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Rents are plunging in the most expensive U.S. markets

businessinsider.com

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Re: Rents are plunging in the most expensive U.S. markets

#141

Post by delias_ »

czep wrote: post #60

Strange concluding sentence about the prospect of an influx of Chinese investors to rekindle rising rents. Is there evidence that such a trend is likely in the near future? I have seen reports that a lot of money is expatriated from China into real estate because it's easy to launder that way. In general is it expected to increase so much that it would have a noticeable impact on rents in the major markets?

Irvine, CA has this occurring. 2014 numbers reported that 80% of single family homes in the area were bought by Chinese families (random first google hit article on it: http://www.zerohedge.com/news/2015-09-30/80-all-new-home-buy...). A lot of the Irvine Company apartments top-level units are effectively birthing centers on the down low, but nobody really seems to take much issue with it.

There is also a significant rich foreign Saudi presence in Irvine and that's definitely more of a culture clash due to the misogynistic nature of mother/son relationships. Super spoiled kids, "slavery" scandals, etc but the money "donated" to Irvine company for things like renovating the spectrum mall is massive. Considering Irvine company owns ~90% of Irvine, I think this foreign interest can't be overlooked in lieu of the more public Chinese impact.

Re: Rents are plunging in the most expensive U.S. markets

#142

Post by SomeStupidPoint »

refurb wrote: post #119
SomeStupidPoint wrote: post #36

Earlier quoted context omitted.

Speculation that this is the case in SF, but is an effect I've seen: You can get a dip in average rent without (sufficiently) dropping bottom quartile rents, which is what NIMBYism tends to block, by having a lot of nice condos built. The top quartile of rents dips heavily as places jockey for condo buyers, everyone moves in to a nicer place as the wave spreads, but the price at the bottom remains (mostly) the same (…

This is a theory, but wouldn't dropping upper quartile rents automatically flow down to lower quartiles? Let's say you have a market with 3 apartments for rent. $100, $200, $300 per month. Luxury apartment is created and starts at $400 per month, but no one rents, so they drop it to $300 per month. The guy renting a non-luxury apartment for $300 says "screw that" and moves to the luxury apartment. Plus, the guy renti…

I get the chain effect, but because of the scarcity of land zoned that way, the buildings that are currently the bottom end up torn down rather than rented for less, and the land re-used because the base value of the land doesn't allow the rent to drop.

So you see drops across most of the market, except at the bottom.

This market effect is actually good! It keeps land cycling to be productively used and everyone gets to live in a nicer place.

The problem is we need to rezone land to drop the value of highly dense land, so those low end apartments drop a bit, rather than being repurposed. (At least, until cities are rebalanced a bit.)

Re: Rents are plunging in the most expensive U.S. markets

#143

Post by BurningFrog »

x0x0 wrote: post #102
BurningFrog wrote: post #53

Earlier quoted context omitted.

The "historic boom" is big compared to the very low rate of new construction of the last few decades, but still small compared to the need and potential. There is a fair amount of construction downtown, but most of the city remains frozen in time. That said, I wouldn't blame it all on NIMBYs. Few changes of any kind get done in this town.

Lots of it is nimbys, just not sf nimbys. The entire peninsula dumps their housing problem onto sf and san jose. viz linkedin and google building millions of ft2 of new campuses for tens of thousands of employees in a town of 80k that is possibly going to study maybe building some housing. Potentially. So where do the employees go? The only places there is housing available.

Agreed.

This needs to be fixed on the state level.

Re: Rents are plunging in the most expensive U.S. markets

#144

Post by ppierald »

My anecdotal evidence shows a dramatic shift of my 20-something and 30-something year old co-workers to Oakland from SF due to affordability. Oakland is close, cheaper (though rising), diverse, and close by BART. This is probably putting a good deal of supply back into the SF market, but putting pressures in the East Bay markets (Berkeley, Oakland, Alameda).

Re: Rents are plunging in the most expensive U.S. markets

#146

Post by yowlingcat »

spikels wrote: post #123
conanbatt wrote: post #37

Earlier quoted context omitted.

