Asking rents in San Francisco continue to slip, but… • Hacker News Board

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

#41

Post by xenihn » Mon, Apr 26, 2021, 10:51 PM UTC

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.

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

#42

Post by xur17 » Mon, Apr 26, 2021, 10:55 PM UTC

tadeegan wrote: post #39

Ive noticed that the rentals on the market, while cheaper are generally lower quality. It seems to me that many landlords are opting for airbnb, where you can find 1 fully furnished 1 bedrooms for 2k$ a month rather than lock in a rent controlled tenant at the current prices.

I've noticed this as well - for house rentals in my area, the size seems to scale with price, and there doesn't seem to be anyway to scale up quality (there are some exceptions to this, but it's mostly true).

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

#43

Post by xenihn » Mon, Apr 26, 2021, 10:56 PM UTC

enahs-sf wrote: post #29

htormey wrote: post #23

Earlier quoted context omitted.

Doesn’t that depend on the age of the building? I thought rent control was 1970s and earlier? That being said, SF is generally very tenant/sub tenant friendly in its laws.

Even still, landlords fear legal repercussions so much that they're willing to let a lot slide. When I moved out of my SF apartment, a plant I had had damaged the floor and my landlord was willing to eat the cost provided we moved out swiftly. Replacing the floors probably set him back a couple grand, but evicting tenants could be far more expensive.

From what I've seen of SF rentals and landlords, that's potentially the most money he had spent on maintenance & renovations in a decade, while collecting some of the most profitable rent in the country.

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

#44

Post by csomar » Mon, Apr 26, 2021, 10:58 PM UTC

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.

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

#45

Post by xenihn » Mon, Apr 26, 2021, 10:59 PM UTC

barry-cotter wrote: post #37

rodgerd wrote: post #32

Earlier quoted context omitted.

> 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. This is absolutely a global problem: New Zealand, Australia, parts of Canada, the UK, are all having the same issues.

Japan doesn’t have this problem because they build housing sufficient to meet demand. Deciding not to build enough housing to meet demand so property owners make money: It’s the Anglo way.

Japan also doesn't have the problem of huge pension funds being able to influence and control housing markets in major metros. They don't exist because there isn't a need for them.

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

#46

Post by gregwebs » Mon, Apr 26, 2021, 10:59 PM UTC

Camillo wrote: post #4

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…

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 because the fed is buying trillions of dollars of mortgage backed securities while the base rates are already bottomed out.

However, the overall value depends a lot on inflation, how much property value will go down in the future in real terms (home prices in many markets are now at levels of the previous housing crises), and how much you have to spend to repair the house in addition to known fixed costs such as home owner's insurance and property tax (actually this rate may go up where state and local governments are insolvent).

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

#47

Post by clpm4j » Mon, Apr 26, 2021, 11:01 PM UTC

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. 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...

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

#48

Post by csomar » Mon, Apr 26, 2021, 11:02 PM UTC

hackeraccount wrote: post #10

That relationship - when purchase prices go up rents go down and vice versa has always seemed odd to me. When you think about it, it makes sense but you'd think most people wouldn't have the flexibility to move between renting and owning.

It would only seem odd if the market was rational. As it is, the market is driven by greed, fear, money laundering, etc...

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

#49

Post by flatiron » Mon, Apr 26, 2021, 11:04 PM UTC

hn_throwaway_99 wrote: post #38

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.

I'm assuming your property taxes are not $0?? I don't know where you live but in Texas property taxes on a $1.1 million home are about $2,300 a month

I thought NJ was bad! I pay $18k a year for a 1.1 million house (assessed at $950k though). Sending three kids to public school though so I make out and then I’m outta here!

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

#50

Post by xur17 » Mon, Apr 26, 2021, 11:07 PM UTC

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.

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