[HN Gopher] Asking Rents in San Francisco Continue to Slip
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Asking Rents in San Francisco Continue to Slip
Author : elsewhen
Score : 53 points
Date : 2021-04-26 20:46 UTC (2 hours ago)
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| tadeegan wrote:
| 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.
| xur17 wrote:
| 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).
| hackeraccount wrote:
| 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.
| wombat-man wrote:
| yeah it probably won't swing back as fast if rates go back up.
| A lot of us who were waiting around for a reason to buy
| suddenly got a reason to make a move. Anyone who bought a place
| is probably not going back to renting soon/ever.
| rossdavidh wrote:
| Mostly I agree with you but you might, if owning, choose to
| rent out your existing place and move somewhere cheaper?
|
| Also, here in Austin, TX I know people who rent, who own
| properties that they rent out to others. It seems odd to me.
| PragmaticPulp wrote:
| Investors buy properties and rent them out when they have
| access to cheap loans. This increases demand on house
| purchases, but increases supply of rentals.
|
| Home prices go up, rental prices go down.
| riazrizvi wrote:
| 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, because
| there are almost the same number of non-homeowner voters as there
| are homeowner voters. It's painful for one side because they (we)
| are being priced out of the property market, and great for the
| other side who is making a fortune.
|
| Only of interest rates jumped up, or legislation was made to
| financially penalize capital gains on second and third homes or
| on residential property funds will home prices return to normal.
| csomar wrote:
| 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.
| rodgerd wrote:
| > 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.
| barry-cotter wrote:
| 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.
| xenihn wrote:
| 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.
| jjtheblunt wrote:
| >Hence purchase prices are rocketing up and rental prices are
| drifting down.
|
| Shouldn't the decrease in homes to purchase increase the demand
| for rentals?
| PragmaticPulp wrote:
| I read it as the homes were being purchased by landlords,
| increasing the supply of rentals
| treeman79 wrote:
| Don't forget mega rental companies. They but thousands of
| homes, then rent them out. All with minimal possible repairs
| and no regards to safety.
| senkora wrote:
| If second homes are being rented, then the supply of rentals
| will also increase.
| cheriot wrote:
| > The systemic problem is that investors are buying up
| residential property inventory
|
| Are you assuming that it's somehow sensible to buy property and
| leave it empty? Owner vs rental doesn't change the number of
| homes available.
| PragmaticPulp wrote:
| Keeping it empty would remove it from the housing pool,
| driving rents up.
|
| I think the comment is saying that investors are using cheap
| loans to buy up properties and rent them out. This increase
| the supply of rentals and drives rent prices down.
| rodgerd wrote:
| Capital gains in the markets I'm familiar with - and this is
| an international problem - dwarf any rental income.
|
| In Auckland, New Zealand, average capital gains exceed
| $40,000 per month. Land banking is incredibly lucrative.
| mikeklaas wrote:
| It's sensible in San Francisco because having an active
| renter makes a property worth significantly less.
|
| Why? You basically cannot kick evict a renter or raise their
| rent.
| htormey wrote:
| 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.
| enahs-sf wrote:
| 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.
| xenihn wrote:
| 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.
| Camillo wrote:
| Is it better to buy a home for investment than it is to buy
| stocks?
| eweise wrote:
| I think it can be initially but it decreases as you have more
| equity in home.
| gregwebs wrote:
| 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 a liability. It can be looked at as a safer
| bet to pay off the mortgage then to invest the down payment
| and try to bring that investment up to the level of the
| mortgage.
|
| 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 (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 fixed costs such as property tax and home
| owner's insurance).
| anonAndOn wrote:
| Probably not. The headaches from crappy
| tenants/contractors/property managers/equipment failures
| (choose any combination) can easily dissuade even the veteran
| landlord, let alone a fresh new one.
| tenpies wrote:
| Depends on geography.
|
| For example, in Canada, housing is up 30% YoY. Trudeau's
| Federal government recently said that even a 10% correction
| in housing would be unacceptable.
|
| In practice, Canadian housing isn't housing - it's a 30% (or
| better) government bond that you get to live in or rent out.
| That's a 30% return guaranteed by a sovereign state that will
| gladly destroy everything else in the country to prop up
| housing. There is no investment like it anywhere else in the
| world, which is why Canada is seeing the largest real estate
| bubble in the world.
|
| The best part? You can sell your principle residence
| completely tax free. Not a penny in tax paid from capital
| appreciation.
| SadCanadian wrote:
| I live here in Toronto and it's an absolute dumpster fire.
| The country is increasingly becoming hollowed out and
| residential investments are increasing as a % of total
| investments. In addition, there is no plan for prosperity.
| GDP per capita has been stagnant or negative and the
| productivity numbers are weak. The housing sector is
| becoming a giant leech sucking the life of out of
| productive investment. Engineers have quit to become real
| estate agents and try their hand at selling to foreigners
| or over-leveraged locals.
|
| Very little hope here from the eyes of a local. Maybe you
| can study software to get out and go to an American city.
| America remains relatively industrious. Canada is just
| becoming a high tax version of Monaco (doesn't even make
| sense but still).
| jcims wrote:
| I live about four hours due south of you and loved
| visiting Toronto as a kid. I had seen similar commentary
| recently about the real-estate market and thought folks
| were exaggerating. From what I could see, they weren't.
