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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

#311

Post by digler999 »

awqrre wrote: post #226
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…

I would rather live in the woods and hunt for food...

only you can't, because civilization has decimated the population of wild animals.

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

#312

Post by davidf18 »

Even with the rents decreasing, they are still way to high for most people and adjusted for inflation, far higher than they were 30 years ago.

The reason for the high rents are structural -- the use of politics to create artificial shortages in housing by use of zoning density restrictions. This is the deliberate creation of market failures due to "rent seeking" -- use of politics to create artificial scarcity to benefit a special interest group. The artificial scarcity inflates the value of property to landlords such as Donald Trump harming renters.

An example, regarding taxi cabs: NYC had a law creating a limit on taxi cabs to 13,000 medallions --needed in order to drive a yellow, hail-able cab. The market value of the taxi medallion was $1.2 million which meant that for drivers who typically lease cabs, a substantial part of their income went towards leasing the cab with medallion. Thus, taxi riders (renters of use of cabs for trips) were paying far more than they should and taxi medallion owners (landlords) were receiving a huge windfall.

Then Uber/Lyft came to NYC and the political artificial scarcity of (electronic) hail-able cabs was relieved. The result is that the medallion price went from $1.2 million to This rent-seeking market inefficiency tremendously damages the economy. Fewer housing units are built than they should be in an efficient market. Tenants are paying a far greater proportion of their income for rent instead of goods and services. Simply fixing this law that benefits wealthy landlords can be a substantial stimulus to the economy.

Another cause of high rents is the number of illegal immigrants that are allowed to stay in certain cities. This NYTimes article claims there are about 600,000 "undocumented" immigrants in NYC (of a population of 8.5 million)[1]. Almost all undocumented immigrants are in the country illegally and hence the more correct word is illegal. These 600,000 illegal immigrants adds substantial market pressure that otherwise would not be there if the law were enforced and hence the rents are far higher for low-income New Yorker American citizens than they otherwise would be.

[1]. "Some 574,000 city residents are undocumented,..." http://www.nytimes.com/2016/11/23/nyregion/economic-tsunami-...

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

#313

Post by cguess »

TulliusCicero wrote: post #299
Bombthecat wrote: post #255

Earlier quoted context omitted.

I'm not sure where you plan to build in new york for example? Build even higher buildings?

Sure, why not? If zoning regulations were relaxed, developers would definitely be willing to build more housing. Even most of Manhattan doesn't have very tall buildings, just look at Google Maps in 3D view.

That's mostly because of the geography of Manhattan though. The places with tall buildings (Midtown and Downtown) sit on a solid base of bedrock, in between this base is much deeper a lot harder to build to. Housing in Manhattan isn't the big problem anyways, it's Brooklyn and Queens. But there are a lot of political issues in there.

Personally, I don't want to live in these new developments because I find them ugly. You can't tell the difference between a new flat NYC, London, Amsterdam and Paris anymore.

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

#314

Post by yowlingcat »

spikels wrote: post #262
yowlingcat wrote: post #146

Earlier quoted context omitted.

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

Wouldn't say that $X is not proportional to $Y/Z%. It's the other way around, that $Y is proportional to $X/Z%. If Z% decreases, that value increases. The utility of a property can serve multiple use cases -- it could be rented, lived in, or used for parking wealth. Financing allows people to purchase property at rates higher than they would be able to with all cash. That specific rate is material to the deal they get on their mortgage at the time that they finance it.

Therefore, low interest rates inflate the prices of real estate because they encourage people to take on debt because it's at more favorable terms. They also encourage people who have mortgages on worse terms to refinance. With higher interest rates, the ratio of mortgage to all cash buyers would decrease, and so the appraised market value of the property would decrease as well.

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

#315

Post by digler999 »

zeroed wrote: post #268
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. On…

What if it's a more benign reason, like they just want to prevent leases from ending in fall or winter when the demand is lower ?

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

#316

Post by davidf18 »

Spooky23 wrote: post #86
zazen wrote: post #17

I know nothing about the San Francisco housing market apart from what I've heard in discussions here on HN. The received wisdom here seemed to be that powerful NIMBY lobbies in SF were preventing needed development and causing the sky-high rent. But this article is talking about an "historic construction boom". Did something change regarding development in SF? Or was the NIMBY effect always a bit over-stated? Anyone…

HN will make this a SFO story because it's HN. The reality is, rental housing is a canary and shifts quickly based on market conditions. The market is flooded nationwide, and if you look closely at newer projects, the better banks have slowed down investment.

