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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

#281

Post by dan-robertson »

holdenk wrote: post #276
dan-robertson wrote: post #271

Earlier quoted context omitted.

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.

That’s exactly the case I’m describing in the second paragraph. I don’t understand what this has to do with the “option” scenario claimed by the post I replied to.

It maybe looks like the landlord is selling a years rent for x and buying a put for the next years rent at y (and recursively options for the later years), but it isn’t really like a put either because it’s really a right-to-try-to-sell rather than a right-to-sell.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#282

Post by nostrademons »

jedberg wrote: post #277
nostrademons wrote: post #262

Earlier quoted context omitted.

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.

I could believe that, but the question that most people are asking is not "What is the average rent that people who choose to stay in the Bay Area are paying?", it's "If I choose to move, can I get cheaper rent?" Certainly I saw that at the higher end of the market in 2009. (The low end of the market - where most people are, and hence the biggest contributor to the average - moved much less then, because there was much less room for it to move.)

I wonder if house prices will also behave similarly. Right now, the "mainstream" market (i.e. the house that working professionals can afford on income and mortgage without being independently wealthy) tops out at about $2.8M-$3M in Mountain View or Los Altos, but there are a lot of houses selling in the $4-6M range that presumably are being bought with stock options. Could perhaps see a collapse of the top end of the market down to the mainstream real estate market if the stock market collapses.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#283

Post by tmpz22 »

jotto wrote: post #259
tmpz22 wrote: post #258

Earlier quoted context omitted.

I'm moving to a new location in SF and I'm seeing rents plummet. My landlord dropped rents across the board by about %20 (after ignoring my email for a rent decrease...). My new apartment is a pretty big down size but is nearly 1/3 of my previous. Rental groups on Facebook are showing a similar decrease in pricing. More anecdata, but as a resident who IS moving I really disagree with your take - we're probably both r…

Curious, from what neighborhood to what neighborhood?

Tenderloin, I mainly looked in the Russian Hill / Marina / Lower Pac heights areas for private 1 bedroom situations in 2/3 additional roomates. I ended up going for a place in the Presidio. For the most part the opportunities I was seeing were for subleases where a tenant moved out hurriedly, which seems to be VERY common right now.

FWIW all private room + 2/3 roomate situations were in the range of $1200 - $1500 vs. my current 1 bed room apartment (no roomates) @ ~$2800 previously.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#284

Post by dmode »

DevX101 wrote: post #5

Looks like people are really leaving the Bay Area. you don't see 10-15% price drops in a year without corresponding drop in demand.

You could also see a price drop for many reasons - increased supply [which is happening], failed IPOs, reduced incomes etc. Last year, a ton of apartment supply came on the market, with 10K units in Oakland alone

Re: San Francisco, Silicon Valley rents plunge amid downturn

#285

Post by qqqwerty »

twblalock wrote: post #209
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.

Looking at the real estate data, prices haven't really dropped that much. 2020 started with a historically low inventory of houses for sale nationwide. During the virus lockdowns, both supply and demand dropped so prices remained relatively stable. I don't think we are going to know the real impact on the housing market until the lockdowns end and people resume normal activities like buying and selling homes. Then we…

There are a few reasons why home prices will take a while to shake out (if they do at all). The CARES act mortgage forbearance is likely preventing any panic selling at the moment. And home owners have a few other tools at their disposal to delay selling like taking in sub-tenants, refinancing, etc.. So I imagine most people selling right now are doing it because they want to, not because they have to. And the real estate agents all have an incentive to keep prices high, so buyers are probably getting the usual 'this is a great time to buy' spiel.

It took about 2 years for house prices to bottom in the 2008 recession. I think the big reason was that it took a while for the record number of foreclosures to work their way through the system. If we do see the housing market impacted due to COVID, I wouldn't be surprised if it took a similar amount of time. But I also think that a quick recovery could prevent or mitigate a downturn.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#287

Post by triceratops »

anthonybullard wrote: post #151
mrcorona wrote: post #105

Earlier quoted context omitted.

Really looking forward to overleveraged airbnbers, the kinds juggling 10 mortgages and causing housing shortages, to get blackswanned.

I wonder why people renting their cars on Turo(or buying cars to do so) aren't causing car shortages? Oh yeah, because there aren't the artificial constraints on supply there is on housing. Let's focus on the problem and not wish ill on those trying to provide a useful service to others.

> artificial constraints on supply there is on housing

I mean this sounds good and all, but in practice property owners are at the forefront of restrictive zoning regulations too.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#288

Post by TheCoelacanth »

marcell wrote: post #185
hedora wrote: post #55

Earlier quoted context omitted.

We were once evicted from an in-law unit without cause. They wanted the space back for use as a home office. (I suspect that’s extremely common these days) In hindsight, we should have held out for a “make us move” offer. $10K’s is typical for that sort of situation in Berkeley. We’re too nice, and moved without a fight, in return the landlord came up with some BS reason to withhold our security deposit.

Umm... while they can't withhold your security deposit, squatting someone's in-law unit is obviously immoral. It's not your property, if they want it back, you have to move. Holding them hostage for $10k is scummy.

It's not squatting. They are tenants and have rights to the property as well. The landlord can get them out, but has to follow the legal process.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#289

Post by pascalxus »

jedberg wrote: post #222
foxtr0t wrote: post #206

Earlier quoted context omitted.

This is an oversimplification of already simple market dynamics. What sets the market is the supply and demand. If demand drops sharply after an event like covid-19 and supply is held constant, prices will go down except in extremely distorted markets like the ones ISPs and telcos play in.

There are two parties to the transaction. The market clearing rate is set when the two parties agree. When one party is not showing up, there is no market clearing rate. The intrinsic value may in fact be down, but there is no way to know for sure without two parties in the transaction.

Over time, he's right in principle. But maybe, there just hasn't been enough time yet for it to play out. if we're seeing price declines, then it's already playing out.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#290

Post by jjeaff »

jedberg wrote: post #277
nostrademons wrote: post #262

Earlier quoted context omitted.

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.

Averages of all rentals are going to be less indicative of reality due to the fact that low income, mid-income, and high income luxury rentals don't necessarily move in lockstep.
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