patrick.net

tts says

Rents tripling? Really? Rents are subject to wages, jobs, and cost of living just like housing.

I live in DT San Francisco, and everyone in our two buildings were just given notice that all of our rents are going up between 75-100% at lease end. Granted, we have an awesome view of SF Bay but still. In addition, I thought we were ALREADY paying exorbitant rents. I guess not because most of us have decided to leave, but literally every single vacated apartment has been filled within days, not weeks or months or staying vacant as you say. Perhaps SF is a totally unique area as compared to the rest of the USA but rents are NOT stable here and I believe the situation is only going to get worse.

Bellingham Bob says

Part of this thesis is $10 gas and Walmart paying $20/hr.

Yea I can see how you'd think that high gas prices would do it at first glance. The thing is people will likely just stay with mom n' pop for longer if rents get tripled but wages remain stagnant or don't go up much more, which if you assume high inflation than $20/hr doesn't seem so hot at all. They just flat out won't have the money to rent or buy. Which is quite likely given the way the blue collar jobs are disappearing and being replaced with low paying McJobs.

And the McJobs _have_ to be low paying.

No really. In nominal terms the hourly wage for a McJob could go to $40/hr for all we know (unlikely even to me FWIW) but the buying power of those $40/hr would have to drop such that it'd be about the same as making the $8/hr or whatever they usually get now. You can't run an economy where the low end shitty service jobs pay high, it just doesn't work since the value isn't there.

Bellingham Bob says
My thesis WRT real estate is that it is one major mechanism by which the proles are enslaved. Inflation is its dearest friend, historically.

The proles can be enslaved by any means a corrupt government has available. Inflation is one but wage arbitrage and anti labor practices are another. My guess is they'll use some combo of all three and play politics to deflect the blame off them and onto their political opponents.

Buster says

I guess not because most of us have decided to leave, but literally every single vacated apartment has been filled within days, not weeks or months or staying vacant as you say. Perhaps SF is a totally unique area as compared to the rest of the USA but rents are NOT stable here and I believe the situation is only going to get worse.

What happens in situations like this is that the new people coming in are the suckers. Usually kids but not always. They'll try to tough out the nut for a year, maybe 2 and then they'll move out like you are because they'll realize they're living to pay their rent instead of doing anything else. More and more of those rooms will sit and stay empty.

Gradually the building owner will be forced to lower rents or lose the building. Usually they lose the building because they have the "I'm not giving it away!!" mental block going on and/or because they can't really afford the building either but had to burn up their credit and cash in order for reality to smack them in the face before they walk away.

IOW the same shit we saw happen in the small rental/SFH market will happen over time to bigger high rise and dense rentals, but it takes time. Years usually.

tts says

My thesis WRT real estate is that it is one major mechanism by which the proles are enslaved. Inflation is its dearest friend, historically.

I could not agree with you more....for this very reason, I think we are in the lull before the gigantic inflation storm (largely created by our own government). The government in no way is ever going to let deflation happen, and the surest way to 'cut' the debt is to ignite inflation. Of course, the only way to then protect yourself is to leverage a hard asset such as realestate so that you can at least ride the storm along and not get destroyed. I am currently a renter but am seeing the writing on the wall. Actually, it may be the best time ever (perhaps in the next year or two) to lock in your real estate deals before the inflation monster kicks into high gear.

since everyone is talking about buying at auction i'll add.

Not everyone who buys there is an investor. My cousin bought her condo at the auction, not an investor. It's her main and only residence.

A lot of that information is free and available on auction.com. It's not great for investment, banks aren't stupid either, bargains are not common. My neighbor bought his unit at an auction at 220. He thought he got a bargain, yet another neighbor is foreclosing at 185 right now.

I wouldn't consider it an investment if it will take you 20 years to get your money back renting it out.

FortWayne says

He thought he got a bargain

Most people who bought in 2006 thought that way too,and most people who bought in 2009 think that way too. Nothing is wrong on what you think. :)

Buster says

Of course, the only way to then protect yourself is to leverage a hard asset such as realestate so that you can at least ride the storm along and not get destroyed. I am currently a renter but am seeing the writing on the wall. Actually, it may be the best time ever (perhaps in the next year or two) to lock in your real estate deals before the inflation monster kicks into high gear.

The inflation we *might have doesn't have rising incomes. You are better off investing into money making operations such as your own business or wall street companies that are bound to make more money in that type of environment.

tts says

What happens in situations like this is that the new people coming in are the suckers. Usually kids but not always. They'll try to tough out the nut for a year, maybe 2 and then they'll move out like you are because they'll realize they're living to pay their rent instead of doing anything else

I'll second that observation. This is a big phenomenon in cities like NYC, SF, and LA, which is why their rental/RE markets can't really be compared to the rest of the country. My years of living in these cities I have seen plenty of this type: she has a glamour job that doesn't pay much (editorial assistant, PR gopher, event coordinator, etc.), subsidizes her $3k/month rent with daddy's money, and after a couple years 50% of them go back to wherever they came from or get tired of having no money and move out to Jersey City or White Plains or Long Island >shudder

Buster says

I live in DT San Francisco, and everyone in our two buildings were just given notice that all of our rents are going up between 75-100% at lease end.

Many buildings in downtown SF are going to corporate leases, so this really isn't a market rate. They realized that corporate leases are bringing in the $$$, at least temporarily.

FortWayne says

The inflation we *might have doesn't have rising incomes.

Oooh oooh, grandpa, please tell us more stories about this magical type of inflation that we might or might not have.

Bellingham Bob says

mdovell says

I think rates really should go up

http://research.stlouisfed.org/fred2/graph/?g=20X

“Nessuna soluzione . . . nessun problema!„

I actually meant the raw Fed Funds rate which is currently 0- 0.25%

It is possible to have inflation imported. The OPEC embargo back in the 70s was a good example of this. Sometimes there can be the opposite like when silver collapsed due to the Hunt Bros. A more recent example is the collapse of Iceland actually led to lower lobster prices in the northeast (temporarily).

NYC has had rent control for over 60 years
http://en.wikipedia.org/wiki/Rent_control_in_New_York
Supposedly Cyndi Lauper was only paying around $1k a month for her place...a fair amount of celebs live in the area not so much because it is a city but because if you can lock in the rate you would be set.

Wasn't rent control a giant subplot of the Friends sitcom in the 90's? I never watched it but that's what I heard...