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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…

#121

Post by imtringued »

nostrademons wrote: post #53
csomar wrote: post #44

Earlier quoted context omitted.

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 global…

I would like to see the collapse that you guys are seeing, I'll repeat this over and over again, the economic strength of the US is exceeding what should be possible under current economic conditions. For the last two decades the Fed was trying to "beat up" the US economy to "teach it a lesson" but it never even bothered to wake up as financial nukes were being detonated instead of using an alarm clock. Now we have Godzilla (corona virus) and the US economy is barely responding after it has been bombarded with stimulus checks.

Lots of things were done to "intentionally destroy" the US economy. The only way the US economy can fail from hyperinflation at this point is by physically destroying it and causing the production capacity of the US to go down, which means the US won't be able to meet foreign obligations denominated in foreign currencies.

The reason why I put the Feds actions in quotes is that its mission is not to destroy the economy, merely kick it out of bed.

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

#122

Post by imtringued »

nostrademons wrote: post #107
dcolkitt wrote: post #78

Earlier quoted context omitted.

I’m not saying that hyperinflation can’t happen. But if you really believe in that hypothesis, you’d do much better to buy deep OTM call options on TIPs and gold instead of real estate.

Yeah, as someone else mentioned, TIPS are terrible investments for actual hyperinflation. In other instances of hyperinflation, "official" inflation estimates (which is what TIPS are benchmarked on) seriously lag the actual inflation rate on the ground. Most layperson financial assets aren't secure investments in this case, because their value depends only on what you can sell them for and it's far from guaranteed th…

Come on, you must be aware that the risk with this strategy. Asset prices could just as well go down, especially if PCE/PCI inflation goes up, which will cause the Fed to stop fighting deflation and then it will start fighting inflation and the tools for fighting inflation have had far better track record than the tools for fighting deflation.

If you must get into debt, then buy assets that net a future return based on productive investments. If you were to buy real estate, you would have to buy it because you are expecting to receive enough rent to pay the mortgage back based on current rents.

If everyone gets into debt and uses it for speculation then we would probably get to see the opposite, an even stronger deflationary wave than what we have had so far.

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

#123

Post by imtringued »

gregwebs wrote: post #46
Camillo wrote: post #4

Earlier quoted context omitted.

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

Mortgages are being given away now that the mortgage rate is about the same as inflation. The mortgage is now the asset and the home is the liability. It is probably you can make more by paying off the mortgage then investing the down payment and try to bring that investment up to the level of the mortgage (plus having enough for capital gains tax). It may be a unique situation in our lifetime that is only possible b…

I wonder how many weird deflationary forces are acting on this economy. Fed buying mortgages causes people to get into debt for their house, ironically they end up consuming less, which drags down inflation and the cycle repeats endlessly with no hope of inflation going up to justify increasing the interest rates.

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

#124

Post by gbronner »

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…

Sf rent control increases are 60% of cpi. If you expect higher inflation and higher taxes, might as well buy apartments and take them for personal use

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

#125

Post by jhallenworld »

clpm4j wrote: post #47
xenihn wrote: post #41

Earlier quoted context omitted.

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. See the Blackstone Group and its related investments in US residential housing. They reportedly made around $7 billion recently through one of their single-family and multifamily housing investment vehicles, which owns > 80,000 homes. Lots of other investment firms doing the same thing across the country. https://www.housingwire.com/articles/blackstone-gets-back-in...

I've been looking at REITs recently- "BREIT" is interesting in that it's not traded. According to them, the return rate is 10%, which is really good..

I don't understand how they are making this much off of rent in San Francisco. The price to rent ratio there is like 50:1, which implies a return of 2%. Perhaps their properties are charging much higher then average rents..

Detroit is the opposite extreme: the price to rent ratio is 5:1 (of course this ignores that the property is likely in terrible shape and the vacancy rate is high).