> HN will make this a SFO story because it's HN

Actually, the rents are far higher than they should be in not only SF, but NYC, DC, Boston, LA, London, and many other cities and the reason is structural -- the use of zoning density restrictions to create artificial scarcity of housing to help the special interest group of wealthy landlords to the detriment of renters. Many people trying to make a life have trouble making ends meet while Donald Trump and other wealthy landlords have far more wealth than they would in an efficient market.

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

#317

Post by TulliusCicero »

cguess wrote: post #313
TulliusCicero wrote: post #299

Earlier quoted context omitted.

Sure, why not? If zoning regulations were relaxed, developers would definitely be willing to build more housing. Even most of Manhattan doesn't have very tall buildings, just look at Google Maps in 3D view.

That's mostly because of the geography of Manhattan though. The places with tall buildings (Midtown and Downtown) sit on a solid base of bedrock, in between this base is much deeper a lot harder to build to. Housing in Manhattan isn't the big problem anyways, it's Brooklyn and Queens. But there are a lot of political issues in there. Personally, I don't want to live in these new developments because I find them ugly.…

> Personally, I don't want to live in these new developments because I find them ugly. You can't tell the difference between a new flat NYC, London, Amsterdam and Paris anymore.

This seems like a solvable problem though. Like if everyone complains about how ugly everything is, why aren't there regulations passed specifying how things should look (or should not look)? Developers mostly just want a consistent way to build and make money, if you specify how things should look most will fall in line instantly.

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

#318

Post by drcross »

davidf18 wrote: post #312

Even with the rents decreasing, they are still way to high for most people and adjusted for inflation, far higher than they were 30 years ago. The reason for the high rents are structural -- the use of politics to create artificial shortages in housing by use of zoning density restrictions. This is the deliberate creation of market failures due to "rent seeking" -- use of politics to create artificial scarcity to ben…

Can you explain how illegal immigrants are able to rent in the New York market? Surely the landlords will demand identification and references and would refuse someone who is illegal?

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

#319

Post by jacalata »

kbenson wrote: post #266
jacalata wrote: post #72

Earlier quoted context omitted.

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…

I was responding to the statement that some banks were planning to leave and some had already left - I have heard of banks planning to leave, but have definitely not heard of anyone doing so. Was curious if the poster might come back with any evidence for that claim but as they haven't, I think it was probably just hyperbole.

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

#320

Post by apatters »

jasonkester wrote: post #285
zappo2938 wrote: post #247

Earlier quoted context omitted.

I've been to the Adventurer Hotel which is the first on that list a long, long time ago. I would not recommend it. I had a layover at LAX, their bus pulled up right in front of me, and some kids said get on. The staff, all the girls were from Russia or Poland and the guys were from New Zealand, Australia, and one bloke from England, on the bus made a pit stop at the liqueur store. They bought at least 12 liters of bo…

I'm with you right up to the point where you say you don't recommend staying at this place. From your description, this sounds like every backpacker hostel, everywhere. Or at least what they aspire to be. Sadly, everything moves upmarket, and "hostel" tends to now translate to giant soulless hotel where they have two or three bunk beds in each room and no real shared space or opportunity to meet other travelers (who…

It seems like everyone's trying to move upmarket and killing everything that was fun, unique or interesting about themselves in the process. It's not just businesses it's people too. Everyone wants to get the same soulless desk job, parrot the same inoffensive opinions, Instagram the same stupid travel and gym photos to show how worldly and fit they are, and sit in their same stupid Ubers so that they can interact with as little of the world as possible while moving through it.

I live in a red light district and I get shit about it on a daily basis, but man, not once have I had a dull night and the stories people tell around here blow my goddamn mind. For sure you wouldn't want to live in this type of environment your whole life, but it's absolutely tragic to watch it all gentrifying and being replaced by lifeless condo developments and Au Bon Pain. I'll take the pregnant prostitutes and the alcoholic backpackers over Au Bon Pain any day because they have CHARACTER.

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