San Francisco, Silicon Valley rents plunge amid downturn • Hacker News Board

Re: San Francisco, Silicon Valley rents plunge amid downturn

#261

Post by reaperducer » Mon, Jun 01, 2020, 10:14 PM UTC

aeyes wrote: post #173

onlyrealcuzzo wrote: post #120

Earlier quoted context omitted.

Right, I asked. And they literally laughed at me, which is what I expected.

I'd follow up with the letter that you are moving out immediately. Let's see who'll be laughing last.

I'd follow up with the letter that you are moving out immediately. Let's see who'll be laughing last.

And they'd follow up with a multi-thousand dollar bill for the remainder of your lease, plus fees, that is legally enforceable, and due immediately.

A lease is a contract. You don't get to just walk away.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#262

Post by nostrademons » Mon, Jun 01, 2020, 10:15 PM UTC

jedberg wrote: post #146

raincom wrote: post #138

Earlier quoted context omitted.

That's the first step, and this has happened many times before. No REIT drops rents; instead, they offer "$0 deposit", "no rent for the first 45 days", etc. Once these tricks are exhausted, rents will drop. The issue is: how long does it take for these tricks to exhaust?

In 2008 rents in the Bay Area just stayed flat for a few years except in the most expensive parts of SF. So in 2008 at least, those incentives were enough. This time may be different though, with a fundamental shift to work-from-anywhere for tech companies.

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 years. (And then shot up rapidly afterwards - I left when it hit $2400/month 5 years later, and it's currently renting for $2900/month.) It had gone down so rapidly that its price was underneath the less-swanky complex a block down the street which normally rented for ~$300/month less and had itself cut rents from about $1800/month to $1450/month over those 6 months.

Rents are sticky - landlords try to avoid cutting if they don't have to. But when there's a choice between letting the apartments go vacant and servicing your debt payments, they have to cut, and if there's a shortage of tenants at that time (because everybody's left and gone home) the cuts can be pretty drastic.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#263

Post by reaperducer » Mon, Jun 01, 2020, 10:15 PM UTC

ivalm wrote: post #172

onlyrealcuzzo wrote: post #120

Earlier quoted context omitted.

Right, I asked. And they literally laughed at me, which is what I expected.

Then move elsewhere nearby and lock in a rent controlled lower value.

Then move elsewhere nearby and lock in a rent controlled lower value.

Even if you move nearby, moving isn't free in either time or money.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#264

Post by kyleee » Mon, Jun 01, 2020, 10:16 PM UTC

regular_person wrote: post #177

tedivm wrote: post #104

Earlier quoted context omitted.

My coworkers in Berkeley are all telling their property managers that they need to either lower the rent or they're not going to renew. Once the UC system said they weren't opening back up for physical classes in the fall demand for places near campus dropped considerably. My landlord hasn't lowered rent, but to incentivize us to stay he replaced our washing machine and upgraded some stuff around the property. That b…

"My landlord hasn't lowered rent, but to incentivize us to stay he replaced our washing machine and upgraded some stuff around the property." So what he should have been doing anyway. Amazing.

Was the washing machine broken before the replacement?

Re: San Francisco, Silicon Valley rents plunge amid downturn

#265

Post by xsmasher » Mon, Jun 01, 2020, 10:16 PM UTC

joshribakoff wrote: post #254

raincom wrote: post #138

Earlier quoted context omitted.

That's the first step, and this has happened many times before. No REIT drops rents; instead, they offer "$0 deposit", "no rent for the first 45 days", etc. Once these tricks are exhausted, rents will drop. The issue is: how long does it take for these tricks to exhaust?

What do you mean tricks exhaust? It's a loophole, so it will work until the laws are changed to close the loophole. It makes no different to the landlord or tenant if the base rent is dropped, or the effective rent is dropped (assuming everyone can do basic math)

"Tricks exhausted" means when the trick is no longer sufficient to keep apartments filled; when the only way to entice new renters is lower absolute rents.

No one is going to click on a $2000 apartment with six months free when the listings are full of $1500 apartments.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#266

Post by raincom » Mon, Jun 01, 2020, 10:24 PM UTC

joshribakoff wrote: post #254

raincom wrote: post #138

Earlier quoted context omitted.

That's the first step, and this has happened many times before. No REIT drops rents; instead, they offer "$0 deposit", "no rent for the first 45 days", etc. Once these tricks are exhausted, rents will drop. The issue is: how long does it take for these tricks to exhaust?

What do you mean tricks exhaust? It's a loophole, so it will work until the laws are changed to close the loophole. It makes no different to the landlord or tenant if the base rent is dropped, or the effective rent is dropped (assuming everyone can do basic math)

The primary reason for these tricks to keep the rents high. If a company offers 45 days free rent on one year lease with $2500 per month, that amounts to effective $2187.5 per month, 12.5 percent discount. During the renewal, the land lord will either keep $2500 per month or add another 3% on top of $2500. That's how these REIT companies have been doing. Even leasing agents won't help, as rents are determined by REIT algorithms.

