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Another mind F*&!


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2011 Oct 27, 4:02pm   20,867 views  72 comments

by Buster   ➕follow (0)   💰tip   ignore  

The last weeks I have, like most of you, been thinking very intently on the state of our union, the economic disparities, the corruption of our systems and institutions, real estate and even OWS.

So here is another kicker. I decided to toss in the towel and buy a place, in spite of most here and elsewhere reminding me of my potential folly. But I finally found a place that we adore and it made financial and spiritual sense so to speak. It just feels right. Tomorrow we close on the deal.

Tonight under the door, our rental complex 'landlord' slipped a rent increase notice under the door. When I read it I about sheet a breek. We rented a place DT on the Embarcadero as we are new to the city and didn't really know where we wanted to live and didn't have time to visit the city to shop around for rentals. What we rented is nice, but nothing great. It does have a stupendous view of the Ferry Building and overlooks a huge chunk of DT and the SF Bay. Stunning. 600sf, an equally large balcony on the 18th floor and a block to Bart/Muni and the Transbay Terminal. Rent $3200. Rather steep but manageable and I get it for the convenience and view. Tonight I find out that if we choose to stay, our rent is going up to.....drum roll....$5200/month. No lie.

So of course I am elated that we have someplace to move to, for quite a bit cheaper, 3x as big and in a great setting and neighborhood just north of the city. But I truly get why the 99% are so pissed and why OWS is more than justified in their anger. It is like everyone is now out of their homes or folks with good jobs and cash can't even buy a place if they wanted to are all flooding into the rental market, allowing landlords such as mine an open opportunity to screw everyone. Pay it or get out.

So my question is this; do they now have us pinned in a double whammy? Is this the beginning of skyrocketing rents even as housing prices continue to drop lower? Is the middle class just so screwed that it has gone completely numb with the shifting realities? Quite frankly, I am joining OWS. I used to even be a loyal democrat. I am now, simply, the 99%.

So what are your thoughts? More rent increases? More social unrest due to what I describe above? I am just a little freaked out at the moment I guess. I do well financially and can only feel compassion for those who make far less. Not even sure how folks are making it. I know, I know, some will say that they are renting someplace an hour or two from the city for 400/month and they don't know what I am talking about....Love to hear what you are all seeing/hearing/and experiencing out there....thanks.

#housing

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1   Buster   2011 Oct 27, 4:14pm  

Oh, perhaps I should also add that I think a lot of OWS, perhaps more than most, because I over look the OWS site in front of the Ferry Building.

2   Â¥   2011 Oct 27, 4:31pm  

Land rent is a very critical imbalance in the system, yes.

If you are familiar with my rants here you've heard what I have to say about that.

One thing that interests me is that the home ownership rate is much lower in the big cities compared to Krugman's "Flatland"

(http://krugman.blogs.nytimes.com/2007/10/20/the-two-americas/)

Parasitical wealth has in fact captured a massive tap on working America via its ownership of the housing stock.

This is even more so in California thanks to the wonderful Prop 13 protection long-term LLs enjoy.

I don't know where rents are going but I do know rents only go down with vacancy, and people go where the jobs are and will pay whatever's necessary to the LL for the privilege of existing on this planet.

I think this decade is going to be a coinflip between deflationary collapse and inflationary quasi-catastrophe (if you're a renter).

Chances are very good the Republicans capture all 4 branches of government next year, and who knows WTF they're really going to do.

It's in their immediate strategic interest to make sure 2014 and 2016 isn't a repeat of 2006 & 2008 for them. This can only mean literal money drops -- shit like $3000 tax credits sent to everyone, $20,000 cash if you buy a car, who the hell knows really.

Whatever happens, things are going to get pretty weird here, and that's just the Federal level. What happens to Blue states in a Republican regime is not something I am comfortable pondering.

