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Asking rents in San Francisco continue to slip, but…

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Re: Asking rents in San Francisco continue to slip, but…

#51

Post by cammikebrown »

thanhhaimai wrote: post #31
bcrosby95 wrote: post #8

Earlier quoted context omitted.

It's less of a problem because you can opt out of buying a home by renting. This is what happened back in the 00s and I know a lot of people that rented to opt out of the purchase market. Speaking personally, I rented a 3 bedroom home in Los Gatos for $2k/month, which was "valued" at around $1 million. The difference this time is its on top of huge increases in home prices and rents. So I think you wouldn't see that…

I'm paying $2500/month mortgage for a home valued at $1.1m. For the extra $500/month, I get: mortgage interest tax deduction, a house after 30 years, the freedom to modify my home the way I like, the security of knowing I'm not at the mercy of the landlord. Personally, I think for the extra $500/month, buying is a better choice than renting; at least for me.

How big was your down payment?

Re: Asking rents in San Francisco continue to slip, but…

#52

Post by thatfrenchguy »

riazrizvi wrote: post #2

The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…

Nah, in San Francisco, you have to be a landlord three decades ago to be able to do this, you can't break even on a rental building or condo today.

Re: Asking rents in San Francisco continue to slip, but…

#53

Post by nostrademons »

csomar wrote: post #44
riazrizvi wrote: post #2

The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…

Assuming the inflation rates are accurate (low inflation), these guys are getting into a risky proposition with a 1.5% discount (property tax still have to be paid out). I would not call it "free" money. These guys might not be as smart or lucky as they seem to be.

It's a bet on the inflation rates not being accurate, or at least not staying at "low inflation" levels.

Personally I would take their side of the bet. I think that inflation rates are going to be extremely high over the next decade, exceeding the 1970s and potentially flirting with hyperinflation, and that folks who are betting on status-quo inflation are about to get screwed the same way folks who didn't see globalization coming in the 90s or Millenials who bought the "study whatever you want and the money will come" line got screwed. But that's why we have financial markets, so each firm can bet on the version of the future they think is most likely, and ultimately one side makes a lot of money and the other goes bankrupt.

Re: Asking rents in San Francisco continue to slip, but…

#54

Post by bsder »

cheriot wrote: post #17
riazrizvi wrote: post #2

The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…

> The systemic problem is that investors are buying up residential property inventory Are you assuming that it's somehow sensible to buy property and leave it empty? Owner vs rental doesn't change the number of homes available.

> Are you assuming that it's somehow sensible to buy property and leave it empty?

Yes if it has been financed in certain ways.

An empty space is assumed to be rented at the same rate as it was before being empty and that empty rent can normally be tacked onto the end of the financing as it is assumed to be a "temporary" thing.

However, if that space gets occupied for less money, the basis of the real estate adjusts and the financer can call up the owner and demand more cash since the basis changed.

Consequently, I have seen quite a bit of real-estate remain empty for years just to avoid having to adjust the cash basis.

This is one of those stupid-ass financial things that absolutely needs to get blasted in law.

Re: Asking rents in San Francisco continue to slip, but…

#55

Post by xur17 »

rodgerd wrote: post #33
cheriot wrote: post #17

Earlier quoted context omitted.

> The systemic problem is that investors are buying up residential property inventory Are you assuming that it's somehow sensible to buy property and leave it empty? Owner vs rental doesn't change the number of homes available.

Capital gains in the markets I'm familiar with - and this is an international problem - dwarf any rental income. In Auckland, New Zealand, average capital gains exceed $40,000 per month. Land banking is incredibly lucrative.

> In Auckland, New Zealand, average capital gains exceed $40,000 per month. Land banking is incredibly lucrative.

On what property value?

Re: Asking rents in San Francisco continue to slip, but…

#56

Post by ska »

thanhhaimai wrote: post #31
bcrosby95 wrote: post #8

Earlier quoted context omitted.

It's less of a problem because you can opt out of buying a home by renting. This is what happened back in the 00s and I know a lot of people that rented to opt out of the purchase market. Speaking personally, I rented a 3 bedroom home in Los Gatos for $2k/month, which was "valued" at around $1 million. The difference this time is its on top of huge increases in home prices and rents. So I think you wouldn't see that…

I'm paying $2500/month mortgage for a home valued at $1.1m. For the extra $500/month, I get: mortgage interest tax deduction, a house after 30 years, the freedom to modify my home the way I like, the security of knowing I'm not at the mercy of the landlord. Personally, I think for the extra $500/month, buying is a better choice than renting; at least for me.

> Personally, I think for the extra $500/month, buying is a better choice than renting; at least for me.

Let's do the math. Nobody is getting a 1.1million mortgage for 3k/mo, so let's pick something conservative but more realistic.

According to zillow, for a 3k/mo payment you can get a 520k loan with a 20% (130k) downpayment, 30 years with an average 3%. You'll be lucky to keep it to 3% for the next 30 years but we'll let that stay. This 3k/mo payment includes estimated property taxes etc., but no home maintenance costs - there's going to be 50k or so of that over the 30 years.

