patrick.net

RentingForHalfTheCost says

Bigsby says

RentingForHalfTheCost says

Guess you just got by in math class then. You made the claim that rents are rising and I called BS on it. Back that up smarty pants and then I'll give you some of my time. Otherwise, keep waiting for my effort to show you how wrong you are about your claim.

Still bluffing I see. As I said, do a google search for the yearly rental changes in the bay area and come back and tell me they declined. You won't because they didn't.

Data=Nada

Yeah, and your evidence is what exactly? Prices fluctuate all the time, but it is a fact that rents are higher now than they were a year ago. They may well have flattened in the previous quarter after a long run up but I've been reading your posts for a while now and you've been stating rents have been declining for a good long time. That has simply not been the case. You really are one for demanding data from others (when a simple google search would suffice), but are hardly forthcoming when asked to back up your own claims.

FBigsby says

Prices fluctuate all the time, but it is a fact that rents are higher now than they were a year ago. They may well have flattened in the previous quarter after a long run up

As a renter in San Jose I agree that rents have gone up year over year. However, I pay a lot less in rent now, live in a much nicer place, in a better part of town, closer to my work. Why? Because I shopped around and didn't just accept a rent increase (most people in the Bay Area will just pay the extra $200 a month)

It does seem that rents are now going back down in the area. My buddy had 2 years of rent increases: it went from $1800 to $2000 to $2200. He just renewed his lease last month and reduced his rent to $2000. As well there are a lot of new rentals coming on the market from these investors that are now landlords.

Bigsby says

but I've been reading your posts for a while now and you've been stating rents
have been declining for a good long time. That has simply not been the case. You
really are one for demanding data from others (when a simple google search would
suffice), but are hardly forthcoming when asked to back up your own claims.

I actually did a google search as you said, and here is a small sample of what I found:

rents +22% YOY
http://sf.curbed.com/archives/2013/01/31/whalesized_rents_finally_done_jumping_to_the_sky.php

rents up anywhere from +1 to +100% in various locations on the peninsula
http://sf.curbed.com/archives/2012/05/14/the_bad_news_as_suspected_rental_rates_have_increased_dramatically_over_the_past_year.php

rents +22 to +28 in various locations in SFBA
http://www.sfgate.com/realestate/article/S-F-apartment-market-is-hot-4237719.php#ixzz2Ja9Tqu6P

SFBA & SV post "double digit gains" for two consecutive years
http://www.costar.com/News/Article/Apartment-Rent-Growth-Expected-To-Decelerate-In-Top-Markets-Ahead-of-New-Supply-Wave/145859?ref=/News/Article/Apartment-Rent-Growth-Expected-To-Decelerate-In-Top-Markets-Ahead-of-New-Supply-Wave/145859&src=rss

Assuming RFHTC would claim "bias" I looked at some other bearish blogs - sure enough they too claim rent increases.

So RFHTC, on this specific point, do you have anything further to say? Are all of these sources, (some of whom freely were pointing out rent declines in 08-09) all in the pocket of the NAR? What too of the bear blogs, and the other posters here - are they all incorrect, biased, and you (and your general lack of data) correct? Is that what you want to have us believe?

Now sure, you can pick apart the sample size of this, or the methodology of that. However, all of them point to a very consistent notion - rents are rising.

That said, note too how several of these items I noted state rents are decreasing in the rate of growth, have "plateaued" or perhaps could even decrease. As such, seems to me these would support your bearish notions and you should celebrate them.

Still, just understand the very narrow point at issue here. Your claim was not that rents are "flat" or "could go down" or "will go down soon". No. Your claim was that rents are CURRENTLY going down now. So the question now is, do you have any data that the rest of us can review to judge the veracity of your claim?

RentingForHalfTheCost says

Just wait for spring! This whole place will be for rent. Owners are now investors. This is going to be funny to watch crumble.

I am not sure where in the SFBA you have been renting, but you are lucky to have avoided the rent increases of the last 18 months. THey are very real and hit my wife and me in a very real way in this time in Mountain View.