3   clambo   2011 Oct 27, 5:46pm  

We're curious if you join the OWS people how will you pay your mortgage? You can't go to work and hang out with the complainers all day.
Rents in San Francisco reflect that it is one of the few places where there are jobs, and there is pressure from foreigners to buy/rent there. San Francisco is one of the preferred places to buy for rich Communist Chinese officials who have gotten rich by corruption. Evidently, the building owners have determined that someone will pay that huge rent to enjoy the views. What is there to complain about?
Why are you freaking out? What you are seeing is just a repeat of the 1970's. I suppose you don't remember them.
As far as predictions, house prices will fall in many places that were a bubble, which means many in California. A house will be a roof over your head, not an investment probably.

There won't be social unrest because there is government welfare that can be *withheld*. See how they are thinking of drug testing people on welfare, housing, etc? That'll keep them in line.
The situation will improve but after the USA finally decides to produce what it needs. Interestingly, we are unique because we can actually produce everything we require right here. We have resources and food production sufficient for our needs if we decide to get them.
There are 285 trillion cubic feet of natural gas under our feet. We can run all the cars, trucks and buses on it for over 100 years. That is a saving of $500 billion every year that we would NOT be sending to enrich foreign oil producers.
Where I live, houses, water are heated by it, and our buses run on it. The electricity is supplied by it (Moss Landing), so any electric car also runs on natural gas actually.
I agree with those who may be at OWS that the bankers are a bunch of clowns, but they've always been. The bankers I refer to are Rubin, Summers, Geithner, Weill, and their ilk who got Glass-Steagall repealed when Clinton was still president. The banks then started their trading desks when they began gambling and of course they lost big eventually.

4   StoutFiles   2011 Oct 27, 10:30pm  

I have a lot of thoughts about the current system, both good and bad. However, all I'm going to say is "Entitled" and "Accountability".

At some point, we need to realize that our dreams of great schooling, a large house, nice cars, a huge family, and a great location can't happen for everyone...at least not without crippling debt. It's the American Dream, not the American Right.

At some point, we need to own up for our mistakes and not blame everyone else. If you borrow money to make the Dream happen, you have to also be ready for the possible consequences.

I'm not even close to rich...I rent, I drive a Toyota, but I have enough money to eat, have shelter, drive, and do fun things. When did that become a horrible life? In a global economy, I see the lives of other countries people and I wonder why exactly we're complaining. It could be much, much worse.

5   mdovell   2011 Oct 27, 10:32pm  

Bellingham..just a question but what do you think the chances are of consolidation of major home builders? (Lennar, D.R Horton etc)

6   FortWayne   2011 Oct 27, 11:20pm  

rent at $5200 a month, are you living next door to Donald Trump? That's more than most families make pretax.

7   Buster   2011 Oct 27, 11:31pm  

Fort Wayne, no I don't and that's my point. Our apartment tower admittedly is in a decent neighborhood, but the actual building or apartment is nothing grand in the least. Hell, it still has an 80s kitchen! Yes, they just upgraded the hallways, but I don't live in a hallway....

8   Buster   2011 Oct 27, 11:36pm  

Clambo, I will join OWS physically from time to time on we and in the evenings, just like Robert Reich does....I literally bumped into him last week. Should you not know he was the former Clinton administration US Secretary of Labor. I have joined OWS and as such will continue to advocate....even when I can't physically attend. Sort of like you can be a person of faith without being in the actual place of worship...jeeesh.

9   bubblesitter   2011 Oct 28, 12:14am  

Buster says

Rent $3200. Rather steep but manageable and I get it for the convenience and view. Tonight I find out that if we choose to stay, our rent is going up to.....drum roll....$5200/month. No lie.

Keep an eye on it. Just curious if it is really gonna rent for $5200.

10   FortWayne   2011 Oct 28, 1:18am  

Buster says

Fort Wayne, no I don't and that's my point. Our apartment tower admittedly is in a decent neighborhood, but the actual building or apartment is nothing grand in the least. Hell, it still has an 80s kitchen! Yes, they just upgraded the hallways, but I don't live in a hallway....

Move the hell out of there man. Because this LL is just trying to rip you off.

