0
0

Rents going up? Prices going down?


 invite response                
2005 Oct 20, 4:02pm   25,733 views  93 comments

by tsusiat   ➕follow (0)   💰tip   ignore  

Is anyone aware of an inverse correlation between a housing bubble of massive proportions popping and subsequently rising rents?

My thinking goes something like this: after all the suckers who go bankrupt lose their houses and are back in the rental market, they will drive vacancy rates in typical rental properties lower (supply and demand).

*Or* do all those illegal in-law suites all over the place absorb a lot of those ex-property owners, and do all those empty houses now rented after foreclosure or whatever depress the market?

As house prices go down over several years (by not appreciating or actually coming down, whatever), and rent gets more expensive (lower vacancy rates), these same people will start to think about the money they are wasting renting and thinking about buying again, and the cycle begins anew.

My vote - I have a feeling rents will be going up as housing prices go down.

Any thoughts?

by tsusiat

#housing

« First        Comments 70 - 93 of 93        Search these comments

70   Peter P   2005 Oct 21, 5:17pm  

I love that Peter P can find food to like in any culture. A true renaissance man.

To be frank, I have yet to develop a taste for Ethiopian food.

71   OO   2005 Oct 21, 5:41pm  

Does it have mountain people like in Deliverance?

It is much more toned down from Deliverance of course. But according to my friend living up there, you have electricity outage every other week in the winter months, roads blocked every month during the rainy season, and beasts of all kinds howling all night. And, it is freezing cold up there at night around-the-year. Residents do need shot guns to fend off wild animals.

Don't get me wrong, I love the mountain life, there are lots of upsides that come with it, the tranquility, the scenery, the fresh air, the acreage (although mostly on steep slopes making it quite unusable), etc. But it is not for most people, and definitely not at the current price level. For one, the wife may pull her hair out dealing with all the inconvenience of an "uncivilized" life.

LG Mountains is an area traditionally for vacation cabins of the valley worker bees who want an weekend exile. It is not a place where people think about "starter home" or "investment property". That's why RE bubble will start deflating there.

72   SJ_jim   2005 Oct 21, 6:39pm  

Residents do need shot guns to fend off wild animals.
As a kid, riding my bike in the hills, rumor had it that residents had shotguns to keep you from steeling their pot plants. No first hand experience of this.

I'm relatively familiar with the area...though I've never heard them referred to as "los gatos mountains"...only "santa cruz mountains" (though most just refer to them as "hills").
Which specific areas are you talking about? Because Loma Prieta is a little further away from Los Gatos compared to say, the Summit Rd/San Jose-Soquel road area. Is that the area you're talking about? Or Bear Creek Road area (i.e. east of Hwy 17 vs. west)?
Maybe because I grew up nearby, & drove all over those hills in high school, it's hard for me to consider them much of a weekend getaway. You're never more than 20-30 minutes from a LOT of civilization. But I suppose if you're not up for the 3-4 hour drive to the sierras....

73   praetorian   2005 Oct 22, 12:34am  

OMG! It's like I was struck dumb by a thunderclap and the scales just fell from my eyes! I wasn't really following until the "Renting is for losers" part, but, man, after that, wow. Just wow.

_Aladdin voice_: It's a whole new woooooooooorld...

http://www.dinkytown.net/java/MortgageRentvsBuy.html

Of course, not everyone wants to live the life of a land lord. Some poor misguided souls even consider worrying about things like tennants silly and a waste of time in the overall scheme of things. They do things like... programming or lawyering or, say, doctoring. Tragic, but what can one do?

Cheers,
prat

74   SJ_jim   2005 Oct 22, 3:15am  

ScottC Says: "Come to my seminar."

75   SJ_jim   2005 Oct 22, 3:47am  

Buy a small, comfortable moderately-priced older home, build equity and save money.

Yes, I believe there'll be a time when this well known, time-honored tradition is once again the status quo.
Right now, however, it's just not possible. In many RE markets, there simply is nothing that is "moderately-priced," based on any standard devised outside of a nuthouse.
ScottC, you've proven to be very knolwedgeable about real estate, and you've been in the business very long; so I'm assuming you've seen the periods when real estate prices went up, and those when real estate prices went down.