So after 30 years, you've got a 650k house + whatever appreciation it has over that time, minus the 50k expenses. Historically house appreciation is about the same as inflation, so if we stay in today dollars that washes out. After 30 years, you walk away with 600k (todays dollars). If we pretend it won't cost you anything extra, 650k

What if you stayed renting and invest that 130k? Stock market long term average is about 7%, net inflation about 4%. So lets use that, I'm cheating by stating in 2021 dollars and you just keep investing the $500/mo difference.

Take 130k today, invest for 3% with a 500/mo contribution for 30 years.

Result is: $601,000 (again, sticking in today dollars as i've zeroed out inflation)

Do the same thing at 4%: $760k

Base on historic market, you're likely somewhere in between. Looks like it's not a huge difference, which shouldn't surprise you. This means that pretty minor differences in your life circumstances can push you one way or another, but nothing is obviously compelling.

(Ok one thing jurisdictionally dependent I didn't mention, there can be tax implications of this or not, depending on where you live. Ymmv.)

Re: Asking rents in San Francisco continue to slip, but…

#57

Post by swimfar »

mateo411 wrote: post #14
bcrosby95 wrote: post #8

Earlier quoted context omitted.

It's less of a problem because you can opt out of buying a home by renting. This is what happened back in the 00s and I know a lot of people that rented to opt out of the purchase market. Speaking personally, I rented a 3 bedroom home in Los Gatos for $2k/month, which was "valued" at around $1 million. The difference this time is its on top of huge increases in home prices and rents. So I think you wouldn't see that…

The article says that rents in SF are down. Housing prices are up. Anecdotally, almost everybody that I know that rents in the City has moved, because they were able to get a better deal.

I don't know about SF, but in the South Bay, house prices may be up, but condo prices are the lowest they've been in years. And that is despite record low interest rates.

Re: Asking rents in San Francisco continue to slip, but…

#58

Post by noodle »

xur17 wrote: post #50
thanhhaimai wrote: post #31

Earlier quoted context omitted.

I'm paying $2500/month mortgage for a home valued at $1.1m. For the extra $500/month, I get: mortgage interest tax deduction, a house after 30 years, the freedom to modify my home the way I like, the security of knowing I'm not at the mercy of the landlord. Personally, I think for the extra $500/month, buying is a better choice than renting; at least for me.

Buying very well might be a better option for you, but there are downside you aren't listing from owning: * high transactions costs (if you decide to move after a few years, say goodbye to all of those savings) * lower liquidity (if you rent, you can just call the landlord and break the lease. if you buy, you have to find an agent, stage the house, and wait for offers) * highly concentrated market risks

Most regular non-trivial maintenance is also on your plate as a homeowner. Need a new roof? That's on you, and isn't reflected in the standard monthly payment. If you rent, its on the property owner.

Re: Asking rents in San Francisco continue to slip, but…

#59

Post by smnrchrds »

tenpies wrote: post #6
Camillo wrote: post #4

Earlier quoted context omitted.

Is it better to buy a home for investment than it is to buy stocks?

Depends on geography. For example, in Canada, housing is up 30% YoY. Trudeau's Federal government recently said that even a 10% correction in housing would be unacceptable. In practice, Canadian housing isn't housing - it's a 30% (or better) government bond that you get to live in or rent out. That's a 30% return guaranteed by a sovereign state that will gladly destroy everything else in the country to prop up housin…

> Trudeau's Federal government recently said that even a 10% correction in housing would be unacceptable.

Could you please provide a source? I cannot find anything on the web.

> it's a 30% (or better) government bond

This cannot possibly be true. First of all, 2020 was a special year for asset prices, not just in Canada and not just for real estate, but for all assets all around the world. Second of all, even if the first assertion is correct, there is a world of difference between not allowing prices to decline vs not allowing them to increase any less than 30% YoY. Third, 1.3^27 is 1192. Average home prices in Vancouver is over 1 million CAD. Do you honestly argue in 27 years, the current homeowners could sell off their property and net a sweet >1 billion CAD? That we would have millions of billionaires in Canada in 27 years?

Re: Asking rents in San Francisco continue to slip, but…

#60

Post by riazrizvi »

xenihn wrote: post #41
riazrizvi wrote: post #2

The systemic problem is that investors are buying up residential property inventory, because there is a massive amount of near 0% cash available to a thin slice of the population. So even though there are as many people as there were roughly a year ago, there are far fewer homes. Hence purchase prices are rocketing up and rental prices are drifting down. There is no strong political will to solve this problem, becaus…

Note that "investors" in this case also includes massive pension funds. This isn't the type of entity that most people have in mind, but it's one of the most pervasive in California, especially in San Francisco. I think the average person thinks of individual investors (flippers, rich foreign buyers) when they hear "investors". Some of the buyers belong to this group, but most don't.

Yes the funds are the worst IMO, they do the most damage to the stability of the market and they have the most political power because their $$$’s are concentrated.
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