11   Patrick   2011 Oct 28, 1:34am  

Why the F are we exempting landlords from fair property taxes? Prop 13 is truly insane.

What's needed is just the opposite: a Prop 13 for tenants. Germany has laws like that: where once you're renting, you have a certain security in your rental. The landlord can raise the rent only so much each year, and must offer you a lease renewal.

Germany is doing just fine with laws that protect renters.

12   Â¥   2011 Oct 28, 2:02am  


The landlord can raise the rent only so much each year, and must offer you a lease renewal.

The problem with rent control is the oddities that happen when the market rent and the actual rent diverge significantly. Supply tends to lock up I think.

Just this morning I read Steve Wozniak's account of his Apple days -- in 1980 he was paying $150/mo for the Park Holiday apartments near the airport.

Today the market rent is $1100. Inflation calculator says $150 should be $400 today.

It's a wonderful world.

13   Â¥   2011 Oct 28, 2:02am  

mdovell says

just a question but what do you think the chances are of consolidation of major home builders? (Lennar, D.R Horton etc)

I know less than nothing about their business.

14   Patrick   2011 Oct 28, 2:24am  

Bellingham Bill says

The problem with rent control is the oddities that happen when the market rent and the actual rent diverge significantly. Supply tends to lock up I think.

Tenants should have some security against unreasonable rent increases though, no? Would a land value tax help renters?

If anyone is going to be for Prop 13, they must also necessarily be for that same protection for renters, or they're not being consistent. Tax control and rent control are very similar.

Hey, SF does actually does have rent control. So how can this guy's landlord raise his rent so much?

15   edvard2   2011 Oct 28, 2:26am  

I can't exactly put my finger on it but in some ways it feels like there is definitely some "bubbleicious" activity going on in the bay area. Especially in the city and the Peninsula. At the moment the high rents and so on seem to be contained in those areas. I'd say 60% of the people I work with live in those two places and it sounds like rent has been going up a lot lately. What's scary is that I was here at the tail-end of the dot-com and back then high rents had spilled over into the east bay and other areas. I hope we're not about to see that again.

Believe it or not we received a rent increase this week. Luckily we have great landlords and after 8 years this is our first raise and it was drum roll.... $75. They love us and we could probably stay forever and as of now we pay very reasonable rent: $1,775 for a 4 bedroom house with a sizable yard.

That said... I am sort starting to actually think about buying a house. I only say this because I'd say that for the last 3-4 months there has been a number of seemingly nicer houses that have come up for sale in our neighborhood- houses that just a few years ago could reliably be counted on to cost at least $500k. Several have been 350k-450k. Still pricey. But we've been saving for years and could knock out most of the cost of a house like that and have a small mortgage. Then again I'm not sure if I want to stay here and if we wanted to we could buy outright just about anywhere else and almost semi-retire before we're 40. Arg. decisions.

16   Patrick   2011 Oct 28, 2:30am  

The legal limit to annual rent increase for the same tenant in San Franciso seems to be very small, since it's tied to inflation:

http://www.sftu.org/rentcontrol.html

So that large rent increase should be illegal. What am I missing?

17   thomas.wong1986   2011 Oct 28, 2:33am  

FortWayne says

rent at $5200 a month, are you living next door to Donald Trump? That's more than most families make pretax.

More hype if anything... such high rents on wide scale wont last.

18   thomas.wong1986   2011 Oct 28, 2:35am  


So that large rent increase should be illegal. What am I missing?

On a commercial side, many rents are limited to rate of inflation, which is so stated in the contract. So large rents are cap'd.

19   bubblesitter   2011 Oct 28, 2:39am  

Bellingham Bill says

Just this morning I read Steve Wozniak's account of his Apple days -- in 1980 he was paying $150/mo for the Park Holiday apartments near the airport.

Today the market rent is $1100. Inflation calculator says $150 should be $400 today.

You forgot to consider what the rent/income ratio then and now.

