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San Francisco Rents in Free-Fall

By Patrick follow Patrick   2020 Oct 2, 7:13pm 773 views   38 comments   watch   nsfw   quote   share    


https://wolfstreet.com/2020/10/01/san-francisco-rents-in-free-fall-new-york-rents-swoon-expensive-cities-college-towns-cities-in-texas-other-states-sag-but-in-16-cities-rents-jump-double-digits/

The combination of work-from-anywhere, ridiculously expensive rents, and coronavirus-fears associated with being on crowded elevators in apartment towers, is doing a job on the rental market in San Francisco. And not just in San Francisco, but also in New York, Seattle, Boston, San Jose, Los Angeles, Washington DC, Denver, and other expensive big-city rental markets. But it’s hitting San Francisco, the most expensive rental market, the hardest.


1   Dholliday126   ignore (0)   2020 Oct 2, 8:19pm     ↓ dislike (0)   quote   flag      

As rents go, prices are not far behind.
3   TrumpingTits   ignore (4)   2020 Oct 2, 8:21pm     ↓ dislike (0)   quote   flag      

Too bad the top 50 were not on that list. I would have liked to see what the rent delta for Minneapolis-Ft. Worth is.
4   epitaph   ignore (0)   2020 Oct 2, 8:45pm     ↓ dislike (0)   quote   flag      

Don't buy a house in a smaller market right now either, consumer confidence isn't on good ground. 2021 looks like is gonna be an even crazier 2020.
5   NoCoupForYou   ignore (3)   2020 Oct 2, 9:06pm     ↓ dislike (0)   quote   flag      

And declining quality of Life!!!
6   just_adhom_preaching   ignore (7)   2020 Oct 2, 10:14pm     ↓ dislike (0)   quote   flag      

I don't even like cats that much but that's one of the most talented memes I've ever seen. Grumpy cat actually LIVES inside of a GW's mouth. Why did not zzyxx come up with this?!
7   Ceffer   ignore (4)   2020 Oct 2, 10:16pm     ↓ dislike (0)   quote   flag      

I'm surprised that New York rents haven't plummeted even more than SF.
8   just_adhom_preaching   ignore (7)   2020 Oct 2, 10:19pm     ↓ dislike (0)   quote   flag      

As for houses, I'm devastated. I'm all set to buy in a reasonable drop but I don't think it's coming. I've heard that even after the moratorium on foreclosure clearing it'll only be about 0.4% of the remaining housing stock under water. Lots of equity with the recent run-ups.

A lot of these missed mortgage payments are just going to get tacked on to the end of loans.

Hard to get a cascade of crashing house prices when people don't have to sell. Unless, for some reason, everyone just decides to sell anyway? Maybe that silver wave finally crests...

Unless you live in 'the city'.
9   richwicks   ignore (2)   2020 Oct 3, 3:29am     ↓ dislike (0)   quote   flag      

just_adhom_preaching says
As for houses, I'm devastated. I'm all set to buy in a reasonable drop but I don't think it's coming.


I'll be surprised if there isn't a huge drop in prices.

I expect rentals are going to really crash, and that just forces homes to go down with it. 2021 is going to be strange, and I don't think this is an interruption at this point, we're in for the long haul. Housing didn't do that well during the Depression - housing was a liability, because it decreased mobility to find work.
10   BayArea   ignore (1)   2020 Oct 3, 6:17am     ↓ dislike (0)   quote   flag      

Interesting Patrick

I’m not particularly familiar with the source but SF looks to have the biggest YoY decline of anywhere in the country.

I’d like to see the same data for SFH because I can’t believe what I’m seeing as I’ve been house shopping the last few months.
11   Booger   ignore (7)   2020 Oct 3, 6:46am     ↓ dislike (0)   quote   flag      

Fuck San Francisco!
12   B.A.C.A.H.   ignore (0)   2020 Oct 3, 9:06am     ↓ dislike (0)   quote   flag      

BayArea says
I’d like to see the same data for SFH


Me too.

I cannot fathom the arithmetic of SFH landlording in the Bay Area. I know renters who share with me what they pay. It's easy to see what the tax bill is from the real estate websites like Zillow. You can also see the sales history to see how much the owner paid.

It doesn't pencil out. My colleagues and I studied this to death about 15 or so years ago. We all came to the same conclusion. But we are engineers, not Hipsters.

The only case that will pencil out would be a Prop-13 assessment from long ago, like an inheritance or retiring and leaving the region and taking the rent for cash flow. (BTW none of the renters I've known are renting from one of those situations). But even in those Prop-13 special cases, there's an incredible amount of sunk capital tied up in the home which in most cases can be unlocked without any capital gains tax.
13   richwicks   ignore (2)   2020 Oct 3, 12:54pm     ↓ dislike (0)   quote   flag      

B.A.C.A.H. says
It doesn't pencil out. My colleagues and I studied this to death about 15 or so years ago. We all came to the same conclusion. But we are engineers, not Hipsters.