Now, I do think that you are getting at something in the quoted part of your post. The amount of inventory coming online in the south bay is enormous. New complexes are being built, and the "investors" are loading the market up with rentals. The needle is going to go full-tilt the other way because of the momentum that "cash flow investing" has picked up, and it is still going. People like E-Man & SFace that got in a while ago should be fine, but today's "investors" are going to find their returns to be dwindling I think. This is nothing new of course, since markets tend to over-correct and overreact. I guess we'll see what happens.

There was no date range stated by Bigsby's claim of rent increases. It was a blanket statement. My rebuttals is about the last quarter. Rents are under pressure right now!!! Shop around, look around, talk to landlords in this area. Investors are not coming close to recovering costs! Say what you want and quote all the articles you want, these next few months will be wild in the SFBA!!

SFace says

"For example, Q1 2013 renewals went out between 7% and 9% in both regions, pretty consistent with the north of 8% renewal increases we achieved during Q4 2012."

http://seekingalpha.com/article/1148561-avalonbay-communities-management-discusses-q4-2012-results-earnings-call-transcript?page=5

You have to hate money to rent at Avalon IMHO. It is only for the rich foreigners who just forward on the expense to the family slush fund. No one living without a trust fund should rent at these crooked establishments. For the cost of a 1 bedroom I can rent a full 3/2 with garden/pool in the same neighborhood. It amazes me the amount people pay to have neighbors coughing 6 inches away from them. Amazing.

donjumpsuit says

So who is losing out? If I bought gold in 1998 instead of that bay area house, I would be $50 richer, wouldn't have paid taxes, and wouldn't have paid a bank to borrow money and be the ruler of all.

My scenario is similar. However, instead of paying $3k/mth 15 years ago to be an owner I rented for $800/mth and bought two places out of the area and invested in gold. 15 years ago at a salary of 60K and not much savings I would have been looking at a 300-400K house. So that would be worth about 1.2m or so today if I did the upkeep properly and dumped about 200k in improvements into the place. I can say that I am close to 2x that value today because I didn't buy. Sure, my salary increased, but most of my smart moves were done when my salary was less that 100k. To each his own.

SFace says

For 2013 in the Bay Area, we expect revenue growth of 5.5% to 6.75%"

I bet they don't get it. Expect all you want. It just doesn't make any sense.

robertoaribas says

I notice you left 15 years of rent payments out of your gold/home comparison...

Rent in SFBA doesn't even cover the taxes and maintenance many times. Owners are running a loss and will be for a while. The only way they can break even is if they bought pre 1997 or they charge $5k for a 2bd/1ba 1000 sqft house. Ain't gonna happen.

Patient: I can't find anything in Santa Clara/Sunnyvale/Mtn View for less than 2500/Mth.

Doctor: I'm a family practice doctor, you need to see an optometrist.

RentingForHalfTheCost says

I rented for $800/mth and bought two places out of the area and invested in
gold. 15 years ago at a salary of 60K and not much savings I would have been
looking at a 300-400K house.

So its true then - even 15 years ago, Patrick's "wait" for rental parity was false in the SFBA. Good to know.

CDon says

RentingForHalfTheCost says

I rented for $800/mth and bought two places out of the area and invested in

gold. 15 years ago at a salary of 60K and not much savings I would have been

looking at a 300-400K house.

So its true then - even 15 years ago, Patrick's "wait" for rental parity was false in the SFBA. Good to know.

You'll never see it in the SFBA. Too many people willing to go into debt thinking it is a great road to wealth.

robertoaribas says

It is very hard to argue a $600K home purchase then would have been a bad investment...

Also, your argument: " I rented in the Bay Area, and purchased elsewhere" is a false choice. You could have bought in the bay area and purchased elsewhere as well.

I couldn't afford a 600k house 15 years ago. A 300K house would have made me cash poor for years. That alone would have meant that I couldn't buy elsewhere. I guess the math is too difficult for the professor. ;)

RentingForHalfTheCost says

15 years ago at a salary of 60K and not much savings I would have been looking at a 300-400K house.

