patrick.net

Just a guess, but I think you might have nailed it with "could it be that rents are high because that’s the final stand for an underwater homeowner? Either rent high to pay the mortgage or walk away?"

We had a 3/2 in Campbell before moving in '06. If we didn't luck out and dump it on another poor sucker before the market crashed we'd have been in the boat of asking $3K -$3.5K in rent to cover the $3.5K monthly mortgage payment.

I've been looking and rents are down (South Bay area). My landlord just asked me to renew my lease for 10% less rent, I politely declined because I'm looking to upgrade to a bigger place for the same price. I'm not looking for single family homes though, just 2bd apt or duplex with garage, hardwood floors and private laundry.

Two years ago rents were up, and I surmised it was because people like me that lost their homes yet made good money flooded the so-called good-school areas, driving up demand.

But in 2009 I noticed that wave must have subsided, as rents were trending down.

But now, they're back up, at least in bubble areas, so maybe I AM right. An early indicator of the option-ARM collapse could be people trying to rent their homes out to cover their newly skyrocketed mortgages. Or it could be knife-catching investors that bought solely to rent out, and that needs to charge a sky-high rent to justify the purchase.

The first waves of the tsunami don't usually show up until far after the event that triggered them.

I'm stubborn. In 2007 I needed to have my own house for my own family. Bigger the better. Now that I've been b*tch slapped into reality, I'll go 9 to a house with my in-laws so-as not to promulgate this insanity.

Rents are down everywhere I look (Cupertino, Los Gatos, West San Jose, Campbell) SFH, I don't look at apartments.

Keep in mind craigslist ads are wishing prices that are no different than the current wishing prices for sales, you just need to be willing to negotiate and walk away if they won't budge.

I dont know where you get your data from Crazyman but
Asking rents are definitely up

I just got asking price for my rental priced in 2000-3000 range. Took about 3 weeks and there was plenty of interest. Maybe because it's in a prime location.

3000/mo is not a lot of money for a professional couple in the BA.

I agree, it was very good during Oct-Nov'09. Now, I see they are slowly creeping back up. Similar unit that I rent now for 1950 is advertised for 2200, may be they will settle for 2100. But, they are going up. May be the vacancy rate has come down, or expecting a spring bounce in rent..dont know.

SF ace says

E-man, this was nothing more than the landlord cheating on the tax return. You know, to the IRS they lose money but show a profit to prospective buyer’s. You can still report the cash as income.

Entirely agree. IRS doesnt care who your tenants are, heck they dont even care if you are legal. All they need is report income and pay tax! I think if you want to cheat, it will come back to bite you, when you want to vacate them, it might be a problem or worse, they might just trash the place and go. What would you do?

As part of my new "Bargain Finder" service (see http://patrick.net/?cat=3) I monitor rents in all the towns and zip codes of the Bay Area and make graphs. So here's some hard evidence of rents, based on 37 advertised rents for exact addresses. Ads without exact addresses are often scams.

So yes, based on a tiny sample, you could get the impression that 3BRs in Morgan Hill are going up, but I think that's just noise. If you look at the graphs for other areas or the whole Bay Area, you don't see that. Also, rents for 1BR and 2BR don't seem to be rising.

Just for giggles I did this search:

http://sfbay.craigslist.org/search/apa?query=reduced&catAbbreviation=apa&minAsk=min&maxAsk=max&bedrooms=

612 listings with the word "reduced" in it.

People are welcome to draw any conclusion they like.

Wow, Patrick... I wish what I was seeing on Craigslist was in line with your graph. Check out this guy, wanting $2750 for a 4BR in Morgan Hill...

http://sfbay.craigslist.org/sby/apa/1582785420.html

This doesn't have an exact address listed. Why would this be a scam and thus not subject to your bargain finder service? (other than it not being a bargain, lol)

Yes, I'd say flat in the last 30 days anyway. Just for the sake of completeness, here's my analogous graph for the whole bay area, which was generating using more than 30,000 actual asking rents for specific addresses:

Great graph. Extrapolating to what I think Morgan Hill should be (20 miles south of SJ, no jobs, mediocre schools, but newer homes and somewhat low crime), I'd say a price for a decent 4BR should be maybe $2250 per month.