So here is why I have been looking at this: how do the rich maintain their wealth during inflationary periods? Own hard assets that pay rent! Also the relatively stable return you can get from rent indicates how much money you need to retire. Suppose you want $100K a year during retirement. Well with 10% returns, you only need $1M.

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

#126

Post by gregwebs »

imtringued wrote: post #123
gregwebs wrote: post #46

Earlier quoted context omitted.

Mortgages are being given away now that the mortgage rate is about the same as inflation. The mortgage is now the asset and the home is the liability. It is probably you can make more by paying off the mortgage then investing the down payment and try to bring that investment up to the level of the mortgage (plus having enough for capital gains tax). It may be a unique situation in our lifetime that is only possible b…

I wonder how many weird deflationary forces are acting on this economy. Fed buying mortgages causes people to get into debt for their house, ironically they end up consuming less, which drags down inflation and the cycle repeats endlessly with no hope of inflation going up to justify increasing the interest rates.

In the long-term I think buying a house at a low fixed rate builds wealth and leads to greater consumption and less reliance on government transfer payments (although the mortgage itself could be considered a government transfer payment). As the fixed mortgage payment gets reduced over time due to inflation the homeowner has greater ability to consume if their wages keep up with inflation.

The only thing we know for sure is that the fed buying MBS has a strong inflationary effect on the housing market that can be seen in the record housing prices.

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

#127

Post by xenihn »

shinazueli wrote: post #113
xenihn wrote: post #101

Earlier quoted context omitted.

Can you please link me a list of cities with a better buy:rent ratio when comparing 2008-2011 SF to 2021 SF? Assuming you were to buy and rent now, since that's the conversation we're having. I have some friends who would be really interested. I just tried to find some on my own, and I could not.

I don’t think you understood his point. Obviously, those homes have appreciated. His point is that people who own property right now in SF stand to make more money by simply selling their property, and using the proceeds to purchase property in other cities around the country, with better ratios. Appreciation, by itself, will naturally drive this ratio down because of rent control laws. The value of the home is the d…

How is that relevant to the original post?

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

#128

Post by closeparen »

xenihn wrote: post #127
shinazueli wrote: post #113

Earlier quoted context omitted.

I don’t think you understood his point. Obviously, those homes have appreciated. His point is that people who own property right now in SF stand to make more money by simply selling their property, and using the proceeds to purchase property in other cities around the country, with better ratios. Appreciation, by itself, will naturally drive this ratio down because of rent control laws. The value of the home is the d…

How is that relevant to the original post?

I don’t think you can make a claim and then dismiss counter-claims based on relevance. You decided that relative profitability of rent in different cities was relevant here.

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

#129

Post by neffy »

midasuni wrote: post #111
ska wrote: post #82

Earlier quoted context omitted.

Yes but wages are too , so you keep the delta. And the mortgage payment goes up with interest rates. Which aren’t exactly independent events. It’s not perfect but it’s reasonable. It may free up some other money in the house case , which you could use to make up some of the difference. Or that might get eaten by rates.

US mortgages tend to be fixed. Wages for up, payments on the house stay the same. At 3%, a $1m mortgage would be 2500 interest a month now, and in 2040. US home maintenance seems high though - roof repairs are a known thing for some reason. In he U.K. I live near an estate of thousands of houses all 50 years old, I can’t ever remember seeing one being repaired.

I think it's because they are mostly wood framed, vs brick in the UK.

But yes, the mortgage rate is fixed in the US, your mortgage payment doesn't change, your wages increase at least with inflation, and relatively speaking the mortgage gets cheaper every year. Rents on the other hand, tend to adjust with inflation. The breakeven point is about 3-5 years as it happens.

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

#130

Post by mateo411 »

swimfar wrote: post #57
mateo411 wrote: post #14

Earlier quoted context omitted.

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.

Yes, I'm pretty sure that's true in SF too. It's a great time to buy a condo in the Bay Area.
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