Was that your position 15 years ago? You are now paying $3050 a month, presumably for a fairly similar house to one that could have been purchased for around 400k back in 97. If buying hasn't been appealing to you before, it certainly isn't going to be moving forward. A lifetime of renting vs you having dumped your money into a 300-400k house back in 97 still doesn't look a particularly great decision to me. You could have easily paid that off by now, so all your current $3050 cheques and all those future payments could have been redirected to your chosen investments (not to mention all the other money in those intervening years you would have saved between your 97 refied mortgage and increasing rental prices).
Now, you did well to buy your two houses and invest in gold back in 97, but that is not exactly a typical scenario for someone on 60k. And if you'd bought say a 300k house, why would that have stopped you making investments going forward as your salary improved? You seem to argue that if you'd tied yourself to that kind of purchase all else would have gone out of the window.
And all this talk about this or that investment back in '97 is kind of missing the point. Investing in a house was a far more typical scenario for most people than dumping money into gold or if you were very lucky, knocking on Larry Page's garage door with 300k in your hand.
And yes, my point about rent increases was vague, but I was referring to what people have been talking about on here for quite some time and the newspaper reports I've read from time to time. You have been arguing the opposite for quite a bit longer than the last few months.

Bigsby says

If buying hasn't been appealing to you before, it certainly isn't going to be moving forward.

Have to agree. It looks worse now and if I was starting out in the SFBA I wouldn't buy if you gave me a house for free but I had to cover the taxes and maintenance based on market values. The taxes alone are enough to bankrupt anyone. People just following the masses and every property tax time I hear the rumbles at work. 10K, 15K, 20K in taxes. Crazy.

At least you can knock down that wall that you know you never will I guess. ;)

Bigsby says

You could have easily paid that off by now, so all your current $3000 cheques and all those future payments could have been redirected to your chosen investments (not to mention all the other money in those intervening years you would have saved between your 97 refied mortgage and increasing rental prices).

Wow, this is funny math. I have paid off a house and another one on top. My investment that I wouldn't have had cover my rent and more. They did that a while ago. It is a question about wealth, and as I have stated before, my wealth is close to 2x of what it would have been if I bought. Sure, not everyone will get that, but you asked about me. I only know me. Someone with a gambling problem who didn't buy a house would have nothing. Someone with a drug problem would have nothing. Someone who bought and divorced would have 1/2 if that. Someone who bought and died would have nothing. I don't know them, I just know me. ;)

RentingForHalfTheCost says

Bigsby says

If buying hasn't been appealing to you before, it certainly isn't going to be moving forward.

Have to agree. It looks worse now and if I was starting out in the SFBA I wouldn't buy if you gave me a house for free but I had to cover the taxes and maintenance based on market values. The taxes alone are enough to bankrupt anyone. People just following the masses and every property tax time I hear the rumbles at work. 10K, 15K, 20K in taxes. Crazy.

At least you can knock down that wall that you know you never will I guess. ;)

And by the way, I'm not a landlord and if I was in the bay area, I wouldn't buy now either. The house I got in Monterey was cheap compared to what I would pay in England (and that's basically pretty much all over the country and not just in the SE), but it's obviously a lot more than many other parts of the US. Mind, it's also cheaper than many parts of the bay area. My home was being rented out by an owner who had bought multiple properties at the peak of the bubble and was in the process of losing them all. I was happy to buy because the rent was slightly more than the PITI was going to be, and more importantly, I loved the house. The property has always been valued at more than I paid (it was a short sale). The value doesn't seem to have gone up much in the last 15 months, but it also hasn't declined, so I'm happy. That scenario clearly isn't true in many parts of the bay area, though it is true in other parts of the US.

RentingForHalfTheCost says

My investment that I wouldn't have had cover my rent and more.

Why wouldn't you have had it? You would have had a lot of spare money for much of those intervening years.

Bigsby says

RentingForHalfTheCost says

My investment that I wouldn't have had cover my rent and more.

Why wouldn't you have had it? You would have had a lot of spare money for much of those intervening years and you would certainly have a great deal more going forward. How is that funny math?

House poor for the years that mattered. $3k/Mth when you are pulling 60K/yr is pretty much broke. No 401K, no IRA, no cash period. 3k x 12 = 36K. 60K * .6 = 36K (after tax take home money). Hmmm.