The only case that will pencil out would be a Prop-13 assessment from long ago, like an inheritance or retiring and leaving the region and taking the rent for cash flow. (BTW none of the renters I've known are renting from one of those situations). But even in those Prop-13 special cases, there's an incredible amount of sunk capital tied up in the home which in most cases can be unlocked without any capital gains tax.


Have you considered the possibility that people have been buying property in this area and operating at break-even cost depending on price increases to realize a profit?

I've heard that the Bay Area HAD a 10% non-occupancy rate last year, and has for over a decade. People buy a house here, park their money, and its just a speculative investment. That's why a shoebox sells for over $1 million here.

I can buy a lakehouse for about $250,000 in Northern NY. If I'm never going back in to work again, I might just do that.
14   BayArea   ignore (1)   2020 Oct 3, 1:23pm     ↓ dislike (0)   quote   flag      

B.A.C.A.H. says
BayArea says
I’d like to see the same data for SFH


Me too.

I cannot fathom the arithmetic of SFH landlording in the Bay Area. I know renters who share with me what they pay. It's easy to see what the tax bill is from the real estate websites like Zillow. You can also see the sales history to see how much the owner paid.

It doesn't pencil out. My colleagues and I studied this to death about 15 or so years ago. We all came to the same conclusion. But we are engineers, not Hipsters.

The only case that will pencil out would be a Prop-13 assessment from long ago, like an inheritance or retiring and leaving the region and taking the rent for cash flow. (BTW none of the renters I've known are renting from one of those situations). But even in those Prop-13 special cases, there's an incredible amount of sunk capital tied up in the home which in most cases can be unlocked wit...


When it comes to rent you are looking at cash flow and/or equity upside

Nowhere else in the country do landlords bet on equity upside more than the SF Bay Area.
15   B.A.C.A.H.   ignore (0)   2020 Oct 3, 2:43pm     ↓ dislike (0)   quote   flag      

richwicks says
its just a speculative investment.
BayArea says
landlords bet

Yep.

My colleagues and I are not Hipsters. We're doofuss engineers.
16   Ceffer   ignore (4)   2020 Oct 3, 3:31pm     ↓ dislike (0)   quote   flag      

B.A.C.A.H. says
My colleagues and I are not Hipsters. We're doofuss engineers.

I didn't realize engineering had that specialty. Is it hard to build a doofuss?
17   just_adhom_preaching   ignore (7)   2020 Oct 3, 3:59pm     ↓ dislike (0)   quote   flag      

Ceffer says
Is it hard to build a doofuss?


I don't think so, I see em on amazon all the time.
18   Booger   ignore (7)   2020 Oct 3, 4:18pm     ↓ dislike (0)   quote   flag      

richwicks says
I can buy a lakehouse for about $250,000 in Northern NY. If I'm never going back in to work again, I might just do that.


19   Booger   ignore (7)   2020 Oct 3, 5:32pm     ↓ dislike (0)   quote   flag      

richwicks says
I can buy a lakehouse for about $250,000 in Northern NY. If I'm never going back in to work again, I might just do that.


Isn't that very expensive by upstate NY standards?
20   Misc   ignore (0)   2020 Oct 3, 6:01pm     ↓ dislike (0)   quote   flag      

Here I was thinking that SF real estate was simply predicated on getting money out of mainland China. Any rent received was just icing to that.
21   B.A.C.A.H.   ignore (0)   2020 Oct 3, 6:04pm     ↓ dislike (0)   quote   flag      

Misc says
Here I was thinking that SF real estate was simply predicated on getting money out of mainland China. Any rent received was just icing to that.


Misc, clearly you're not in the Bay Area.

The buyers you cite covet detached, SFH only in school districts and enrollment areas with nosebleed high Standardized Test Scores. That's why they're not the ones who bid up SF home prices. Those are Hipsters.
22   CBOEtrader   ignore (6)   2020 Oct 3, 7:21pm     ↓ dislike (0)   quote   flag      

I moved to Vegas in May. Was looking to change places in August. The vegas rental market heated up in August and is impossible atm. Landlords are having 20 way competitions between credit scores and raising rents 10%, everything was snapped up within 12 hours.

I decided not to move.

The agent told me since noone can be evicted, there are fewer units available AND the landlords are 4 times as careful about who gets to rent. due to rent forgiveness, its almost like an honor system and it's hurting both landlords and tenants.
23   just_adhom_preaching   ignore (7)   2020 Oct 3, 8:20pm     ↓ dislike (0)   quote   flag      

Misc says
Here I was thinking that SF real estate was simply predicated on getting money out of mainland China. Any rent received was just icing to that.