20   SFace   2011 Oct 28, 2:40am  


So that large rent increase should be illegal. What am I missing?

It's an exempt building.

having said that, I was looking at Archstone (Fox plaza and St Francis website) today and it seems rents are up at least 10%-15% accross the board vs last year. A two bedroom is now starting at 4,200 now vs 3,600 about a year ago.

21   clambo   2011 Oct 28, 2:45am  

You don't think I know who Reich is? He's all over the place.
The OWS people will make no political influence because they represent the same anger everyone has towards bankers. The other feelings of fear, angst, resentment, envy are pointless emotions.

The Tea Party people also were annoyed that TARP was used to bail out Goldman's bad bets, Timmie made them whole on their bad AIG bet, 100Cents on the dollar. Merkel by comparison just said the banks get 50Cents on their bad Greek bond investments. Tea Party people were also pissed that TARP was misued by Obama to bail out the United Auto Workers union, stealing from and screwing the bondholders and giving the UAW equity they didn't deserve.

Your post was incredulous about a rent increase. Why? San Francisco is still the most scenic, most liveable city in the USA. Manhattan is exciting but the place is stressful unless you are a zillionaire, and no city has the climate to compare with San Francisco.

22   edvard2   2011 Oct 28, 2:56am  

clambo says

Your post was incredulous about a rent increase. Why? San Francisco is still the most scenic, most liveable city in the USA. Manhattan is exciting but the place is stressful unless you are a zillionaire, and no city has the climate to compare with San Francisco.

Others would argue against that claim. I live in the Bay Area and personally try and avoid SF because it is:

1: Overpriced
2: sort of grubby and dirty
3: traffic is awful
4 overrun with tourists

Also- I have friends who live in NYC and they wouldn't dare ever leave because they think the place is just the absolute most amazing place on earth and you know they don't think that for the weather.

23   Patrick   2011 Oct 28, 3:11am  

SFace says

So that large rent increase should be illegal. What am I missing?

It's an exempt building.

How did that building get to be exempt? Kind of defeats the whole rent-control thing.

24   fil   2011 Oct 28, 3:26am  


SFace says

So that large rent increase should be illegal. What am I missing?

It's an exempt building.

How did that building get to be exempt? Kind of defeats the whole rent-control thing.

I believe units built after 1989 or 1986 or some designated year are not covered by rent control. Also Single family homes are not covered and i think in some cases converted condos.

In my opinion, living in a downtown apartment tower is nuts. You could get a pretty good size place in some nice neighborhoods for $3200 and for over $5000 you could rent a fab place in very nice neighborhoods.

25   clambo   2011 Oct 28, 3:46am  

I grew up in NYC and it's fun. But, you must have a ton of money to live well in Manhattan.
NYC has about 4 weeks of weather per year that is as nice as San Francisco for 8 months per year.
Manhattan is cool, the rest of NYC can be scary, some just slightly nicer than the area inhabited by the "prawns" in Discrict 9.

26   tatupu70   2011 Oct 28, 3:48am  

clambo says

and no city has the climate to compare with San Francisco.

I'll take San Diego, thank you.

27   TPB   2011 Oct 28, 4:10am  

Kudos on the move and decision to buy. You're paying 3.2 grand for rent and aren't sweating that, then you should be fine with your purchase.
What will your mortgage be, less or equal to what you were paying I hope.

Which brings me to another question, you can afford 3200 a month, and you're all up in arms and participating in the OWS movement?

I just don't get this OWS movement?

OWS should consist of pissed of Wal-Mart greeters, and Fry Cooks, not Brokers, day traders, engineers and software developers living posh ruffing it in the park in the day, then driving home in their Beamer and parking in their lighted security garage.

28   Jimbo in SF   2011 Oct 28, 4:20am  

Using a 30yr mortgage @ 4.25%

The $3,200 rent is the same as a payment on a $650k mortgage
The $5,200 rent is the same as a payment on a $1,050k mortgage

I think this helps explain why buying is not as crazy as it seems in SF, when the only other option is to rent at these prices.

