patrick.net

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.

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.

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.

but in places like Ketchum, ID

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

"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?

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?

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

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.

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

No.

I hate Tahoe.

"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.

What was the unemployment rate in Jan 2000?

~2%

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

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

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.

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.

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.

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.

"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.

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

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.)

"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.

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.

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

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:

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

Chindian effect?

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.

"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.

"climbing rapidly for two years now"

thats only the effect due to inflation.

"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.

"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.

Patrick,

Take a look at HousingTracker as well. The median asking price is down from 748K to 599K for South BA.

What ???? No comment on the DQ report ?

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

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

Peter P Says:

> 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?

You can’t really compare “Tahoe” a huge area that includes six different counties in two different states with the small resort towns of Sun Valley, Aspen and Jackson Hole. On a busy weekend there are more people in South Lake Tahoe than the entire population of Blaine County (Sun Valley), Teton County (Jackson Hole) and Pitkin County (Aspen) COMBINED…

With that said the real rich in Aspen (Like the Saudi Royals) are probably richer on average than the real rich in Sun Valley (Like East Coast Hedge Fund Guys) who are on average richer than the real rich in Tahoe (Like Sand Hill Road VC Guys) who are richer on average than the real rich in Jackson Hole (Business owners that like to get away from it all).

P.S. Jackson Hole slipped down in the “average real rich” rankings when Wal Mart founder Sam Walton’s kid mega Billionaire John Walton pulled a “JFK Jr.” and slammed his toy plane in to the Jackson, WY airport runway a few yeas back…

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

True, though the latter _demand_ itself is generally more elastic over a shorter time frame than the _supply_. This manifests itself as an indirect tie between employment & salary to *sustainable* rent levels. The 4 maid to a room example is an anomaly which the market will correct for as maids either leave the area for better economic outcomes in other areas _or_ employers of maids are forced to pay higher wages (or more units are built or landlords are forced to accept lower profit margins or some jackass city council member succeeds at instituting rent controls...usw)

StuckInBA Says:

> I think FAB hit the nail right on head - just supply
> and demand. Simple, old, plain vanilla economics.

It’s good to see that at least one person agrees with me…

> The apartment rental companies are faster to move
> in either direction. They know the conditions on a daily
> basis. That’s their business.

One other thing to keep in mind is that most “rental surveys” just call the biggest apartments in the region (my Dad with over 100 units on the Peninsula has never been in a rent survey in 40 years). When you read “rents in SF up 9%” it means that “the ASKING rents at Parkmerced, Fillmore Center and South Beach Marina apartments are up 9%”. When you read “rents in SV are up 9%” it means that “the ASKING rents at the big complexes owned by Essex and Avalon-Bay are up 9%...

http://www.msnbc.msn.com/id/22712082/

In case it hasn't been posted yet. And here just this last weekend a realtor was telling me and my wife that "prices in this area just simply don't go down, ever".

Randy H Says:

> The 4 maid to a room example is an anomaly which
> the market will correct for as maids either leave the
> area for better economic outcomes in other areas _or_
> employers of maids are forced to pay higher wages.

The term “living like Mexicans” has been around for a long time since every time a maid that learns English moves to a better job in the US there is another maid coming across the border and take her job (since it is better than most jobs in Mexico and living 4 to a room in the US beats living 12 to a room with the entire extended family in Mexico)...

It's a stylized example and I suspect you fully grock my point. I make no statements about who's coming over what border for which reason. Just that demand for rental units is more elastic than supply of rental units.

ackson Hole slipped down in the “average real rich” rankings when Wal Mart founder Sam Walton’s kid mega Billionaire John Walton pulled a “JFK Jr.” and slammed his toy plane in to the Jackson, WY airport runway a few yeas back…

Why would someone like him fly a plane like that? KJAC is challenging enough simply because of the hot and high conditions.

I will never fly in planes like that. Well, I do not shop at Walmart either.

I just renewed my lease today - $50 increase (private owner).