Small mom and pop landlords play it differently. They will just rent you outright without these tricks.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#267

Post by fragmede » Mon, Jun 01, 2020, 10:24 PM UTC

garethsprice wrote: post #239

tinyhouse wrote: post #116

Earlier quoted context omitted.

People without kids aren't gonna move to the suburbs because of viruses/riots. Subrbian life is optimized for families.

Anecdotal but as half of a DINK couple who recently relocated to an exurban vacation property, our main reasons for being in an expensive city (office, culture, social gathering) have evaporated and I'd be surprised if they came back the way they were for years. Speaking as someone whose main desire in life was to live in a big city, the suburbs are looking pretty nice right about now (as, again anecdotally, they are…

> I'd be surprised if they came back the way they were for years.

Depends on what you're looking for. The police managed to find and shut down an underground club mid-April[0]. I'll bet the police didn't find the only one.

I'd be very surprised if it takes more than a year. Thinking back to the airline industry post 9/11, the airlines were strongly motivated to reopen the skies. The situation's different, but as we learn more about COVID-19, we get a better and better picture on what is necessary for it to be safe to reopen. The Hubei restaurant airflow study[1] says it's possible to be in the same room as an infected person and not get sick.

We shouldn't rush to reopen, but we can be more proactive than just "hope it goes away", by, eg expanding testing.

[0] https://www.sfchronicle.com/crime/article/Police-shut-down-S...

[1] https://www.nytimes.com/2020/04/20/health/airflow-coronaviru...

Re: San Francisco, Silicon Valley rents plunge amid downturn

#268

Post by alexpotato » Mon, Jun 01, 2020, 10:32 PM UTC

jedberg wrote: post #73

This article seems to be based on only a few transactions, as not a lot of people are actually moving right now. I manage a couple of properties in the Bay Area, so I keep a close eye on these things. What I'm seeing is not a drop in rents, but an increase in $0 deposits and many weeks of free rent upon move in (sometimes 6+ weeks). Landlords are very reluctant to lower rents, because with the statewide rent control…

The same thing happened in Manhattan back in 2008 due to the financial crisis.

- 13 month rents for the price of 12

- $0 deposits

- etc

In practice, this meant that a lot of young people who were living in Brooklyn decided to move back into Manhattan. This was one of the main driving forces behind the transition of the Financial District (basically almost the southern tip of Manhattan) from an office only area to a residential area.

I actually knew someone who lived in an "apartment" building that had been converted from an office building. The layout was of an apartment but if you looked up you saw the classic perforated drop ceiling tiles of an office.

Re: San Francisco, Silicon Valley rents plunge amid downturn

#269

Post by [deleted] » Mon, Jun 01, 2020, 10:46 PM UTC

raincom wrote: post #266

joshribakoff wrote: post #254

Earlier quoted context omitted.

What do you mean tricks exhaust? It's a loophole, so it will work until the laws are changed to close the loophole. It makes no different to the landlord or tenant if the base rent is dropped, or the effective rent is dropped (assuming everyone can do basic math)

The primary reason for these tricks to keep the rents high. If a company offers 45 days free rent on one year lease with $2500 per month, that amounts to effective $2187.5 per month, 12.5 percent discount. During the renewal, the land lord will either keep $2500 per month or add another 3% on top of $2500. That's how these REIT companies have been doing. Even leasing agents won't help, as rents are determined by REIT…

[deleted]

Re: San Francisco, Silicon Valley rents plunge amid downturn

#270

Post by nostrademons » Mon, Jun 01, 2020, 10:49 PM UTC

onlyrealcuzzo wrote: post #47

xur17 wrote: post #26

Earlier quoted context omitted.

> Coincidently I have been seeing a lot of fully furnished units coming on the market which I assume were former Airbnbs. I've been noticing this as well (I can still find some of them on Airbnb actually). I'm currently in the market for a house, but wondering if waiting a year might be a wise move..

Well if you think this is going to be a downturn, you should look at how other downturns in housing unfolded. Usually, house prices take a while to fall once things get bad. Usually, you start to see a lot of deals and properties selling way under asking before average listing prices drop. If we are going to get to that point, it certainly doesn't appear to have happened yet.

I'm starting to see this - of the 8 or so houses sold in Los Altos over the last month, one was 5% under asking and the other was 18% under asking. It's still pretty rare though.

More interesting is the huge hit to the volume of sales. Mountain View was turning over about 8 houses/month before COVID, but for each of the last 2 months, only 4 houses have sold, and 5 in March.

I think it'll be a while, and depend upon how the reopening goes, whether we get layoffs at major tech companies, and whether remote work becomes common.