29   StoutFiles   2011 Oct 28, 4:27am  

Jimbo in SF says

I think this helps explain why buying is not as crazy as it seems in SF, when the only other option is to rent at these prices.

I would argue that living in SF in general is crazy at those prices.

30   Teri   2011 Oct 28, 4:27am  

The GOP says

Which brings me to another question, you can afford 3200 a month, and you're all up in arms and participating in the OWS movement?

Why is it surprising in this day and age to care about problems that harm other people more than they harm you? That being said - those of us who can afford more are getting less and less for our work. It takes upper-middle incomes to afford a middle class life. It's about the 99% not 90%.

31   Jimbo in SF   2011 Oct 28, 4:36am  

StoutFiles says


I would argue that living in SF in general is crazy at those prices.

I don't disagree with you, but there is a constant turnover of new people to any city and SF especially with the Tech industry nearby.
The new arrivals are forced to pay today's higher rent prices, while long term renters are cushioned by rent control.

32   Â¥   2011 Oct 28, 4:50am  

"you can afford 3200 a month, and you're all up in arms and participating in the OWS movement?"

That $3200/mo is just one more way those getting something for nothing -- parasitically living off of others' hard work -- have their taps in the system.

Another area of rent-seeking is in health care -- per-capita health care is $8000, twice what the "socialized" countries pay.

http://www.kff.org/insurance/snapshot/OECD042111.cfm

So a family of 4 is getting price-gouged by around $16,000 a year right there.

But hey, what's the problem if you can afford it, right?

That's an idiotic way to think -- it makes you miss the fact that capitalism is eating itself now.

It does that, periodically.

http://progressandpoverty.org/

33   TPB   2011 Oct 28, 5:18am  

Bellingham Bill says

Per-capita health care is $8000, twice what the "socialized" countries pay.

Stop paying it! You(America Collectively) are only encouraging the behavior of our Bizzaro world Capitalist based health care system when you sign that line, or take a job because they tell you are getting "Benefits" yet you're paying a Luxury Car payment with insurance every month for that "Benifit" it makes no damn since at all. Considering before Clinton tried to "Fix" healthcare THEN, when an employee talked about insurance from his work place, they always said...
"and Free Medical".

Just saw a piece on the news last night, where people in dire need of cancer drugs, can't get them because drug companies have stopped making them. Not because they weren't needed, but due to the profit margin is greater on creating and pursuing new pattens on totally unrelated drugs.

http://miami.cbslocal.com/latest-videos/?autoStart=true&topVideoCatNo=default&clipId=6393991

Meanwhile these drugs were considered the only available option for what they treated. So now there's not only a shortage or deficit, but a greater demand than ever. Generic drug makers are now going to make this drug and sell it for 1000% more than the original company. Remember Trout's rant on generic drug and patent shenanigans?
Due to all of the mergers fewer companies actually manufacture pharmaceuticals. That means even for these thousands of generic companies, it's one of these few pharmaceuticals companies that create their product at the end of the day.
They choose what they make and when. They create the profits, and you make it happen by enabling these greedy Insurance companies to screw the old, sick and infirm, and charge the Healthy out the Ass to pay for it.

It's Monetized to the max, I don't see how any Insurance scheme based health care system can work in this country.
In fact, we should outlaw Employer Health insurance, where an employee has to pay one dime of it.

What deal you have with your practitioner is your business.

We need education and health in this country. We should have Federal medical schools, and federal doctors in a federal health care system.

We're all far better off saving our money under the mattress and buying a liver on the African black market, than participating in this insanity. It would be a hell of a lot cheaper too.

34   Jon137   2011 Oct 28, 5:36am  

Buster says

So what are your thoughts? More rent increases? More social unrest due to what I describe above? I am just a little freaked out at the moment I guess. I do well financially and can only feel compassion for those who make far less. Not even sure how folks are making it. I know, I know, some will say that they are renting someplace an hour or two from the city for 400/month and they don't know what I am talking about....Love to hear what you are all seeing/hearing/and experiencing out there....thanks.