Regarding your bargain finder service, is there any way you'd consider a smaller "per use" fee? Like maybe $10 for one day access?

Renters usually don't spend more than a few weeks looking, and after a few days they have a handle on an area, so subbing for $50 per month may not be for them.

But for landlords I think per month is right on.

Right, it's not for renters. The landlords have the money, and this whole site is just me, so I have a hard time doing customer support for many low-paying customers rather than just a few relatively high-paying ones. From the painful experience where I charged for the news links, I know that if people pay anything, they really demand quick customer support.

But just email me some questions and I might post answers on the forum as a kind of advertising.

@patrick

offtopic, comment about your side site.

Marketing on that page seems way to scamy to me. Since I've read your posts and know the site, I wouldn't care about it. Others falling upon just this part of the site are probably going to think scamy though.

I would recommend putting up a bit more information at the top of the before throwing out the free trial offer. You might even want to put down that you have to pay the monthly fee, but you'll get a refund if the information is of no use to you. Make sure to point out that refunds are very quick and without any reason required. Simply click "close my subscrition, refund me please" button.

Also put down a bit more on what you are offering and how you are correlating the data. Give people an idea of what they are buying, and how it's more than they could do.

Perhaps explaining in simpler terms what each column is offering people, how it effects them. For a professional buying agent, I'm sure they would understand. For mom and pop buying a house or two, it might be terminology they aren't used to.

On the first graph, instead of showing the "best" deals, why not change that to something more useful, or more like the data people are probably used to? You've sorted on the "best deal out there" link, but perhaps sorting on an area code, size or asking price might be better? It will also help people see how granular you are getting. Currently you're showing a couple of good deals around the bay area, but is that *ALL* there is to the site? If I saw 100 deals in one area code, I would say "wow! tons of data points here!"

Help people see how the data could pertain to them. I'm guessing that most people look based on a value range, or perhaps start with a number of bedrooms range instead. Eg, I want a 2bd rental around where I live. Give people something more attuned to what they are used to looking at, when they do this manually.

Perhaps even have some "information" lay overs on the page showing where each link is going to go to. I'm guessing google street view for some of the addresses? Perhaps if you click on zipcode it will show you others around that zipcode? Make it obvious what they are getting.

The average rental rate is cool for renters! Buy if a buyer buys a place based on a 20 day moving average for rentals... I would be a little surprised! Can you offer anything larger than that, or is that your largest data set right now?

At the bottom with the subscribe, tell people what it costs. You'll get fewer click thrus, but the ones that do go through will convert more often. People don't like clicking on subscribe buttons when they aren't sure where it's taking them or what it will cost. People feel they've "bought" something when they click on those buttons, and if they aren't sure of what they are getting, are less likely to click.

I've noticed that craiglist seems to have flooded with high asking rents recently. I went to an open house and the owner told me she was "underwater" and was going to come EVERY WEEKEND until she moved her 2 bedroom unit at $1450 per month. This is in suburban Northern Virginia and in an older condo complex.

Looking at Craiglist and, especially, the MLS I saw several places going for at least $100 less p.m. than her asking AND even TOWNHOUSES for $50 less or places for the same price in primo, new locations.

So I'm inclined to agree with the author: These are "last stand" prices and we may be seeing a flood of rental listings at high price that make a very contradictory market condition appear to be true: A flood of high priced rentals!

In the long run, from watching the market, I see such rentals sit around for a few months and the landlords either advertise at a more reasonable price ($200 to $100 less) OR quietly take the lower asking price. Do the math and this means that the landlord probably winds up, in the very least, losing money with a unit sitting vacant similar to if they had just offered the place at $300 off.

One more thing... I noticed an announcement from the condo board that they are going to raise the "move in fee" from $250 to... more (I'm not invited, obviously.) So the condo board doesn't want renters. I hope they like foreclosures...

Well taking $200-$300 less, if a tenant stays 2-3 years, that adds up. Waiting for $1400 vs $1100 can be quite beneficial.

There are always people out there who don't look around enough and pay the extra.

