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San Francisco, Silicon Valley rents plunge amid downturn

sfchronicle.com

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Re: San Francisco, Silicon Valley rents plunge amid downturn

#211

Post by sethhochberg »

cpascal wrote: post #114
hendzen wrote: post #85

Earlier quoted context omitted.

Streeteasy data [0] shows a drop in listings but no fall in asking rents. However there has been a sharp rise in concessions - i.e. free month upon new lease signing. My guess is landlords are currently keeping apartments off the market rather lock in lower rents, and when they do need to move a unit they use concessions since they look better from an accounting basis. I think eventually we will see a fall in gross r…

Now that I think about it, you are right about there being more concessions. You are seeing a lot of "2-3 months free" listings now.

Even before the pandemic it felt like 50% of places on Streeteasy had been listed with net effective rents in recent years... the current situation is probably just accelerating a trend that was already well underway.

Doesn't mean I'm not kicking myself for signing a 2-year lease on a place last fall, though. I love my apartment, I've been here 2 years already, and its a fair price, but I'm basically 8 months into a 24 month lease and could probably save almost 10k over the next 16 months if I had the option of breaking the lease and moving.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#212

Post by war1025 »

jedberg wrote: post #73

This article seems to be based on only a few transactions, as not a lot of people are actually moving right now. I manage a couple of properties in the Bay Area, so I keep a close eye on these things. What I'm seeing is not a drop in rents, but an increase in $0 deposits and many weeks of free rent upon move in (sometimes 6+ weeks). Landlords are very reluctant to lower rents, because with the statewide rent control…

> we're incentivized to keep the rents high and give months of free rent.

That's basically a fancy way of lowering the rate, right?

Our friends just bought a new house in a development and the builder did a similar game where they added in some bells and whistles instead of coming down on the price. Their reasoning was that they couldn't drop the price because that's public data and it would put pressure on them to accept lower prices from other buyers in the neighborhood.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#213

Post by onlyrealcuzzo »

aeyes wrote: post #173
onlyrealcuzzo wrote: post #120

Earlier quoted context omitted.

Right, I asked. And they literally laughed at me, which is what I expected.

I'd follow up with the letter that you are moving out immediately. Let's see who'll be laughing last.

Well, I can't just break my lease. I am moving out at the end of my lease.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#214

Post by conanbatt »

paul7986 wrote: post #132

Never saw allure of living there..sky high rent, smells of a homeless epidemic like no other I've seen and overall the desire to live in any big city with COVID and riots/protests is even more unappealing! Hopefully all that and remote work pushes many to buy in more suburban and rural areas.

Jobs + weather. Put both of those in the median american value and the city would become a desert in a year.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#215

Post by cynusx »

jcomis wrote: post #14

I think the reality will set in soon on this once the CARES bonus UI is removed (and if it is not replaced) and the PPP loans run out. Right now everyone I know in real estate is still convinced it was just a minor blip and love to cite cherry picked stats about how a recovery is already under way. Coincidently I have been seeing a lot of fully furnished units coming on the market which I assume were former Airbnbs.

Agree, currently there's a lot of stimulus in the market and also the courts are not open so foreclosures and bankrupcies can't happen.

I am actually setting up a fund to buy distressed properties, if anybody is interested just hit me up (email in profile)

Re: San Francisco, Silicon Valley rents plunge amid downturn

#216

Post by jedberg »

conanbatt wrote: post #197
jedberg wrote: post #133

Earlier quoted context omitted.

Rent control has a lot of unintended consequences. It is supposed to be a short term band-aid for bad zoning policies, but the zoning policies actually have to be fixed if you want to remove the band-aid.

I'm willing to bet you more than a beer that a large share of people under rent-control are high earners.

You don't need to bet, there is plenty of data to back that claim. The biggest beneficiary of rent control are middle-class earners with artificially low rent. The low-income and retired renters are ancillary beneficiaries.

Here is one of many papers: http://www.socsci.uci.edu/~jkbrueck/course%20readings/gyourk...

Re: San Francisco, Silicon Valley rents plunge amid downturn

#217

Post by 0xffff2 »

sjg007 wrote: post #199
jedberg wrote: post #193

Earlier quoted context omitted.

The law specifically excludes discounts in fact: " In determining the lowest gross rental amount pursuant to this section, any rent discounts, incentives, concessions, or credits offered by the owner of such unit of residential real property and accepted by the tenant shall be excluded. " Civil code section 1947.12.

Seems like a loophole ripe for abuse.

Just like everything else, it's a two way conversation. The discounts have to happen with the tenant's knowledge and agreement. If you don't like it don't rent from a landlord who plays those games. If every landlord is playing extreme games with discounts to game the rent control law, it only points to the deeper problems that we all know exist but refuse to fix.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#218

Post by nickv »

throwaway1777 wrote: post #64
guenthert wrote: post #60

Earlier quoted context omitted.

In Germany about half the population is renting. That in itself doesn't mean they're not fostering a community. The difference of course is, that in Germany there are very stringent renter protections, so tenants do usually plan to stay for long times (a good share for a lifetime).

We have similar pro-tenant protections in the Bay Area to Germany.

No way. Berlin passed a FIVE YEAR RENT FREEZE in January. Our protections aren't on the same planets as Germany's.

https://www.nytimes.com/2020/01/31/world/europe/berlin-gentr...

Re: San Francisco, Silicon Valley rents plunge amid downturn

#219

Post by jedberg »

war1025 wrote: post #212
jedberg wrote: post #73

This article seems to be based on only a few transactions, as not a lot of people are actually moving right now. I manage a couple of properties in the Bay Area, so I keep a close eye on these things. What I'm seeing is not a drop in rents, but an increase in $0 deposits and many weeks of free rent upon move in (sometimes 6+ weeks). Landlords are very reluctant to lower rents, because with the statewide rent control…

> we're incentivized to keep the rents high and give months of free rent. That's basically a fancy way of lowering the rate, right? Our friends just bought a new house in a development and the builder did a similar game where they added in some bells and whistles instead of coming down on the price. Their reasoning was that they couldn't drop the price because that's public data and it would put pressure on them to a…

It is, but it doesn't affect the base rate, so it allows a bigger increase when things get better again, because the increase limit is a percent of the current rent (not including discounts).

Re: San Francisco, Silicon Valley rents plunge amid downturn

#220

Post by mv4 »

jedberg wrote: post #141
yalogin wrote: post #135

Earlier quoted context omitted.

Its just another way of saying landlords need to incentivize renters. So the market has definitely changed. I feel this is a stopgap measure and that rents must come down eventually. At that point the incentives will stay too.

During the last downturn in 2008, only the highest rents in SF dropped. The rest of the Bay Area just stayed flat for a few years. This downturn may be different because of the shift to work-from-anywhere in tech, but it will be interesting to see. A lot of people like their tech offices, with their free lunches and snacks and gyms and coffee and so on.

People liking their tech offices won't be the deciding factor here. The tech companies like the prospects of hiring people on completely different terms now, outside of the Bay Area. Expect things to change dramatically.
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