Two words: Oak Land.

For $1500/mo you can basically have your pick of one and two bedroom apartments in the best neighborhoods. You could rent a place five minutes walk from Rockridge BART.

35   rooemoore   2011 Oct 28, 5:37am  

Jimbo in SF says

Using a 30yr mortgage @ 4.25%

The $3,200 rent is the same as a payment on a $650k mortgage

The $5,200 rent is the same as a payment on a $1,050k mortgage

I think this helps explain why buying is not as crazy as it seems in SF, when the only other option is to rent at these prices.

gotta factor in the 20% down payment

36   edvard2   2011 Oct 28, 5:58am  

Jon137 says

For $1500/mo you can basically have your pick of one and two bedroom apartments in the best neighborhoods. You could rent a place five minutes walk from Rockridge BART.

b-b-b-but that would mean that they would have to ( gasp) move to the east bay! ( scary music)

37   Jimbo in SF   2011 Oct 28, 5:59am  

rowemoore says

gotta factor in the 20% down payment

No doubt, but if you can afford $3k-$5k in monthly rent, I would assume you have a higher than average income and probably have significant savings.

38   Jon137   2011 Oct 28, 6:03am  


Tenants should have some security against unreasonable rent increases though, no? Would a land value tax help renters?

If anyone is going to be for Prop 13, they must also necessarily be for that same protection for renters, or they're not being consistent. Tax control and rent control are very similar.

Hey, SF does actually does have rent control. So how can this guy's landlord raise his rent so much?

Oakland has rent control. The amount rents can go up is determined annually.

I think it has the effect of letting rents rise with inflation and economic conditions but not erratically, which can force people to move and unsettle their lives/jobs. I think that should be the only purpose of rent control. NOT this BS about "once you move in you have a right to live here forever."

SF and NYC are examples of broken rent control. It encourages people to never move, which in turn creates a supply shortage, which in turn drives prices up for newcomers. Basically, new renters are subsidizing the old renters.

For example, my brother took a job as a caretaker for a woman who lived on the upper west side, about a block from Central Park. It was a shabby, worn 4-bdrm apartment, probably 2000 sqft. She had been renting it since the late 70s. Her rent?

$470/month. If it went back on the market it would go for 6k/month. I don't know about you, but that just sounds like a mafia hit waiting to happen!

She couldn't sublet, but she could let my bro live there rent free in exchange for helping out with her kid. She herself was a semi-failed therapist probably making $40k per year, yet she's living a block away from Yoko Ono.

That's what rent control does there. You could make twice what that woman does and she would still be living better than you for the sole reason she just sat her fat ass down in one place long enough.

39   Â¥   2011 Oct 28, 6:40am  

Jon137 says

Basically, new renters are subsidizing the old renters.

well, no. Aggressive rent-control ordnances just give the same price protection to leasehold tenants that fee simple tenants enjoy.

You could make twice what that woman does and she would still be living better than you for the sole reason she just sat her fat ass down in one place long enough.

All owners have this same fat ass then.

Funny thing is I checked the place I was renting in LA in 90025 in 1991.

The rent was $700 then and if I had stayed it'd be $1300/mo now thanks to rent control.

Market rate is $1600 or so I guess.

40   Patrick   2011 Oct 28, 7:41am  

Jon137 says

Her rent?

$470/month. If it went back on the market it would go for 6k/month.

OK, that's definitely broken. But OTOH, giving landlords the power of unlimited rent increases is a broken system too. Very disruptive to renters' lives.

What would happen under a Georgist system? Georgism means that the portion of rent due to mere land ownership is taxed at 100%, but the rent due to capital improvements is taxed at 0%.

I suppose if the market value of the thread author's place is really $5,200/month, then the land value tax would be most of that, but the tenant would not get a break. The rent would really be that high, and the tenant would have to pay it. The landlord would also not be terribly thrilled, because his profits from non-productive rent-seeking would be gone.

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