I used to go to house parties in Palo Alto at a pals place he was renting out with some of his pals. He was renting and was a some sort of satellite engineer.

One night I bounced down the street with a cutie in and out of bushes in neighbors yards and I realized the houses were all empty.

Got back and queried my pal about it: Just investment properties rich Chinese back on the mainland had purchased to let sit.

Those were fun parties/fun crew. Even if they were mostly peepo about a decade older than I was.

Edit: Most of them were in Atherton, but same thing.
24   Hircus   ignore (0)   2020 Oct 3, 8:28pm     ↓ dislike (0)   quote   flag      

BayArea says
I’m not particularly familiar with the source but SF looks to have the biggest YoY decline of anywhere in the country.

I’d like to see the same data for SFH because I can’t believe what I’m seeing as I’ve been house shopping the last few months.


I just clicked random SF markers on zillow looking at their rent price graphs for current rentals. Most didnt show any price plunge for this yr, but some did at about 10-20%

I did notice a maybe 5-10% decline smoothly since 2016.

I was amazed at how many apts under 2k/mo are available, and not all of them look crappy either.
25   BoomAndBustCycle   ignore (0)   2020 Oct 4, 8:08am     ↓ dislike (0)   quote   flag      

richwicks says
Housing didn't do that well during the Depression - housing was a liability, because it decreased mobility to find work


You couldn’t work remotely in any realistic fashion back then. Lack of mobility isn’t an issue anymore for a large portion of the white collar workforce. I love working from home now and would probably need a significant raise to go back in office happily.
26   HeadSet   ignore (2)   2020 Oct 4, 8:09pm     ↓ dislike (0)   quote   flag      

I was amazed at how many apts under 2k/mo are available, and not all of them look crappy either.

Imagine how that sounds to people outside that area. For most of the country, $2,000 per month better be more like a nice 4 bedroom 2 car SFH than a dinky apartment.
27   mell   ignore (6)   2020 Oct 4, 9:14pm     ↓ dislike (0)   quote   flag      

The total decline since the top is actually just over 20% for SF rents. That's a lot. However the top was so high that it's still expensive. They will slide more and house prices will eventually follow, but the RE racket will fight tooth and nail to prevent it with the help of the Fed and moratoriums and forbearance, but currently you can't get a Uhaul in SF without advance reservation and people are moving out left and right. Like in 2008 it took forever for that shit to come out, the Fed is mighty. But CDOs are being packaged and sold again, and you know when you see CDOs making a comeback that they have to hide that junk bond shit in there of all the loans that are going to default for sure and quickly sell them as AAA or BBB rated securities while they can bribe the rating agencies just a bit longer before the downgrade. I don't know if it's going to be 25%, 50%, or 75% of 2008 (or worse), but a correction is coming in the next years. Even another 4 years of Trump can't stop this shit in the bay area. I'm amazed the bull cycle has lasted that long which likely means it can stretch out another year or two max. but the chicken will come home to roost. The state is bankrupt and so is SF. Also my prediction is prop 13 will fall as the state is scrambling to squeeze the taxpayer where it can. True rents have come down a lot but it's still a fucking affront to prospective renters when they go and visit the non-commercially run "cheap" offers and the fridge and stove is from 1945, the coin operated shared laundromat is filthy as shit and the forced air ducts haven't been cleaned in 100 years and people break with their bathtub through the ceiling of the renter below (this really happens!). Slumlording has always been a great pastime of the bay area.
28   WookieMan   ignore (5)   2020 Oct 5, 4:11am     ↓ dislike (0)   quote   flag      

mell says
but currently you can't get a Uhaul in SF without advance reservation and people are moving out left and right.

I don't claim to know the market out there, but this is probably the reason rents are dropping. Renters have the ability to move and will. Much more difficult for owners to pick up and sell or move. They also could be moving and keeping the place as an investment property and adding their homes as rentals, increasing rental inventory and thereby dropping rents by increasing supply.

Markets are local, but the fundamentals and data for housing is still pretty solid. It feels like forever ago, but a shit ton of people learned some mighty big lessons from 2006ish. You also can't do what you could back then purchasing 10 homes just by having a pulse.
29   FuckCCP89   ignore (6)   2020 Oct 5, 9:03am     ↓ dislike (0)   quote   flag      

WookieMan says
You also can't do what you could back then purchasing 10 homes just by having a pulse.


I thought that too but somehow there is a modern twist on Casey Sirin of yore called "AirBnB empires".
30   WookieMan   ignore (5)   2020 Oct 5, 9:15am     ↓ dislike (0)   quote   flag      

FuckCCP89 says
I thought that too but somehow there is a modern twist on Casey Sirin of yore called "AirBnB empires".