| Just now I was going to make a joke about the long game
| being in Nunavut but checked my work first and, uhh,
| nope. That's some crazy shit. $600k for a (nice) 5br on a
| half acre in the tundra? No thanks.
|
| I know we look funny from up there but we do love y'all.
| My sister-in-law is from Guelph and lives in Ohio, we
| just bought matching F150's. So feel free to come down
| any time. The politics suck but the weather's fine.
| Logon90 wrote:
| A 30% return on real estate or a 30% depreciation of CAD?
| That's the interesting question. Though the best one to ask
| at this point is: crypto or real estate?
| vmception wrote:
| The primary feature of the real estate market is that the
| prices change so slowly that margin calls take years to
| happen. People are trading houses on 400%-2000% (4x-20x)
| leverage. Whereas with the stock market and other asset
| classes, you can't generally get that much leverage, and when
| you do the risk of getting margin called is perpetual and
| instant.
|
| So although housing prices don't necessarily increase faster
| than the S&P500, and that there are many local variables in
| play, the same 7% increase YoY can really be a 140% increase
| YoY, while you are also renting out the home for more
| cashflow.
|
| Liquidity of the housing market has vastly improved over the
| last 5 years, mostly due to new kinds of lenders and
| underwriters in the market, with the current year being even
| more liquid than ever.
|
| The downsides of real estate haven't gone away. Like
| maintenance and physical presence needed, which is difficult
| for an individual as the portfolio expands. The physical
| presence demand - or the need to make it economical for there
| to be someone else maintaining the property - means that it
| is difficult to come up with the downpayment for real estate
| in areas you would actually like to live in, but are fully
| capable of renting in. So the barriers of entry stay where
| they are.
| toomuchtodo wrote:
| The margin call only occurs if you can't service the debt.
| As long as the note is paid, you can drag the debt out to
| note maturity (assuming fixed rate vs ARM, interest only,
| etc). If you have enough income from investments, and can
| service the note until maturity, whether you rent the
| property or not is immaterial. You can leave it vacant
| forever. Same if you pay it off and hold.
|
| For this discussion, I'm going to waive away the
| maintenance costs on a SFH, as they are immaterial for the
| size of the homes in SF regardless of what the value is
| determined to be by an arms length transaction.
| vmception wrote:
| Yes, and this is true in both markets, real estate or
| stocks. In the stock market you have up to 5 days to
| service the debt, and may also get liquidated instantly
| if the broker feels threatened. In the real estate market
| you have months upon months and maybe years, before your
| property is taken away from you.
| toomuchtodo wrote:
| I agree that the mechanisms are somewhat similar, but
| also that they are wildly different (unlike a securities
| margin loan or pledged asset line, your lender can't
| foreclose if the value of the property declines and you
| can't meet a margin call; as long as you keep paying the
| note, the value of the property could plummet to zero and
| the lender must continue to accept payments and allow you
| to retain ownership of the parcel).
|
| Conversely, someone like Interactive Brokers is going to
| liquidate your holdings with extreme prejudice if the
| securities collateral declines below what their risk
| management feels comfortable with (other brokers are
| going to call you and perform a margin call).
|
| You also can get way more leverage with real estate loans
| versus margin loans or pledged asset lines.
| vmception wrote:
| It's good that they can't, but even in the stock market
| you can get perpetual gradual margin calls that you can
| continue to meet if you felt like it, as long as they
| were gradual and not steep then a good broker will not
| liquidate your position at the lows.
|
| I'm mainly responding to provide helpful context to
| others. Not for a typical pedantic thread where we are
| already agreeing with each other but just squabbling over
| semantics.
|
| I would say this is the primary savings grace for real
| estate investors and homeowners. They get to build equity
| in so many scenarios that it works out for them and lets
| them maintain access to low cost capital, against the
| equity they build up.
| gjs278 wrote:
| nobody can confidently say one way or the other. both could
| crash. at least with the stocks you probably aren't doing it
| on margin so you won't lose the principle and can wait it
| out. with the house you can lose all the payments and the
| house if you can't cover the mortgage.
| xenihn wrote:
| 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.
| bcrosby95 wrote:
| 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 large
| of a correction after this particular run-up, because before it
| both rent and purchase prices were already extremely high.
|
| Ultimately I see it as only a minor problem on top of the huge
| problem of the basic affordability of shelter.
| mateo411 wrote:
| 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.
| treeman79 wrote:
| Live in a cheaper metro. A year ago land lord was all buddy
| buddy.
|
| Now it's like, oh your rent is way to low.
|
| Look at moving to another metro, no homes for rent.
|
| Market is insane.
| thanhhaimai wrote:
| 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.
| jjnoakes wrote:
| The main difference is your mortgage was likely acquired
| long before the value reached that level.
|
| The choice was never between renting and buying a $1m home
| for a $500/mo difference.
| hn_throwaway_99 wrote:
| 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
| CoastalCoder wrote:
| In the U.S. at least, property taxes are normally treated
| as part of the mortgage payment.
|
| They're not _technically_ part of the mortgage payment,
| but they 're a line-item in your monthly payment to the
| lender.
| d3ntb3ev1l wrote:
| Long term rentals will cease to exist when all this free money
| purchases convert directly to fuckin Airbnb's
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