76   Peter P   2005 Oct 22, 4:15am  

The problem with most homebuyers I deal with every day is that they all want to start at the top. These are young people, twenty- and thirty-somethings with high ideals, suddenly earning a larger salary than they ever imagined, and they all want to buy their dream home cheap.

True enough. However, in a bubble, fixer-uppers usually have their "potential" priced-in already. On the other hand, starter homes are way overpriced because people are stretching to get in.

What you want is free and clear title to ownership, the right to possession of and rents from property. And the more properties, the better.

I agree. I want to eventually invest in real estate when the valuation is reasonable.

Renting is for losers. The real money is in ownership.

I guess I will be the "loser" for a while. ;)

BTW, I heard the Kalifornian speculators are buying up properties in Texas. What do you think?

77   Peter P   2005 Oct 22, 4:20am  

the median home price in our county is about 500k for a median salary of 80k –>bubble

We are about 700K for a median salary of 80K -> hyper bubble!

78   KurtS   2005 Oct 22, 5:25am  

We are about 700K for a median salary of 80K -> hyper bubble!

Similar median salary up here, but $900K "median" home.

79   KurtS   2005 Oct 22, 11:53am  

t is a mountainous area clsoe to Loma Prieta (ring a bell?) where residents have to get private/mutual water, propane gas and rely on septic tanks. It is a community for people who REALLY want to live in the mountains and tough it out.

I'd be very careful buying anything up there...you want a geologist to check it out and decide how stable the land is. After the Loma Prieta quake, a number of people off Summit road who had damage discovered their land was no deemed unstable, and they couldn't get permits to rebuild. There was a 2ft wide crack down the middle of the road due to the whole ridge shifting.

80   SJ_jim   2005 Oct 22, 5:37pm  

"Yeah, you would think someone with all that experience would know better than to make the statement “Rent prices are directly tied to the owner’s expenses”. "

It's funny...I knew someone who was looking for a tennant to rent a room...when I asked how he came up with the rent rate, he said it was what he needed to pay 1/2 the mortgage on his 2br condo (he was living in the other room). It happened to be a reasonable amount relative to the market, but the mentality kind of gave me a "WTF?" moment. My take: the "need" factor does play some role...but it has to be put in the context of the "needs" of the other competing landlords.

81   SQT15   2005 Oct 22, 5:43pm  

If you look in the paper and on craiglist, there are all kinds of listings that make you go "WTF?" The average rent might run in the $1600mo neighborhood, and you'll get these listings for $2500mo for a comprable house. Huh? But I think there are so many "investors" out there who bought without a clue and they're trying to cover the mortgage by renting the house out. But regardless of what they need, they're only going to be able to get fair market value; that's why you hear the phrase "negative cash flow " so often.

82   praetorian   2005 Oct 22, 5:56pm  

I'd like to propose a new rule:

Anyone who uses the term "Anglo-Saxon" in an argument automatically loses, regardless of how compelling the rest of the argument is.

Cheers,
prat

83   SQT15   2005 Oct 23, 3:10am  

So the Anglo-Sa......new rule?

Sh**, now I have to start over....

84   SQT15   2005 Oct 23, 6:25am  

I propose an exception: any argument that’s funny enough to cause food food particles larger than Cocoa Puffs to be launched from the nostrils for a distance greater than the length of a 6-foot dinner table.

Lol (but not quite that hard)
Sounds like a good rule to me.

85   tsusiat   2005 Oct 23, 3:58pm  

Hey Jack,

As someone who lives north of Minnesota, I think there are numerous people who might not like the tone of your "ice and snow" diatribe! Mind you, as someone who lives south of me, hope you don't mind if I warm up on some fire and brimstone diatribes sometime...

;>

86   SQT15   2005 Oct 24, 3:32am  

Besides, people in MN are much nicer and more laid back. I couldn’t live among the yuppies and right wingos in OC or any of those fancy places out there (but Northern CA is somewhat a better place to live if you ask me). Oh well.

