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Silver Contributor
4rent
Posts: 540
Registered: ‎01-28-2011
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Bay Area rents, home prices up sharply

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
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Re: Bay Area rents, home prices up sharply

  Those inhumane, heart of stone landlords! :smileyvery-happy:

Super Contributor
fareastwarriors
Posts: 233
Registered: ‎10-26-2012
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Re: Bay Area rents, home prices up sharply

No surprise there.

Gold Contributor
mediaguru
Posts: 1,871
Registered: ‎03-03-2011
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Re: Bay Area rents, home prices up sharply

[ Edited ]

Now look at this and tell me:

 

(a) This is a trend that can continue, when salaries are only up about 6% YoY (in the GOOD neighborhoods. Worse in most areas)

(b) Somehow buying is a "good deal" when the rental is clearly a better value. SF buy = ~$3400/mo, rent = $3100/mo

 

Some parts that is certainly not the case.  For example, I'd much rather spend $225k or $340k and buy a house than spend 1400-1800/mo on renting a place (which is probably even worse).

 

Interesting to note that sales prices rising faster than rent rates pretty much across the board.  Seems to be a sign of an overzealous/bubblicious seller's market to me...

Silver Regular Contributor
sfsfr
Posts: 689
Registered: ‎04-15-2012
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Re: Bay Area rents, home prices up sharply


mediaguru wrote:

Now look at this and tell me:

 

(a) This is a trend that can continue, when salaries are only up about 6% YoY (in the GOOD neighborhoods. Worse in most areas)

(b) Somehow buying is a "good deal" when the rental is clearly a better value. SF buy = ~$3400/mo, rent = $3100/mo

 

Some parts that is certainly not the case.  For example, I'd much rather spend $225k or $340k and buy a house than spend 1400-1800/mo on renting a place (which is probably even worse).

 

Interesting to note that sales prices rising faster than rent rates pretty much across the board.  Seems to be a sign of an overzealous/bubblicious seller's market to me...


The only take home here is that they are both going up. You can't really compare the buy amounts to the rent amounts without normalizing for size, location, and so forth. Rental units on average would sell for less than homes for sale.

Gold Regular Contributor
sheriff
Posts: 2,291
Registered: ‎06-01-2012
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Re: Bay Area rents, home prices up sharply


mediaguru wrote:

Now look at this and tell me:

 

(a) This is a trend that can continue, when salaries are only up about 6% YoY (in the GOOD neighborhoods. Worse in most areas)

(b) Somehow buying is a "good deal" when the rental is clearly a better value. SF buy = ~$3400/mo, rent = $3100/mo

 

Some parts that is certainly not the case.  For example, I'd much rather spend $225k or $340k and buy a house than spend 1400-1800/mo on renting a place (which is probably even worse).

 

Interesting to note that sales prices rising faster than rent rates pretty much across the board.  Seems to be a sign of an overzealous/bubblicious seller's market to me...


Rents can't move as quickly as prices because of leases and in some areas rent control.  The rental I moved out of in San Jose last year was limited to 8% increases when prices for homes went up way more than that.

Gold Contributor
mediaguru
Posts: 1,871
Registered: ‎03-03-2011
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Re: Bay Area rents, home prices up sharply


bck wrote:

mediaguru wrote:

Now look at this and tell me:

 

(a) This is a trend that can continue, when salaries are only up about 6% YoY (in the GOOD neighborhoods. Worse in most areas)

(b) Somehow buying is a "good deal" when the rental is clearly a better value. SF buy = ~$3400/mo, rent = $3100/mo

 

Some parts that is certainly not the case.  For example, I'd much rather spend $225k or $340k and buy a house than spend 1400-1800/mo on renting a place (which is probably even worse).

 

Interesting to note that sales prices rising faster than rent rates pretty much across the board.  Seems to be a sign of an overzealous/bubblicious seller's market to me...


The only take home here is that they are both going up. You can't really compare the buy amounts to the rent amounts without normalizing for size, location, and so forth. Rental units on average would sell for less than homes for sale.


That is true, but overall the median is likely to stay very similar (it would be weird to see a sudden spike in big SFH rentals, for example)

 

So you can't draw final conclusions, but comparing medians is a fairly apples-to-apples thing, so you can still see that the trend of house prices rises faster than rents is a bit of a shell game, driven by a combination of low inventory, Prop 13, and current interest rates...

Gold Contributor
mediaguru
Posts: 1,871
Registered: ‎03-03-2011
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Re: Bay Area rents, home prices up sharply


sheriff wrote:

Rents can't move as quickly as prices because of leases and in some areas rent control.  The rental I moved out of in San Jose last year was limited to 8% increases when prices for homes went up way more than that.


Good point, but it also drives the point that, with inventory as dry as it is, combined with growing benefit of rent-vs-buy ratio, a lot of people would be wise to stay put and rent instead of buying at the moment...

Super Contributor
donjumpsuit
Posts: 245
Registered: ‎08-07-2012
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Re: Bay Area rents, home prices up sharply

The thing about rents going up, is that they can go up all they want, it won't affect both the pool of people willing to buy, nor will it affect the chance that investors will jump into the rental market because it's a no-brainer money maker.

 

As rents go up, people "group-up".  

Find roomates and room shares situation to lessen thier burden.

Renters move in with parents or relatives removing them from the renter pool.

 

This doesn't happen in a house buying situation.  Buyers facing rising house prices don't "group-up", they just benefit from lower mortgage rates.

 

Rents can topple real quick in this situation.

 

They can also topple with a couple quarters of stagnent economy, or restrictions on lending which would reduce the amount of start-up capitol, removing jobs.  Also job losses tend to snowball.  One company goes under or goes through a round of lay-offs, others follow, and rents tumble.

 

This can impact the housing markets.  Recently one of the largest hedge fund investors who was buying up real estate for rental purposes concluded it was a losing situation, even in the face of rising rents.  Since prices are way up, and inventories low, these could hit the market and pull prices down.  It all remains to be seen.

Gold Super Contributor
norcalnative
Posts: 3,277
Registered: ‎05-04-2009
0

Re: Bay Area rents, home prices up sharply

As a Land Lord - I'm glad to see that rental values are closing the gap between the cost of the actual property and the rental value. Given renters for the past few years in most areas have not been paying enough rent to cover the actual property costs in most locations. This has miss led most renters regarding their perception of property costs heck even water bill costs for those of us owners who pay water.

 

As rents start to match actual property cost - renters will start to develop a better sense of the REAL cost to live in such property and either step up and pay their share or - down size to a property that they can afford.