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Rents are plunging in the most expensive U.S. markets

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Re: Rents are plunging in the most expensive U.S. markets

#251

Post by gragas »

ehnto wrote: post #152
13of40 wrote: post #139

Earlier quoted context omitted.

You could argue that home prices are tied to wages and rent is tied to home prices.

I would say that easy access to loaned capital has perversed the connection between wages and house prices a bit.

>easy access to loaned capital has perversed the connection between wages and house prices a bit

Only to a certain extent. Loaned capital is still limited by wages (no one is going to give a $1 million mortgage to someone who makes $40k per year). But again, I don't think wages has hardly anything to do with house prices; it's all about supply and demand. Sure, most people might only be willing to pay 1/3 their salary on housing. That doesn't mean that the price for housing is that number. If a huge supply of housing for less than that price floods the market, then why would everyone continue to pay 1/3 their salary for housing when they could pay 1/4 or 1/6?

Re: Rents are plunging in the most expensive U.S. markets

#252

Post by onlyrealcuzzo »

freyir wrote: post #236

A 2 bedroom in my building dropped from $3950 to $3250 over the past few weeks. The landlord can't unload it. And today I got a notice that they're raising my rent. Shortsighted -- they'll have another vacant apartment on their hands soon.

Ha, I'm in Hollywood, and my complex has been sending out emails offering promotions to recommend friends on a bi-weekly basis for a few months now. Vacancy has got to be around 20%. Meanwhile, there's 6 new luxury complexes with over 1500 units opening or that have opened this year--JUST ON MY BLOCK ALONE [2,3,4,5] (for reference, the entire population of Hollywood is roughly 22k [1]). The new complexes are practically ghost towns, Eastown in particular was offering a free month for ages before finally dropping rents 10%. Sunset Gordon Tower is literally kicking everyone out that moved in, which was only 17% occupied anyway [5].

Meanwhile, my lease is set to expire, and the renewal offer comes with a 10% bump in my rent (as it has for the last two years).

The sad part is, I feel like it's working from an economic standpoint. Vacancy was close to zero when I moved in (literally got the only apartment available). Even though it's now got to be around 20%, the rent has risen by over 30%. Pretty sure that means they're making 4% more over the course of 3 years, which given the dismal global economic growth, that yield isn't too shabby.

With all the vacancy, you'd think development would be slowing, but it's actually picking up even more. There's 7 new hotels planned for the block [6]. And there's several other residential towers planned for the block [7], 750 new units by 2018 just in one, the Palladium Towers [8].

Keep in mind that this is just one block. Roughly the same thing is happening a mile up Hollywood Blvd at Highland. And to a lesser degree a mile down the street at Western.

All of this is great. We desperately need the new units. The mixed-use walkability will be an example to the entire city for how great Los Angeles can be.

But where are this many luxury renters suddenly going to appear from? Wishful thinking?

[1] https://en.wikipedia.org/wiki/Hollywood - 22k population

[2] http://la.curbed.com/2016/7/16/12206104/camden-apartments-ho... - Camden 287 units

[3] http://la.curbed.com/2014/3/9/10134626/6201-hollywood-christ... - Eastown I 535 units

[4] http://urbanize.la/post/eastown-apartments-phase-ii-moving-a... - Eastown II 515 units

[5] http://la.curbed.com/2015/9/14/9921562/sunset-gordon-cim-gro... - Sunset Gordon Tower - 299 units (quite the circus).

[6] http://la.curbed.com/maps/hollywood-hotels-map - Hollywood Hotels Map

[7] http://la.curbed.com/maps/a-guide-to-the-nearfuture-of-the-h... - Hollywood Future Skyline Map

[8] http://la.curbed.com/2016/3/22/11286562/hollywood-palladium-... - Hollywood Palladium Tower (planned)

Re: Rents are plunging in the most expensive U.S. markets

#253

Post by gragas »

_delirium wrote: post #177
fram wrote: post #161

Earlier quoted context omitted.