I don't doubt people in MN are easier to deal with. I lived in LA briefly and couldn't stand it. Northern CA is much better, but in some areas the level of pretention rivals So Cal. If that trend continues I probably will eventually leave CA for the sake of my sanity. My great hope is that if this market returns to sanity, the overinflated ego's of the yuppie class will deflate with the bubble.

I think the greatest "conundrum" in this whole mess is how so many people who earn median or below median incomes can find a way to pay so much for a house. It's truly baffling even with the rampant use of all the NAAVLP's.

87   Jamie   2005 Oct 24, 9:55am  

"I am sure that everyobdy is nice in MN, and everyone in CA is unbearable."

We must perpetuate this profound truth, if for no other reason than to keep undecided relocators headed toward Minnesota. California sucks! Everyone is broke, or stupifyingly rich, or homeless, or illegal. Crackheads break into my BMW every time I leave it parked for more than five minutes, and there are thirty migrant workers living in the house next door to me.

Minnesot-y is the place you oughtta be, so load on up your truck and head for...oh, sorry, having a Beverly Hillbillies moment there.

I believe the above argument is called the Surfer-X maneuver.

88   Jamie   2005 Oct 24, 10:07am  

"Worst off, you people move out and bring all that weird shit to the rest of the country, and it’s little wonder why most Americans hate CA yuppies."

Well, anyway, excuse my snark, Jeff. I'm frankly glad there are a ton of people that would never want to live here. Some people think Minnesota is paradise, some people think California is, and so on. Thank God we aren't all trying to live in the same place. I just wish some more people would leave CA. ;-)

To address your question of why people will pay so dearly to live here, sometimes it's job, sometimes it's family, sometimes it's both. Sometimes it's because they haven't lived anywhere else and are afraid if they have to live in any other part of the country their cool factor will diminish considerably and they will be bored to death. Sometimes it's because they can afford to live anywhere and think this is the best place to live.

Why buy a shitbox? Well, I haven't, but of the people I know who have, they're usually buying out of fear, and they think they'll be able to remodel--they just want to get into a place before the market goes any higher. It's never good to make a purchase because of fear, and so here we have this stupid housing market.

89   SQT15   2005 Oct 24, 2:44pm  

We must perpetuate this profound truth, if for no other reason than to keep undecided relocators headed toward Minnesota.

Thats right! California is no place to raise a family. Now Minnesota, that's the ticket.

I didn't mean to sound so down on CA before. But the town I was living in was turning into the worst aspects of a miniature LA, and I've kind reached my tolerance level. It was a great place to live for so long, but once it became inundated with BA yuppies who sold their sh**boxes in the Bay and found themselves able to buy 4,000 sqft homes with money left over for a BMW and an Escalade, it just became unbearable.

I moved across town and I like it much better. The neighborhood is very nice and modest enough that I haven't run into the same attitude here.

All in all, I like CA. You sure as heck can't beat the weather.

Oh wait, I wasn't supposed to say that.

It sucks here! Stay away! Move to Minnesota!

90   tsusiat   2005 Oct 24, 6:27pm  

Seattledude:

as a Victoriadude, surrounded by geriatrics and american tourists instead of chinese and iranian immigrants, I can totally see where you're coming from-my parents are boomers and they both did better than their kids with less education. A common pattern in late 20th century financial outcomes.

My grandparents bought their first house in Kerrisdale for $3000 in the 1930s. Now the same house would be a couple million - in the last ten years something demographic has happened in congruence with financial voodoo like you say and WHAM!.

All I can say is, amen.

91   surfer-x   2005 Oct 26, 4:34am  

=p~

92   surfer-x   2005 Oct 26, 4:35am  

:-&

93   surfer-x   2005 Oct 26, 4:48am  

Yes, the Fuchs needs to come home now, he is seriously late with his rent.

« First        Comments 70 - 93 of 93        Search these comments

Please register to comment:

api   best comments   contact   latest images   memes   one year ago   random   suggestions   gaiste