I looked through the bay area renters guide (pre craigslist days) and eventually found if I found an area I liked and just phoned a couple complexes I would say $500+ per month over the renters guide. I did this even last year, the prices for any places listed in there were still $500 more than craigslist.

The strategy works, depending on how much time you've got and how selective you want to be.

Hmmm.

I know you guys are clucking about the BA. Here in LA rents are going DOWN. No question about it. I'm trying to buy an income property, and I have to keep adjusting my numbers.

It's chaos.

No one knows what's going on. Agents are lying through their teeth. Sellers state rents they haven't received in over a year. "Delivered vacant", used to mean a big rubbing of the hands, now mine just get sweaty. I don't know what I can fill those vacant dwellings with and for how much? Let alone how long it takes to fill them. Which is the REAL criteria, as you loose WAAY more money while dark. THAT doesn't show up on graphs.

Renters are all over it. The property I live on has changed hands 2x in the last 6 months (3 SFH - 1 property) . My landlord didn't raise the rent for the first time in 15 years. If you knew what a tight fucker he is you'd know... he's worried.

This discussion is more proof, that there is NO consensus. I think the smug landlords here are falling prey to the same belief system that built the housing bubble. You/we are not immune to external markets. J.O.B.S - take those away and you can graph all you want... there just won't be anyone to afford higher rents.

I own 4 houses in London and I have reduced the rent on 3 properties to keep the tenants in. If I'd lost them just before the snowstorms, I would have been dark for 2 months with no showings. I'm in competition with my neighbor (also landlord) to get and keep tenants. He was greedy, and didn't drop the rent. Vacant since November... Mby I'll send some dollars over and buy his place when he's forced to sell.

PolishKnight says

I’ve noticed that craiglist seems to have flooded with high asking rents recently. I went to an open house and the owner told me she was “underwater” and was going to come EVERY WEEKEND until she moved her 2 bedroom unit at $1450 per month. This is in suburban Northern Virginia and in an older condo complex.

People that lose their homes need a place to live, but they're losing their homes because they can't afford them. Prospective landlords can only charge what the market will bear, and NOT what they need to break even.

If us renters could afford to pay somebody elses inflated mortgage, we wouldn't have defaulted on our own.

stocksjustgoup says

Prospective landlords can only charge what the market will bear, and NOT what they need to break even.

Sometimes, prospective landlords charge what THEY THINK the market will bear, NOT what is fair for renters. Don't know what's going on in west coast and don't know what's so special about northern VA though, there still are plenty of people in need of shelter, and they're moving to cheaper apartment.

So, what's happening at least here in northern VA at this moment is that, SFH and townhome rent is going down, apartment rent is going up. The management in my rathole raised rent too. It is like $100 more than a year ago. Oh, yeah? You think its not fair? You get the hell out of here now in this freezing winter, find yourself cheaper rathole. That's basically what they are doing and I love their attitude.

Rents are down in 2009 and will continue to decline in 2010 and 2011 just like property values.

Please beware of the deciet being posted that rents are stable or going up. This is a lie.

If you believe that check out:

www.cyberhomes.com
www.marketwatch.com
www.forbes.com
www.patrick.net

Beware of anyone who makes a profit by getting you to believe their lie. These are the same dishonest realtors, property managers, loan officers who significantly contributed to the grossly inflate prices in 2006 and now the housing crisis of 2009, 2010, and into 2012.

Prices will never be the same and will continue to drop. The housing crisi was the biggest lie of the Decade, please do not buy it again.

Fool me once shame on you. Fool me twice shame on me.

Don't be a fool, rentals and property values are dropping at approximately 20 % per year. There is a huge hidden inventory, thosands of distreesed and underwater homes in Northern California.

I’ve owned and managed a small handful of rental properties for over 25 years. My rents have NEVER gone down. Ever. Not even once.

Nomo,

In response to your staunch claim I ask you this: Have you stopped to consider that the last 25 years has been the most prosperous time in our nation's history, if not the world? Inquiring minds tend to believe that prosperous times are over; so, given that, is it not possible that you may have to drop your rents at some point in the future? It could happen, no?

hooch_raider says

I’ve owned and managed a small handful of rental properties for over 25 years....