I'm not sure what you mean, but I'll try to express myself more clearly. In the most basic sense of economics for prices to fall supply has to increase more than demand. If demand increases more than supply the opposite is true. There's nothing saying that a more supply can't also increase demand or even increase demand more than supply. When more wealthy (or ambitious) people move into an area it often leads to that…

Yeah, this is one particular kind of gentrification cycle that's sometimes seen in cities (most clearly in parts of Manhattan). Higher-quality new housing is built, which is one part of making an area more attractive to more affluent residents, which drives up prices despite there being more total housing available than before. What of course is less agreed on is how to untangle all the interacting causal factors her…

>Higher-quality new housing is built, which is one part of making an area more attractive to more affluent residents, which drives up prices despite there being more total housing available than before.

This has me convinced that people might be right that new housing could lead to higher rent in some cases, but at the same time those people are wrong for arguing against basic supply and demand. Sure, supply increased and prices went up. But it could be that demand increased more than supply did, as pointed out by the parent comment.

Re: Rents are plunging in the most expensive U.S. markets

#254

Post by jeffwilcox »

BWStearns wrote: post #224
meddlepal wrote: post #202

Earlier quoted context omitted.

Yep, flawed study. The stuff in Brighton, deep Dorchester, Hyde Park and Roxbury should be thrown out since a lot of it is very much not TOD and you'd barely know you were living in Boston.

What is TOD btw? I think I agree with you but I'm curious about the term.

Transit-oriented development - built along trams/metro/rapid bus cooridors

Re: Rents are plunging in the most expensive U.S. markets

#255

Post by Bombthecat »

pascalxus wrote: post #229
johngalt wrote: post #203

Earlier quoted context omitted.

The problem isn't: "We are an exploited underclass unable to live in reasonable conditions." The problem is more along the lines of a gold rush type movement of people. Where large cities are attracting a large influx of people increasing demand on housing faster than it can be corrected. Plenty of inexpensive housing in Ohio. Not so much along the California coast.

That, plus a complete refusal on the part of government and voters to build any more housing. not to mention all the environmental impact fees, taxes, and endless regulation which increase housing costs way beyond where it would be without. It's not just LA and SF (gold rush cities that have housing problems). In CA, even the rural areas with miles of space in every direction, housing still costs a lot more than the…

I'm not sure where you plan to build in new york for example?

Build even higher buildings?

Re: Rents are plunging in the most expensive U.S. markets

#256

Post by nostrademons »

withdavidli wrote: post #187
nostrademons wrote: post #107

Earlier quoted context omitted.

For historical perspective - when I first moved out to the Bay Area in 2009, I paid $900/month for a master bedroom + private bath in a 3BR townhome, in Mountain View. My roommates paid $650/month. If you've never been through a downturn in the Bay Area, you'll be amazed at how low prices can go (and also at how many people can become unemployed and move back to where they came from).

I've read Yelp reviews on a previous 2/2 in San Mateo. $2600 at that point, one review had a price listed a few years back (~2011), ended up being near 20% increase year over year. Also heard of the U-Haul stories of where there was none left in the bay because everyone moved out. Don't think that's going to happen this time around. Think that start ups, or at least their employees will be acquired into bigger/more s…

20% YoY increases is about right in boom times. My rent increased by about $300/month/year from 2011-2014, then has been roughly stable since then. It was stable from 2009-2011 though.

In 2009, most of the startups were really small Web 2.0 outfits with 2-6 employees. However, the big companies were laying off people, and very few companies were hiring. I was initially going to apply to E-Bay/PayPal (I had a contact there), but the day that I was going to apply they announced they were laying off 5000 people, and I was like "Welp, that's not happening." My roommate worked at EMC and went through 3 rounds of layoffs, with about 3/4 of her department laid off. Was very lucky to end up at Google, which according to the news media was in hiring freeze (like everyone else) at the time; I had an awkward conversation with my recruiter where I was like "Are you actually hiring right now, or am I wasting my time?" What tended to happen was that the big companies cherry-picked the startup founders/employees that they really wanted and laid off all their low performers, and everyone who didn't have a track record of producing stuff was basically fucked.

I wasn't around for the dot-com bust in 2001 or the 1991 recession, but my understanding is that they were far worse in Silicon Valley, because the dot-coms had hired a large number of underskilled workers who literally had nobody willing to hire them when their employers went bust. I suspect 2017 will be worse than 2009 but better than 2001 in tech; unicorns collectively employ many more people (particularly low-skilled people) than Web 2.0 startups, but the crash this time is a slow-motion slowdown and doesn't seem to be affecting all companies, and so there's time for stronger companies to pick up the pieces of weaker ones.

