patrick.net

I think that's right. There are too many factors there to know whether or not rental houses (in some locations) are really going up or down or sideways, right?

Some are trying to cover the note; some are believing the headlines and increasing their advertised rates; some are getting gobbled up at higher rates by former homeowners, happy to not pay their old mortgage $$.

People have moved in with family; some ads on Craigslist are scams, where the identical picture is shown but at $1000 less per/mo. Apparently, they meet you outside and let you peek in the windows or whatnot, then take your fake deposit on their fake property.

I wonder if Patrick could compile real rents from real visitors for a barometer?

Sounds about right to me, except I'd say prices / SF should go down a bit as the SF goes up. Building costs are not linear with square foot. Smaller houses typically cost more per square foot to build.

Rents also are probably not linear. If a 1000 SF apt cost $X, I would expect a 3000 SF house to go for

If you make a box x ft per side your outside walls are 4x long. Your area is x^2. As the length increases, your area increases faster than wall length. If that is too abstract, use an example. A 20 by 20 house is 400 square ft, and has 80 linear ft of walls. That is 5 square ft per ft wall. A 50x50 house is 2500 square ft. It has 200 ft of wall. So it has 12.5 square ft per ft of wall. In addition to the cost of the actual walls, the foundation costs are partly proportional to wall lengths. More importantly, both houses have one kitchen, which is the most expensive room in the house. They have one sewage, water, wand electric hookup a well.
Idiots thinking too highly of price per square ft is one reason for exploding house sizes. Price per square foot a pretty rough guide.

YeseYNot: Great points. Well explained.

The problem (at least my problem) with rent numbers it that there is a disconnect between asking rents, and the price the market will bear. So in the absence of hard numbers on what homes (not apartments or condos) actually rent for (not what the listed rent is), price per square foot is the only semi-objective measure I have found.

Now you might ask why do I not trust advertised rents for houses? Because in most cases in my area 1) the same homes stay listed for months if not years... often they are then removed only to show up on the MLS months later as short sales or foreclosures.

2) Most of the advertised rents are either as much as (or more than) what a mortgage would be.

Again this is for SFH's only. Not apartments or condos.

So a rough guide (price per square foot) is better than no guide.

Now I already know that Tanking Housing Prices is going to jump on me for this, but if you look at what I pay per square foot now to rent. And what it would cost me to buy house, the numbers work out about the same on a square foot basis. Sure the monthly PITI would be 1.5x my current rent, but I'd have 2x the space.

Patrick’s calculator is a great tool, but it is predicated on rent numbers. You know the old adage “bad data in, bad data out”. Just trying to get a better handle on that side of the data. Perhaps census data has some nuggets buried in it on this front.

ECBB, I get what you mean. I think that there may be a lot of people who have already moved on and need to bring money to the table to sell their house. As an alternative, they see if they can get someone to rent and break even. They probably won't negotiate to a reasonable rent, b/c they would rather go to forclosure.

THP, What do you mean bid? Are you a builder? I am not, so my understanding is not so great. But I figure anyone thinking about buying or building should keep in mind.
1) Two story houses are cheaper than 1 story, b/c roofs and foundations are expensive.
2) You can make $/ft^2 go down by adding big empty rooms.
3) Square or rectangular houses are cheap. Extra corners are less boring, but are expensive.
4) Anything other than about 8 ft floor to ceiling and odd wall lengths (not multiples of 4 or 8 ft) are more expensive.
5) Good insulation is the cheapest way of reducing energy costs. If you are not in a super expensive land area, good insulation should be considered.
6) The shell of a house (joists and subfloor, wall studs, sheeting, and siding, and roof) is pretty cheap (25% or something like that) of total price. Internal finishes and particularly good ones add a lot.

Here's a barometer of the current rental market in Santa Rosa, CA.

I have an upcoming vacancy on a side-by-side one story duplex w/ large yard & garage. Good condition. Currently advertised on CL (for 12 days) at $19.57/sf. No applications. Will reduce asking to $18.97/sf annual GOI.

The current market is obviously soft, i.e. a renters' market. I'm an experienced landlord; have owned this particular property for 7 years.

Think income approach to value for Single Family Rresidental. What you get when you rent a house over an apartment. I think because of the banks dumbing houses on the market that that factor is keeping homes low.

First time buyers are hard to find. They either don't make enough money, are weighed down with student loans, had a foreclosure, sold on a second and can't buy for three years, or bought on the Obama give away and can't sell for five years.

If we have no buyers the only thing left is to rent.

I believe I memtioned that, the Obama give away that traps you in an over priced home for five years.

E-Man

Yes, I mistakenly purchased the duplex close to the bubble peak in Sonoma County. Fortunately I was able to get the loan modified, and it's now a break even cash flow property.