Hmm! You are a property manager for 25+ years. That explains why your join date is 12/07/2009. :)

Seaside writes: "So, what’s happening at least here in northern VA at this moment is that, SFH and townhome rent is going down, apartment rent is going up. The management in my rathole raised rent too. It is like $100 more than a year ago. Oh, yeah? You think its not fair? You get the hell out of here now in this freezing winter, find yourself cheaper rathole. That’s basically what they are doing and I love their attitude."

Pkennedy writes: "Well taking $200-$300 less, if a tenant stays 2-3 years, that adds up. Waiting for $1400 vs $1100 can be quite beneficial.
There are always people out there who don’t look around enough and pay the extra."

That's the free market for you! Pkennedy, let's run the numbers: If the tenant stays for 2 years at $200 more, that's $4800 bucks. It's a game of chicken and not a very profitable one. I've seen such places sit on the market for 3 months or so and if the landlord caves in, that's a loss of $3.5K. If they get their demand, it's a gain of $4800 BUT THEY STILL lose $3.5K so the net gain is only a $1K AND THAT IS IF THEY WIN!

In answer to seaside (and indirect to Pkennedy) We know people who pay about $200 more for us for places that are nothing special or partically good. Some people are just not good consumers OR they have bad credit ratings. We have stellar references so we've been able to haggle down $200 a month BUT the landlord knows 100% that we pay our rent on time, maintain the place meticulously, and don't cause any trouble with the neighbors or association. Yes, it is possible for a landlord to have the attitude "don't like it? Go to the street!" BUT what kind of tenants will that get them? I know of situations where landlords did get that $1400 a month for a 2 bedroom apartment BUT the tenants secretly moved in _5_ people total!!!

Townhouses have been overpriced for some time and now I'm beginning to see them come down to the point of just a $100 a month over apartments as rentals and gradually not much more to buy. I wonder if SFH's will be the next to start sliding down to the bottom...

@junkmail: I think you've indirectly nailed down the problem. LL's simply don't know what to charge. Some haven't had to change a tenant in years, now they're just doing the same thing they did years ago. Some think they've just lost a tenant, good time to adjust the rent up. Others know there is a glut and drop it. I think it's mostly a bunch of unknows, and the rents are coming down, especially in higher turn over areas, like apartments, who are constantly in tune with the market.

@seaside: If a LL can get a person to pay extra for rent now, by the time summer rolls around, those people will be used to the higher rents. It's a game of chicken. If I was you, I would look at moving now. Even though it sucks, if you hire 2 locals to help you, you'll be done in 6 hours. I've gotten moving down to an art form, because I'm in the BA and jobs move around enough and I hate commutes. If you rent a truck way bigger than what you need, you don't need to pack it at all, or mess around outside. You just haul things in the back and drop them. There is no reason to play moving tetris. Also, pack up all the little things and move them in the week prior to your move. 1 trip a day in a 4 door car will chew through all your loose stuff pretty quickly. People are always surprised how much can fit in a car when it's packed tightly and loosely. You'll get the benefit that you're one of few renters out there, and all these dark apartments will be way easier to bargain with.

@nomograph: If you've never dropped rents, you're probably charging too little. Just like on ebay, if you win every auction, you're bidding too much.

@polishknight: $1000 is a decent chunk of money. Look at most businesses, a good store makes 10% profits. That $1000 might not represent much in terms of the whole investment, but it does represent a huge chunk of profit and/or losses they could be incurring. For many it's worth it. That is how many of these large apartment complexes work. They charge extra and if the place is dark for awhile, so be it. They would rather get the higher rent than fill it. In the end it works out for them. NOTE: If I was a LL right now, I would take whatever and worry about it next year. I wouldn't risk having it empty for 3-6 months this year. I've only had one LL call up my references, the rest just said yes to me after running a credit report. Even when my credit report was empty when I was younger, literally empty. I think most LL's can tell pretty quickly if you're going to mess around or not.

I thought I'd put in my two cents about the rental debate in the Bay Area as someone who has been actively looking for the right place over the past 4 months.

