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San Francisco, Silicon Valley rents plunge amid downturn

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Re: San Francisco, Silicon Valley rents plunge amid downturn

#271

Post by dan-robertson »

gpm wrote: post #256
joshribakoff wrote: post #254

Earlier quoted context omitted.

What do you mean tricks exhaust? It's a loophole, so it will work until the laws are changed to close the loophole. It makes no different to the landlord or tenant if the base rent is dropped, or the effective rent is dropped (assuming everyone can do basic math)

The landlord is selling: - A month (or year) of time in the apartment for cost $x. - An option on purchasing more time for cost $y/time unit. What these "tricks" do is make $x less than $y. That makes sense in the short term when you expect to be able demand higher rent/unit time in the future. When that expectation is no longer likely, it makes sense to lower $y to $x because other landlords will, and they will have…

I don’t think that’s true. The landlord can cancel this “option” reasonably easily so it is quite different from selling a call.

I look at it like: the fair value for rent is x. The current rent is y > x. If the landlord nominally lowers the rent, they cannot raise it to as high a value next year, and they do not want to do this. Therefore they are incentivised to (effectively) give the tenant money along with the rent to decrease y without changing the nominal rent and giving up on the right to increase it.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#272

Post by JPKab »

FreedomToCreate wrote: post #113

My community has dropped prices 10% and is offering 1 month free (4 year old complex in north san jose). However they are not offering this to current renters whose renewals are coming up. They offered me a 0% increase and when I cited that the 5 other identical apartments are currently available for essentially 20% off (10% discount over 12 months plus one month free), they began been pushing the narrative that the…

Just let them know you are looking at other units with competitors, and that you expect them to price match. You have the power. Act like it, and they'll lower the rent for you. They don't want to carry that empty unit.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#273

Post by ThrowAwayBay »

My lease in Sunnyvale is ending in 3 months, already last month my landlord approached me and asked if I want to stay for an extra year at a 5% increase. I told him I'd like to take some time to think about it and see where things are headed, but I'll need to get back to him soon. My house is below market already from looking at Zillow, and even with a 5% increase it still will be, but I'm not sure what I should do (besides asking nicely to drop the increase). I'm not sure if/how this will affect big 4-5 bedroom family homes vs. smaller places. Young single people can just up and leave, for a family it's less trivial.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#274

Post by asdff »

ra1n85 wrote: post #59
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.

Two things: 1. The consequences of having millions of unemployed people with bills to pay and no income are too much for a nation, let alone politicians in an election year. My bet is that the payments will be extended or replaced with something as the alternative is not viable. 2. WFH has already started normalizing, and will shortly become a differentiating perk offered by companies. I don't suspect that may of the…

Cash strapped employers in high COL areas could end up lowering costs by just hiring remote workers from low COL areas who've just been laid off.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#275

Post by dan-robertson »

jedberg wrote: post #170
billjings wrote: post #165

Earlier quoted context omitted.

My friends in property management tell me that people are indeed moving. My neighbor had a turnover just last month. Job losses plus no rent relief pretty much require that people will move.

People are moving out but not in. Move-ins set the rental rate. A lot of people are leaving for lower cost areas or to move in with family.

Not everyone is stuck at home with no income. If I were working in the Bay Area for a company that was still doing ok, and I were already planning to move around now, I would definitely see this as an opportunity to get a good deal on rent by moving. Maybe some other people are thinking this. Or maybe they are thinking that there is no point moving elsewhere in the Bay Area and are moving further out.

Though I would certainly expect the number of transactions to decrease a lot.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#276

Post by holdenk »

dan-robertson wrote: post #271
gpm wrote: post #256

Earlier quoted context omitted.

The landlord is selling: - A month (or year) of time in the apartment for cost $x. - An option on purchasing more time for cost $y/time unit. What these "tricks" do is make $x less than $y. That makes sense in the short term when you expect to be able demand higher rent/unit time in the future. When that expectation is no longer likely, it makes sense to lower $y to $x because other landlords will, and they will have…

I don’t think that’s true. The landlord can cancel this “option” reasonably easily so it is quite different from selling a call. I look at it like: the fair value for rent is x. The current rent is y > x. If the landlord nominally lowers the rent, they cannot raise it to as high a value next year, and they do not want to do this. Therefore they are incentivised to (effectively) give the tenant money along with the re…

Except in places like San Francisco with rent-controlled housing.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#277

Post by jedberg »

nostrademons wrote: post #262
jedberg wrote: post #146

Earlier quoted context omitted.

In 2008 rents in the Bay Area just stayed flat for a few years except in the most expensive parts of SF. So in 2008 at least, those incentives were enough. This time may be different though, with a fundamental shift to work-from-anywhere for tech companies.

In 2009 rents dropped rapidly in Mountain View. I moved here in early '09 and my employer paid a realtor to show me around for a day. Told him my budget was $2000/month, and asked about a fairly swanky mostly-corporate-housing-but-a-few-individual-tenants complex. "Oh, that one's out of your price range", he said. Ended up taking an apartment there for $1400/month six months later, and it stayed at that level for 3 y…

Sorry I'm on mobile right now but the last time this came up I posted graphs showing the median rent in the bay area was flat from 2007 to ~2010. There were certainly some complexes cutting rent, but most renewals were flat and most renters are not moving every year.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#278

Post by jedberg »

tylerhou wrote: post #260
jedberg wrote: post #121

Earlier quoted context omitted.

> Once the UC system said they weren't opening back up for physical classes in the fall demand for places near campus dropped considerably. You've been given bad info. The UC President said all campuses will be open in the fall, in a hybrid mode. Berkeley's Chancellor has said that labs will be open with restrictions, but most likely lectures will not. That of course could change. One of the properties I manage is in…

UC Berkeley has not yet made a decision on whether classes will open in the fall. There are three possible plans for the fall at the moment [1]. The UC President has said that they expect a hybrid mode of instruction, but it's not clear whether there will be in person classes. It seems like each school themselves have a say in the decision. > Napolitano indicated that each UC campus would be required to “meet system-…

I think you just said the same thing I did.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#279

Post by dan-robertson »

imtringued wrote: post #241
chrischen wrote: post #202

Earlier quoted context omitted.

Rent control is trumpeted as some sort of protection for low-income people, but it actually has no such provisions that make it available to, or targets such people. The only beneficiaries of rent-control are people who happen to be incumbent residents.

Also incumbent landlords who are sitting on paid off properties. A landlord with an old building has less vacancies if he doesn't have to compete with new construction.

That doesn’t make sense to me. If a landlord wanted the advantages of low vacancies due to low rent, why not just lower the rent?

Re: San Francisco, Silicon Valley rents plunge amid downturn

#280

Post by jedberg »

dan-robertson wrote: post #275
jedberg wrote: post #170

Earlier quoted context omitted.

People are moving out but not in. Move-ins set the rental rate. A lot of people are leaving for lower cost areas or to move in with family.

Not everyone is stuck at home with no income. If I were working in the Bay Area for a company that was still doing ok, and I were already planning to move around now, I would definitely see this as an opportunity to get a good deal on rent by moving. Maybe some other people are thinking this. Or maybe they are thinking that there is no point moving elsewhere in the Bay Area and are moving further out. Though I would…

Up until the new modified shelter in place orders, you couldn't move unless your lease expired or you already had the move planned. Also moving companies were allowed to stay open if they provided their movers with PPE, so many chose to shut down.

So for the most part people just couldn't move, even if they wanted to.

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