Will renters and prospective homeowners ever catch a break?
Either the home purchase market is hot or the rental market is hot, and right now the rental market appears to be twisting the knife into would-be renters, while prospective homebuyers are playing the waiting game with the housing market.
From today's Chronicle,
More than 25 people packed an open house Saturday for a studio apartment on Russian Hill with hardwood floors, a view of the Bay and a monthly rent of $1,450.Yeah, there's plenty to debate here, but my point is that you just can't win in this town if you're a renter, can you? You want to buy, but it's "too expensive", so you rent and now that market is tightening significantly (and has been for a few months now).
By Sunday the unit was snapped up.
That sizzling demand is driving up prices, experts said. The average asking rent for a Bay Area apartment jumped 8.2 percent to $1,415 in the third quarter compared with $1,378 for the same period a year earlier, according to an analysis by Novato research firm RealFacts that included apartments of all sizes from studios to three bedrooms. The occupancy rate rose 1.2 percent, to 96.2 percent.
The apartment rental market and the housing market have traded places. [more...]
I will, however, take this opportunity to remind you of my opinion of the purchase market right now. There is quite a bit of inventory, much of which is stagnant, and much of which could also provide great opportunities for buyers.
Some will disagree, and with that I wish them luck in the rejuvenated multiple-offer world of the renter.
Rental market is red-hot [SFGate]
Rental doors slowly closing on apartment hunters in Bay Area [SFHomeBlog]
Bay Area rental market hits a happy medium [SFHomeBlog]
Up to 25,000 SF residents pay more than half of their income in rent [SFHomeBlog]
posted by Matt Lanning @ 11:30 AM
10 comments
links to this post
10 Comments:
So if rental prices continue to increase at this 8% per annum, it will 'only' take around 10 years for the cost of renting to catch up with the after-tax holding costs of buying an equivalent proeprty - if house prices remain static, that is. I think I'm going to rush out and buy. Or maybe not.
Like I said, plenty of debate around this issue... But the fact that it may never be cut and dry is the point of my post...
"Will renters and prospective homeowners ever catch a break?"
Hey - it's an expensive place to live!
Using Matt's "break" terminology:
Renters caught their real break from 2002 until 2005, though rents have not gone back up to 2000 levels. Yet.
Looking backward and forward, buyers had their true break in the mid-90's - and will get a break again in several years.
When just exactly, and for how long that break will be... is open to debate, of course.
At some future date, higher rents and lower house prices will bring more clarity to the buy/rent question (as mentioned above) and the premium to own won't be so large, or as large as it is today.
I think that day is several years away, at least.
My $0.02, of course.
[Re: "Premium" to own
Meaning I think there will always be a premium; that won't ever go away completely around here unless the economic conditions are so bad everyone will have a lot of other more important things to be concerned with - like where to get food, or perhaps with protecting their own life]
I think the problem for most renters...at least those that I know, is the down payment. So it doesn't really matter how high the rents go, even if someone can afford a fairly high payment, they can't come up with down payment unless they have a rich relative willing to 'gift' it to them.
Cameron is right. The issue is whether SF is a place where a first time buyer can enter the market (It is not). And whether it is sustainable for SF to be so exclusive to home ownership in the long run (I don't know). The balance of rents to 'purchase price' / affordability are certainly linked and to think otherwise is void of economic sensibility.
SF is a unique market; always has been, always will be. So debate away, but the market always bears the facts out over time. Lot's of signs pointing towards a slow down that could last longer than the seasonal dip we are seeing now.
Andy
That's funny... My rent hasn't changed in 4 years. I rent a huge 4 bedroom house with one other person and my wife for roughly $1600, or around $550 a month each. Chicken feed if you ask me compared to paying almost $4,000 a month for a studio loft in SF.
I love this whole Realtor speak that right now is the "perfect" time to buy with the only reasoning being tied to the fact that there's a lot of inventory. If there are 10,000 BMW's all priced at $70,000, then does their sheer numbers alone make them a great deal? I don't see any logic in buying for the next few years until prices come down, which they will because EVERYONE I know who's thinking of buying someday is thinking the same thing: wait and the prices will come down.
"I think the problem for most renters...at least those that I know, is the down payment."
Using generalizations about renters isn't very accurate. Just like homeowners, everyone who rents has a different situation. I personally save over 70% of my income while renting. This compared to the average homeowner, especially recent ones who are plunking down as much as 60% of their incomes just on housing costs. There's a quality of life lesson in there.
Get in line behind the thousands who have been saying the same thing for ten years or longer... And compare their savings or equity with those of us who haven't been poo-pooing real estate, or hoping against hope.
Smart purchases can be made in any market. Period.
Your choices might make sense for you, and that's great. Doesn't make purchasing a home in San Francisco a bad move for others.
And in the meantime, enjoy paying someone else's mortgage (or padding their IRA).
I seriously doubt that I'm doing worse than some of these fine folks who bought a home in the last 3 years using toxic loans and not even paying on the principal. I bet you can name a few people that are doing well who bought, by I know for a fact I know TONS of people who are just barely making it who "bought" using IO, ARM, or even IO/ARM combos. These people are hurting just paying this, and they'll be hurting a lot more once those loans reset, or the value of their home doesn't go up.
You see, what I think most people on both sides of the fence are missing is that it doesn't take severe home devaluation to topple a RE market. Truth be told, the RE bubble was over in 2003. I bet you remember 2003 for having a short period of slumping sales. Most people don't. It was then that these so-called teaser loans came into existence.
Since 2003, over 60% of home purchases in SF and the BA were made using IO or combo IO/ARM loans. Again- these loans seldom position the "buyer" from actually paying down the principal. They often reset to a higher payment, and in the case of ARMs, actually add more to the principal owed.
So it doesn't take a rocket scientist to see that once these homedebtors who used these exotic loans fail to see appreciation, then the whole delicate balance is thrown into the bicycle spokes. The entire RE market was tied way more to specualation than I think anyone ever knew. I'm not necessarily sure that prices in the immediate time period will fall dramatically. It takes a monumental event or a period of inflation, or "stagflattion" to cause this to happen. The monumental event is what's under everyone's radar, and that event is the unexciting realization that prices are now flat. This is what will eventually start the ball rolling.
As far as "throwing my money away". well my rent is so cheap that I've essentially saved up enough to put down more than 50% of a downpayment on a typical BA house. But I am not so foolish to throw my hard-earned money away on a depreciating asset.
I consider cheap rent a way to pay myself.
I agree with Anonymous
Post a Comment
Links to this post:
Create a Link
<< Home