Hubby and I live in El Cerrito and are looking for another SFH in EC, Kensington, Albany, or the Richmond View. We have stellar (800+) credit scores, savings, and hubby makes six figures. I'm expecting our first child.

I took us 6 months to find the place we're living in now (SFH, EC) and we're moving because we need another bedroom for the baby -- and because of a nasty mold/mildew problem in our bedroom. Folks, we live on a REALLY busy residential street and when we applied for this house (2008) there were 15 other applicants. This is not a luxurious house by any means.

Rents have not come down in our area -- if anything, they feel stagnant or slightly higher. This may be because of the demand of the area (close to BART, AC Transit, UC Berk., etc...). We have seen some sh** holes called "homes" in our search. And they've all been over $1900 mo. for 2 bedroom/1 bath. We're farily insistent on our new rental having central heat (a luxury around here), electrical panels that aren't circa 1920, and dual pane windows due to allergies. Good freakin' luck. Its amazing how people live and how LL refuse to maintain properties....thus, the many months it takes to find something decent.

When we do find something we like, we usually wind up getting the place (haven't once or twice). But, I wonder, what happens to all those people who are loosing their houses, have poor credit, or poor employment history. They're obviously not living around here because of the demand of people like us looking for housing close to San Francisco....and trust me, there are alot of us. I've been to open houses for rentals and I think there are quite a few people actively renting as a financial planning strategy. We've never applied for a rental in this area without there being a waiting list or crazed open house filled with tons of thirtysomethings.

We have an application in right now for a place in EC, 3 bedrooms, 1.5 baths, basic, clean house with dual pane windows, central heat, hardwood floors...rent is $2100/month. The LL is still conducting appointments (we arrived on the heels of a family who had an appt. and looked rather stressed) -- she's told us that we're on the top of the list so far but she has to sort through the other applicants (around 10 or so). I think rental markets have pockets and can be insulated. We've been waiting for rents to drop but they haven't yet (in 3 years of waiting). Perhaps this year? One can only hope!

I think it really depends where the rentals were. Rent is probably below the 2000 peaks in many places. I remember seeing apartments for 2-3K, which are 1400-2000 now. Housing is probably higher, but rental apartments is probably quite a bit lower now. 2000 was a bad year to be renting in the bay area. Ugh!

I think some rentals are holding up because there aren't many rentals in a certain area. Every person in my office got a rental reduction in SF over the last year, and the ones that moved where able to push down prices even more by just asking.

I moved within redwood city to capture a lower rent. I had been at my last place for only a year, but decided the drop in rent was well worth it, especially since smaller places were opening up, which is what me and my wife wanted and which ultimately pushed our rent down 40%. While looking around, we went to many apartment complexes and they claimed rents had dropped 20% or so. Perhaps a lie? Not really, because my wife actually remembered the prices from the previous year when we had looked at a couple of these places back then, and they were actually 20% less.

Hubby and I live in El Cerrito and are looking for another SFH in EC, Kensington, Albany, or the Richmond View. We have stellar (800+) credit scores, savings, and hubby makes six figures. I’m expecting our first child.
lisyb, Hang in there. We a friends in a similar situation (East Bay, but South) and they ended up biting the bullet (as 3+bedrooms could be had for ~$400k where they're at). I've noticed that in my burg Poor Dad landlords (aka. cash flow negative) have been handing back their multi-units to bank, and they've recently begun hitting the market as REOs. This will increase the downward pricing pressure on the rental markets. Have you thought about hunkering down in a place like this, while you wait for SFHs to be priced right?
http://redoak.idxre.com/idx/detail.cfm?cid=1&bid=2&pid=40446755

Yes, in the South Bay, rents are definitely lower now than they were in 2000. That was the height of the dot com bubble. People were paying $2k for a 1bd apartment down here - it was absurd.

I have been leasing in Danville and rents have dropped approximately 20 % over the past 3 years. I have searched and researched the rental markets and the prices continue to drop.

The going rate for leases in Danville, San Ramon,Windemere, Dublin, Alamo are somewhere near $1.00 per square foot and less on larger homes.

Negotiate, negotiate, and negotiate. The biggest lie of the Decade in Northern California is over!

