raise the rents because their
revenues were saging. I dont see any boom aside from SOX compliance
increasing. But will spur moving G&A fuctions out of state because its too
expensive to maintaine instate.

38   ThomasP   2008 Jan 17, 5:49am  

"climbing rapidly for two years now"

thats only the effect due to inflation.

39   DinOR   2008 Jan 17, 5:51am  

"Many infact have in Or"

That is until we run them off! I guess some developer wants to turn the old Con-Way freight yard into.... yep, CONDOS! Another long time employer bites the big bell beefer.

Actually they went under over the Labor Day weekend 2002. They shipped LTL (less than truck-load) shipments for Intel.

40   ThomasP   2008 Jan 17, 5:52am  

"but it’s down the most since I started collecting data"

lots of M&A activity is taking jobs out. Just look at Oracle
and now BEA! Who is next? I think they swallowed up
about a dozen companies... I worked at Agile Software
and Oracle is gutting the insides out! Please leaving and
being replaced. Oracle doesnt want to pay severences
for layoffs due to M&A they done.

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