Good point. I don't think that is as rampant as what was going on in 2004-07 though. That's a small percentage of the mortgage market. Vacation homes whether rented out or used by the owner statistically have been risky loans. Hence why you generally need 20 down to get the bank to pick up the phone or take an application. I've been out of the business about 3 years now, so maybe they were handing out loans in a risky manner. I'd be surprised though.

Speaking of loans, has Logan abandoned Patnet? I presume he'd have some insight on the current situation. Looks like he hasn't posted since 2018 and changed avatar and name. Weird. Hope he's okay.
31   mell   ignore (6)   2020 Oct 5, 11:18am     ↓ dislike (0)   quote   flag      

FuckCCP89 says
WookieMan says
You also can't do what you could back then purchasing 10 homes just by having a pulse.


I thought that too but somehow there is a modern twist on Casey Sirin of yore called "AirBnB empires".


In the bay area and wine country there's quite a clampdown on AirBnB with steep fines in many counties. It's not that easy anymore, but people now buy property in Reno to AirBnB it out to hikers, gamblers, and skiers.
32   Eric Holder   ignore (1)   2020 Oct 5, 2:04pm     ↓ dislike (0)   quote   flag      

mell says
It's not that easy anymore, but people now buy property in Reno to AirBnB it out to hikers, gamblers, and skiers.


Lot's of these "AirBnB emperors" were caught swimming nekkid when Covid-related travel restrictions put the kibosh on their cash flow.
33   WookieMan   ignore (5)   2020 Oct 5, 2:14pm     ↓ dislike (0)   quote   flag      

Eric Holder says
mell says
It's not that easy anymore, but people now buy property in Reno to AirBnB it out to hikers, gamblers, and skiers.


Lot's of these "AirBnB emperors" were caught swimming nekkid when Covid-related travel restrictions put the kibosh on their cash flow.

This is true, but they're getting caught with their pants down without the short term rental revenue. Unless you've got connections, most anyone buying a vacation home is putting 10% and most likely 20% down. Values haven't dropped, so even if they foreclose the bank isn't losing money or the owner could just sell it. And a wave of vacation rental foreclosures would probably be a rounding error on the housing market nationwide. If they decide to sell then inventory will increase and we'd see it, but I haven't been reading about increasing inventory anywhere unless it's hyper local.

It's a valid thought, but it's not going to move the housing market at all in my opinion. Just maybe some nice waterfront or mountain homes hit the market. Also, travel restrictions didn't stop "staycations" where people just drive 3-4 hours away. They just didn't go out to eat, go to a concert, game, etc. Drove to a vacation rental in TN back in May. Things were humming along just fine there. Not a care in the world.
34   SunnyvaleCA   ignore (1)   2020 Oct 5, 3:52pm     ↓ dislike (0)   quote   flag      

B.A.C.A.H. says
The only case that will pencil out would be a Prop-13 assessment from long ago, like an inheritance or retiring and leaving the region and taking the rent for cash flow. (BTW none of the renters I've known are renting from one of those situations). But even in those Prop-13 special cases, there's an incredible amount of sunk capital tied up in the home which in most cases can be unlocked without any capital gains tax.

I'm not so sure about not paying capital gains tax. If it's a shack near me and you're ancient, you're looking at close to $2MM sale minus $100k fees from real estate cartel minus the $50k you paid in 1975 and, finally the $500k exemption (do you get only $250k is your spouse is dead?). So About $1.4MM capital gain. 20% federal capital gains rate (hurry up! The democrats want to bump that waaaaay up.) And 9.3% California, which isn't a deduction from feds. So roughly $400k tax waste.

That said, your income on a rental will be taxed also. I assume you'll pay California taxes if the property is in California, even if you have escaped.
35   Booger   ignore (7)   2020 Oct 5, 3:59pm     ↓ dislike (0)   quote   flag      

Patrick says
But it’s hitting San Francisco, the most expensive rental market, the hardest.


A certain duck that used to annoy everyone here:
36   Ceffer   ignore (4)   2020 Oct 5, 5:03pm     ↓ dislike (0)   quote   flag      

A couple of IHLs set out from the Berkeley Marina on a schooner to fake their disappearance for a while to get histrionic attention, and Iwog was crucified to their masthead. I think that was the last sighting.
37   Onvacation   ignore (6)   2020 Oct 5, 5:07pm     ↓ dislike (0)   quote   flag      

Bonzo says
If you want his latest insights: https://loganmohtashami.com/


by LOGAN MOHTASHAMI POSTED ON AUGUST 26, 2020
Demographics Crushed The Housing Bears In 2020
READ MORE


yep, that's Logan
38   Onvacation   ignore (6)   2020 Oct 5, 5:11pm     ↓ dislike (0)   quote   flag      

Booger says
A certain duck

Is fine.

He got lucky with timing during the crash. The man had a lot of analytical sense. Too bad he was an insufferable prick.

Just kidding @Iwog

QUACK!

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