The high end neighborhoos in Danville, Alamo, San Ramon, Windermere, will mirror Tracy and Moutain House. The wave of foreclosure is moving West from the Central Valley and these areas will be hit hard.

Beware of anyone telling you different, Rememebr it is lies that created this mess and effected millions of homeowners nationwide.

I recently renewed my lease in prime santa clara (close to El camino real). I got it for 20% less than what I was paying.
Couple of my other friends also got the same deal in other apartments.

As a whole rents dropped. One of my other friend used to pay 1400, now it is reduced to 1250.

Folks

Personal experience, I used to rent a tiny townhome apt for $2500 in 2008. Had to move out in late dec 08 for a job in a diffrent city. Now we just came back and I just signed a lease for a similar sized SFH for $2000. This is around the Garden Gate Elem school in Cupertino. I think the key is in being patient and negotiating. I had been searching for the past 6-8 weeks. And I did try to survey some places that I had initially seen, they are still available. I think there is a lot of inventory, and its just the land lords are still not seeing the reality.

Houses in the East Bay cost so much to rent, I'm thinking of buying. Crazy move?

Nomograph

Can you let us know, in what areas do you have your properties?

nani says

I recently renewed my lease in prime santa clara (close to El camino real). I got it for 20% less than what I was paying.

I didn't even know there was a prime Santa Clara. I guess I live in prime Santa Clara too!

wish i was lucky says

Also remember that Unions were strong in the 70’s and 80’s and part of the 90’s.
Now the Unions are in the process of being busted, the Companies are managing to go bankrupt or merge and somehow not owe the Retirements that were promised.
The future is not promising - unlike the future after the last recessions. There is no way we can have the worst housing bust in history and come out smelling like a rose. The worst just hasn’t happened yet - of this I am sure.

Well said. This is exactly my concern and what motivates my thinking, actions, and comments. While I absolutely apprecaite what posters like Nomograph have to say about the past, if we refuse to turn our heads away from the past and look toward the future, we will never see the train coming. We may not be able to predict the future, but refusing to look at the present and how it may affect the future is same as saying, "Housing will NEVER EVER go down!" Well, we know how false that often stated phrase is. Why are so many people refusing to "hope for the best but plan for the worst"? Nomo and others...gut check yourselves. From one concerned citizen to another...watch out for the locomotive. To all my fellow renters, muscle up and start NEGOTIATING with landlords!! (goes for sellers too if you are trying to buy).

kpinna says

Houses in the East Bay cost so much to rent, I’m thinking of buying. Crazy move?

Not crazy in Antioch, Pittsburgh, and parts of Oakland. You gave me a great chance to shill for my Bargain Finder service (see header of this page). I'm tracking most of the rents and for-sale prices in the Bay Area, and there are definitely places where it makes sense to buy. They're not the nicest places, but they do have some good deals compared to renting.

I just looked up the large complex in San Jose where I rented in 1984: the 2 BR 2 BA unit I rented in 1984 for $750 is now listed for $1425. I reckon that's a CAGR in the rent of about 2.5%. Don't blame rental control for that low rate because I think rent control in SJ allows up to 7% annual increase.

wish i was lucky says

Also remember that Unions were strong in the 70’s and 80’s and part of the 90’s.
Now the Unions are in the process of being busted, the Companies are managing to go bankrupt or merge and somehow not owe the Retirements that were promised.

The unions died in the mid 80s. Not much left when we entered into 1990. Many Unions wanted defined benefit retirement plans which caused companies to go bankrupt to begin with. Had they taken a defined contribution retirement plan you would have avoided bankruptcies. Anyway, no company holds the retirement benefits, they are held by the retirement plan administrator, a third party.

wish i was lucky says

What about the companies where the retirement was in the stocks.

The union style Defined Benefit pensions were 10%, while majority were defined contribution plans like the 401K. Like anyone else I have a plan which I control .. i can transfer from any category, cash, equity funds, or bond funds anytime without any black out restrictions. The adminstrator like Schwab or Fidelity, do no business with buying their clients stock nor is there a 'Retirement Board'.

What you saw with Enron story was a small minority. And I mean a really small small minority exaggerated by the media. Did you see other well known companies have that kind of pratice?