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From what I’ve seen, rent prices aren’t falling. Landlords are just offering 1-2 months fee if you sign a year lease.
Earlier quoted context omitted.
The events of the past 6mo have caused tons of people in places like NYC, SF, etc who were on the fence to cash out an move elsewhere. Housing prices, local politics, just about everything is gonna suck real bad for the people in the destination locales because a bunch of people with more money than them are showing up and trying to tell them what to do.
I'm really curious about the macro political effects too- if a surge of CA-based liberal leaning tech workers move to Texas, is Texas purple?
Earlier quoted context omitted.
US inflation over that period was 35%. So that means rent increased by ~50% in 15 years, this is way less than I imagined for SF.
That cherry-picks the top tick from the last housing price bubble. Compared to either 10 or 20 years ago, housing prices have more than doubled. https://fred.stlouisfed.org/series/SFXRSA
A good start, let's hope it continues. Rents are still roughly double what they were 15 years ago, when decent studios in central neighborhoods went for under $1000/mo.
I would say the city being “closed” is the major driver. Among my group of ~40 coworkers, about 30 (including me) have left the city. As far as I know all but one were renting. Everyone who left gave the following rationale: - we can work remotely so move wherever or nomad now - SF is not very fun during the pandemic - WFH in my tiny apartment is much less enjoyable than when I was working in the office and didn’t sp…
Earlier quoted context omitted.
The events of the past 6mo have caused tons of people in places like NYC, SF, etc who were on the fence to cash out an move elsewhere. Housing prices, local politics, just about everything is gonna suck real bad for the people in the destination locales because a bunch of people with more money than them are showing up and trying to tell them what to do.
I'm really curious about the macro political effects too- if a surge of CA-based liberal leaning tech workers move to Texas, is Texas purple?
From what I’ve seen, rent prices aren’t falling. Landlords are just offering 1-2 months fee if you sign a year lease.
I found it easy to get the landlords to drop the price $200. The few landlords who refused to play ball were messaging me a month later with discounts begging me to take the place.
Earlier quoted context omitted.
If there was no rent control, prices would drop even more. Firstly landlords are afraid to permanently lock down at a lower price, offering free months of rent instead. Secondly rent controlled tenants are afraid to lose their apartments, that are still below the market rates.
That makes no sense. Rent controls don't specify a minimum rent, all your reasons apply equally to rent controlled and uncontrolled rentals.
The free market wins again - supply and demand uber alles. If we can't build tons of new apartments, then 1/3 the city fleeing for the suburbs does the trick too!
Rent is like a traffic jam. The market collapses on the margin. You don't need to remove 30% of the cars to reduce freeway congestion by 30%, and you don't need to remove 30% of the residents to lower asking rents by 30%, either.
There is a smaller group of buyers, investors, of the inelastic type - who if they run away, will cause a market to plummet. They are the opposite of price sensitive, they're maybe from overseas snapping up property at 'above asking' because they need to get $1M out of their countries and they're looking for any kind of return that's reasonable.
Consider 1% interest rates in a foreign country (or region within the country) and possibly a government who may come and confiscate wealth? This is a risky proposition for the burgeoning international middle class.
And of course, the cohort of 'IPO winners' who are less elastic in their acquisitions as well.
These 'inelastic buyers' (local, regional, foreign) are important because they are 'strong signals' to the market for price validation. Consider that nobody knows objectively how much a home should be valued at. Everyone is 'looking down the street' to see how some other property sold which is used as a primary reference. In a 'sea of ambiguity' then the 'inelastic/confident' buyers will anchor the prices. And if they don't care (i.e. inelastic), then then prices go up, way up.
The confluence of:
a) Low interest rates b) Globalism c) The 'belief' that real estate will never go down d) Lack of capital controls and tons of corruption in one regime exporting to another with a different set of rules which creates huge asymmetries (really part of #2) e) Expanding local economy.
Means real estate will go insane.
The numbers for SF are 4-6% [1] which is actually quite high, similar numbers for Vancouver and Toronto - and this only includes international buyers, whereas in the Valley there is obviously a cohort of IPO Winners.
It also means: there will be no local culture. Almost all citizens who were born and raised in an area will be pushed out over the course of their lives so local ideas, customs, language, norms etc. go away. This is not accounted for in our economic models. Edit: FYI the newcomers in the expanding economy won't be these 'inelastic buyers' who are a small cohort and may not be residents anyhow - newcomers will be regional/national/international workers, but the side effect is the same. The Silicon Valley is not a normal community, it's more like a 'workplace residence'.
2)The issue with the traffic analogy - is that some drivers are considerably more likely to cause problems than others.
2-3 break-heavy drivers who are slow to catch up can cause a backlog.
[1] https://www.sfweekly.com/news/how-much-s-f-real-estate-do-we...
[2] https://phys.org/news/2020-09-foreign-homes-impact-prices.ht...
Seems like there is more room to fall here, given that I would expect fires like this year's to become virtually ubiquitous in the next 15 years.
Yes, trees regrow, but global warming is shifting rainfall away from California so trees won't regrow at the same rate as before.