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

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

#261

Post by morgante »

_delirium wrote: post #177
fram wrote: post #161

Earlier quoted context omitted.

I'm not sure what you mean, but I'll try to express myself more clearly. In the most basic sense of economics for prices to fall supply has to increase more than demand. If demand increases more than supply the opposite is true. There's nothing saying that a more supply can't also increase demand or even increase demand more than supply. When more wealthy (or ambitious) people move into an area it often leads to that…

Yeah, this is one particular kind of gentrification cycle that's sometimes seen in cities (most clearly in parts of Manhattan). Higher-quality new housing is built, which is one part of making an area more attractive to more affluent residents, which drives up prices despite there being more total housing available than before. What of course is less agreed on is how to untangle all the interacting causal factors her…

In practice, it's impossible to keep this from happening.

If you don't construct luxury housing, it's not like you can keep people from moving in. Witness all the tech employees living in genuinely terrible Mission apartments. All that happens is you end up with gentrification that works around construction laws: old single-family homes being converted into hacker houses, run-down houses being rented by well-paid tech workers, with lower income people being forced to move ever further away.

Objectively, most San Francisco housing is really not attractive. Yet rents are still extremely high because there is demand despite the poor housing. It makes far more sense to construct efficient luxury housing which can soak up the luxury demand so high-income earners don't end up taking over the traditionally affordable housing.

Now that the construction pipeline is finally coming through, we're seeing this effect and rental prices are starting to fall. If your theory were true, we'd expect rents to be rising now that construction has finished—the exact opposite of what has happened.

It might be possible to make an area unattractive for gentrification, but I think it's pretty damn hard. Construction bans certainly don't do it. Not even violence does (though crime as an affordable housing strategy is significantly under-researched).

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

#262

Post by spikels »

yowlingcat wrote: post #146
spikels wrote: post #123

Earlier quoted context omitted.

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 yiel…

Not sure I am following you but the classic valuation relationship would be something of the form $X is proportional to $Y/Z% (i.e. revenue or income capitalization valuation). So if $X is fixed (your assumption) and Z% decreases (interest rates decline) then $Y (rents) must also decrease. QED

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

#263

Post by eloff »

ZanyProgrammer wrote: post #219
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…

Does your friend have a typical well paying tech job? He should save up first month's rent and move out. I don't quite get these hacker houses, if people are earning normal tech salaries they should only be temp solutions.

And piss away $3500/month just on rent for a one bedroom? No thanks. If I was single and living in SF I'd go for one of those hacker houses for sure.

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

#264

Post by spikels »

didibus wrote: post #58
spikels wrote: post #14

Earlier quoted context omitted.

I agree that laws passed to deal with high housing costs are often counterproductive in the long run. The classic example is rent control. Can you explain your theory that low rates drive high rent inflation? Seems like it would be the opposite for several reasons: low rates are associated with low inflation, low rates make it much cheaper to build and operate apartment buildings, etc.

Counter productive in what ways? Rent control works great for Montreal and has for years. That city is very affordable to live in, because of it.

I'm no expert on the Montreal rental market and rent control rules but if you are not experiencing shortages then the rent controls are likely not "binding". That is, the controlled rental rate is very close or above what the rental rate would be without rent control.

Since it appears that Montreal has relatively low rental rates it is likely that supply is high but demand is low relative to other cities. This is consistent with the relatively low population growth of the area (the Island of Montreal had a larger population 60 years ago than today!). In this situation rent control would have very little impact and be unnecessary anyway.

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

#265

Post by closeparen »

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.

You can have a 3bd/2ba house with detached garage in an excellent school district for $200,000, as long as you do it somewhere designed for cars, cold, and economically stagnant.

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

#266

Post by kbenson »

jacalata wrote: post #72
mschuster91 wrote: post #54

Earlier quoted context omitted.

London, I believe, has a big problem with the Brexit because many banks plan on or are already leaving the country. No banksters, no tenants for outrageously expensive properties.

Hmm, I haven't heard of any banks leaving yet.

Here's some stories.[1][2] Of course, these are about future plans, not actually leaving, so take them however you want. AFAIK,the real concern is not that banks will actually "leave" the UK, but that they will downsize as they move operations to other areas of the EU, which makes complete sense. Some of the laws that allowed free access to EU citizens from the UK will end with brexit, and while UK officials will try to get something similar in place, there are EU officials that feel that a deal that's essentially the same is not in their favor, and that the UK should pay a penalty for leaving. This is the uncertain climate that is causing some banks to hedge their bets and move some operations to the EU.

1: http://uk.reuters.com/article/uk-britain-eu-banks-idUKKCN12M...

2: https://www.theguardian.com/politics/2016/oct/22/leading-ban...

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

#267

Post by ryanlol »

tormeh wrote: post #194
chongli wrote: post #156

Earlier quoted context omitted.

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. How do those laws work in practice? Everything I've seen about these sorts of tenant protection regulations make them infeasible to enforce in the case where the tenants are migrant workers who might even be working illegally. The idea is that if a person is already running afoul…

Poland and The Netherlands are both members of the EU, so immigrant workers from Poland are legal by definition. As for illegal migrant workers I suspect that it's just not that big of a problem, quantitatively speaking.

There's a plenty of legal migrants working illegally.

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

#268

Post by zeroed »

pfarnsworth wrote: post #171

The best cure for high prices is high prices. Very few trust that supply vs demand doesn't work, but it absolutely does. Sure there will be temporary spikes in price, but as rents go to ridiculous heights (I think $5000 for a 2 br condo is utterly ridiculous, and that prices is about 5 years old in SOMA), it will abate at some point. As long as there isn't a monopoly, or people aren't manipulating the markets, fair a…

They are manipulating markets.

Apartment communities (I first saw this in Bay area) are doing whatever they can to make sure you end up in a particular month of a year. This is summer, at least now.

Most of them are doing this. Some use lower prices for 6-7-14 months (the number depends on what month right now). I personally signed up for 14 months without realizing what would happen to me. Some try to just cheat. One of apartment communities sent me a contract for 13 months without mentioning a word. Fortunately I knew about this scam at that time and didn't sign it.

So as long as many people need to renew their contracts at the same time - boom! Artificially heated market.

I hate them so much for doing it.

I wish more people were aware of it.

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

#269

Post by blhack »

cb18 wrote: post #214
blhack wrote: post #178

Earlier quoted context omitted.

It sounds like you have a mortgage... What is your point?

I suspect he's saying that his daily payment on his house is roughly on par, or less than the daily rate of a high priced hostel. You could have figured that out yourself without the attitude, right?

GP's point was that their friend had to find a place to stay with one day's notice which seemed to be the limiting factor.

A mortgaged house, and short-notice, temporary housing are not in the same category. I was asking if there was some point that the person I was responding to was trying to make that I wasn't seeing.

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

#270

Post by foldr »

ryanlol wrote: post #267
tormeh wrote: post #194

Earlier quoted context omitted.

Poland and The Netherlands are both members of the EU, so immigrant workers from Poland are legal by definition. As for illegal migrant workers I suspect that it's just not that big of a problem, quantitatively speaking.

There's a plenty of legal migrants working illegally.

Polish people have the right to work in the Netherlands (or any other EU country).
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