Re: Rents are plunging in the most expensive U.S. markets

#257

Post by nostrademons »

gnicholas wrote: post #238
nostrademons wrote: post #107

Earlier quoted context omitted.

For historical perspective - when I first moved out to the Bay Area in 2009, I paid $900/month for a master bedroom + private bath in a 3BR townhome, in Mountain View. My roommates paid $650/month. If you've never been through a downturn in the Bay Area, you'll be amazed at how low prices can go (and also at how many people can become unemployed and move back to where they came from).

Yep: first, rents crash in the East Bay and other outlying areas, and then as traffic diminishes people who were paying $$$ to rent in PA/MA/MV decide that it wouldn't be so bad to live farther out. Rents then drop everywhere, although home sale prices never really drop much in PA/MA—they just level off for a while.

Condo prices can drop - in 2009 there were 2BR condos available for about $400K, while the cheapest you could get in early 2015 were about $900K. You're right though, I didn't see single-family homes drop much even in 2009; they still went for more than a million.

Re: Rents are plunging in the most expensive U.S. markets

#258

Post by TheSpiceIsLife »

repsilat wrote: post #246
TheSpiceIsLife wrote: post #173

Earlier quoted context omitted.

The loan repayments on my three bedroom house are AU$47 a day, or about US$35. ($215,000 purchase price in 2016).

Is your $215k Aussie house in close to town in Sydney, Melbourne or Brisbane? There are plenty of cheap houses in America too, living in LA/SF/NYC is a luxury that people pay a premium for.

No, no it's not. I live in Launceston, Tasmania - population approx. 100,000 people.

living in LA/SF/NYC is a luxury that people pay a premium for.

Yeah nah. I don't really follow this. Unless you consider terrible traffic and less than idea air quality luxuries. Having said that, I did live in Adelaide for 13 years.

Okay, I'm being too critical, too inflammatory. Big cities bring people together in a pretty special way that enables all sorts of culture to arise that doesn't happen here, in these big country towns, or struggles to exist on the fringes as a caricature of it's big-city counterpart. And I definitely miss that.

Choices, I guess. I can't afford to buy a house in any suburb I'd like to live in in the big cities in Australia. And I'm getting too old to rent or sharehouse. It's good here, 800 rock climbing routes within an hours drive of my house; kayaking and surfing; high-speed internet and Hacker News; a dog; business opportunities we're putting in to action.

Re: Rents are plunging in the most expensive U.S. markets

#259

Post by [deleted] »

johngalt wrote: post #203
oneplane wrote: post #136

Earlier quoted context omitted.

Woah, I knew about things being bad in the USA, but I didn't know living conditions are going towards third-world standards :/ Where I live (The Netherlands) there are laws that even protect foreign workers (i.e. from Poland) from all being stuffed in a single room. At this point it's starting to look like even jail cells have more room and privacy.

The problem isn't: "We are an exploited underclass unable to live in reasonable conditions." The problem is more along the lines of a gold rush type movement of people. Where large cities are attracting a large influx of people increasing demand on housing faster than it can be corrected. Plenty of inexpensive housing in Ohio. Not so much along the California coast.

[deleted]

Re: Rents are plunging in the most expensive U.S. markets

#260

Post by solidsnack9000 »

pmoriarty wrote: post #233
chimeracoder wrote: post #201

Earlier quoted context omitted.

Ironically, rent control may have been the single biggest factor leading to the consolidation of ownership of New York real estate by the ultra-wealthy. If you were a landlord, you couldn't afford to pay enough to buy your tenants out of their apartments. But massively wealthy investors and big banks could - and they did . They bought the rent-controlled apartments that were money pits for small landlords, and then p…

"Once the tenants had left, the apartments could be easily converted back to unregulated, market-rate apartments." This is why rent-controlled apartments should never be allowed to go back to "market rates". They should remain rent controlled in perpetuity. Problem solved.

Carried to its logical conclusion, this probably creates a situation where it's worth it to knock down the building and make all new apartments.
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