Low rates drive up mortgage lending and increases housing value, that is far from being "my theory", it's an accepted phenomena. There are other things related to the housing market, like construction lagging demand(the U.S. is not building as many dwelling units as purely demographic demand needs) or demand being pro-cyclical. As far as i can tell, developers are picking up the pace and the whole situation might fix…

I thought we were talking about rent levels not home prices! Again how does low rates drive up rents? Keep in mind that very few people borrow to pay rent while most apartments and their construction is financed by debt. At first approximation low rates would be neutral for demand but positive for supply.

You might be conflating overall rental demand activity with overall real estate financing activity. Keep in mind that low interest rates create continuous opportunities for financing, bandlimited to the minimal interval between credit knocks for doing so. If Joe Q. Landlord can refinance or purchase property at an assumed valuation of $X, that incorporates an expected inflation subject to interest rate Z%, which yields a median monthly rental fee of $Y.

Re: Rents are plunging in the most expensive U.S. markets

#147

Post by Shivetya »

oneplane wrote: post #136
xor1 wrote: post #122

Los Angeles though... :( One of my friends just moved here and is sharing a 5-bedroom home with 25 other people. I thought he was bullshitting me, and I still couldn't believe it when I went over. He's paying $600 a month to share a bedroom with four other guys. He told me it was the best thing he could find on 1-day notice. He pays for rent online, and he has no idea who the actual owner is, nor who is actually rece…

Woah, I knew about things being bad in the USA, but I didn't know living conditions are going towards third-world standards :/ Where I live (The Netherlands) there are laws that even protect foreign workers (i.e. from Poland) from all being stuffed in a single room. At this point it's starting to look like even jail cells have more room and privacy.

well his example probably violates more than one regulation the issue being of course, someone has to report it.

Re: Rents are plunging in the most expensive U.S. markets

#148

Post by foota »

SomeStupidPoint wrote: post #95
foota wrote: post #63

Earlier quoted context omitted.

This is not entirely accurate. If the median rent drops, this means necessarily that the rent for at least some portion of the renters below the 50th percentile has dropped. So while it is possible that the very bottom hasn't changed much, the middle/top of bottom necessarily has.

It's not necessary for the bottom quartile (which is what I was talking about) to change at all for the median to move, as long as the median stays above the highest value in the bottom quartile. The lower-middle quartile could absorb all of the change. A quartile is 25%, or a quarter, if you didn't know. My concern was for bottom quartile rents, since the bottom 20% of society is largely concentrated on the low end…

Sorry, I misread your comment. I'm curious what a rent vs percentile curve looks like for the area. Unfortunately, I wasn't able to find one.

Re: Rents are plunging in the most expensive U.S. markets

#149

Post by NotSammyHagar »

debatem1 wrote: post #106
felizuno wrote: post #80

Market corrections in overpriced cities. Seattle still growing, turns out sustainable growth is sustainable.

Why do you think Seattle's growth in housing costs is sustainable? Certainly the cost increases in single family detached units have been large and rapid. My naive interpretation of that would be that such increases are a) unlikely to continue indefinitely and b) are pushing demand for 2+br apartments to unusually high levels. That's weakly supported by this data, which show a 6.4% increase in 1br prices and 8.2% for…

seattle has more growth counted in the number of construction cranes than any city in the us. prices of standlone houses seem to be increasing, apartment pricing is less clear, but this article seems to know.

Re: Rents are plunging in the most expensive U.S. markets

#150

Post by codingdave »

oneplane wrote: post #136
xor1 wrote: post #122

Los Angeles though... :( One of my friends just moved here and is sharing a 5-bedroom home with 25 other people. I thought he was bullshitting me, and I still couldn't believe it when I went over. He's paying $600 a month to share a bedroom with four other guys. He told me it was the best thing he could find on 1-day notice. He pays for rent online, and he has no idea who the actual owner is, nor who is actually rece…

Woah, I knew about things being bad in the USA, but I didn't know living conditions are going towards third-world standards :/ Where I live (The Netherlands) there are laws that even protect foreign workers (i.e. from Poland) from all being stuffed in a single room. At this point it's starting to look like even jail cells have more room and privacy.

That example is extreme. Most of the USA pays less, and usually one home or apartment is shared by just one family/couple, or a few friends.
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