RentingForHalfTheCost says

House poor for the years that mattered. $3k/Mth when you are pulling 60K/yr is pretty much broke. No 401K, no IRA, no cash period. 3k x 12 = 36K. 60K * .6 = 36K (after tax take home money). Hmmm.

You weren't paying 3k a month when you earned 60k. Nobody pays 3k a month when they earn 60k. A 300k purchase back in 97 wouldn't have been costing you 3k a month between 97 and now, so I'm not clear what you are arguing.

Bigsby says

That scenario clearly isn't true in many parts of the bay area, though it is true in other parts of the US.

True, I would love to have work close to Monterey. I would buy in a heartbeat. SFBA is the sickest place on earth IMHO. You are buying a heated garage for close to 1million. If you want to fix things up, then the city will have their way with you. They have to cover their entitlements of full pensions at grossly over-inflated salaries you know. So, all in all you buy a house made of cheap particle board with some paint thrown on to cover up the obvious, and then have to pay a long line of people on the take over and over and over. Some people say they like it and it is the only way to go. I have to disagree and make sure I keep my accumulating cash in a safe place away from the torments.

RentingForHalfTheCost says

New Renter says

Based on what I see there and from Craigslist inventory is low, especially for pet friendly rentals.

Lose the pets. Sorry. That will make you overpay more than anything out there. If you really need pets then owning is most likely in your future. Probably more than kids. As a landlord I used to let people have pets, but after replacing hardwood floors, moldings, etc. never again. The idea of clean for some pet owners is just too different. You might be one of the good ones, but you will pay the premium because of a few bad ones. Kinda like insurance.

Rant on-

Are you @#$^%%# kidding? Kids are FAR more destructive than pets! Pets don't misuse hammers and screwdrivers on houses. Pets don't drive tricycles into plate glass windows. You whine because you had to replace a bit of floor and molding? Then take it out of the deposit, THAT IS WHY YOU CHARGE A DEPOSIT! Require your tenants to take out a renters insurance policy with a pet rider. If you didn't charge enough of a deposit then its your own damn fault!

I have worked with a rescue group and it is heartbreaking to see people have to surrender their pets because their asshole landlords think they *might* make a mess. Boo fucking hoo.

OK, Rant off.

As you can tell this is a sensitive subject for me. The unlucky pets are surrendered to shelters and yes there those pets are usually killed. The housing crash really exacerbated this problem.

Seriously try investing a little effort into making your places pet compatible. It IS possible to do so. When you have the flooring up, seal the underfloor. Use Kilnz on the walls before painting. Keep a supply of extra molding and whatnot on the property so if your renter can fix problems as they arise rather than letting them accumulate. Forbidding pets is the pussy's way out.

rufita11 says

Based on what I see there and from Craigslist inventory is low, especially for pet friendly rentals.

Lose the pets. Sorry. That will make you overpay more than anything out there. If you really need pets then owning is most likely in your future. Probably more than kids. As a landlord I used to let people have pets, but after replacing hardwood floors, moldings, etc. never again. The idea of clean for some pet owners is just too different. You might be one of the good ones, but you will pay the premium because of a few bad ones. Kinda like insurance.

So your solution to affordable rent is to majorly curb your quality of life ("lose the pets")? Pets reduce depression and dogs get your butt out of the house to exercise daily (if you are a responsible and loving human).

All true. Our lovely dog showed up at our door 12 years ago. Probably around 14 today. Large hound mut from TN. Could not get rid of him or find his owners. One of the best things that has ever happened to me.

Moved to Canada. Could not find a place to rent. Reluctantly, purchased. 1.5 years later, condo sold for 150K more. Thanks to 'The Buster'. I would just look and marvel at him. I mean, I have worked my ass off my whole life, he just shows up and makes 150K a year....doesn't work, sleeps and eats as much as he wants, gets lots of love, etc.

Moved to a larger condo...rinse and repeat.

Moved to SF. Found a lovely place to rent. 6 months later....DOUBLE the rent increase....OUCHx100. Could not find a decent place to rent, primarily due to our dog. Reluctantly purchased a home. Now, 1.5 years later, comps show our home at 300+K more than when we purchased.

So, added up, this boy has made 500+K in 7 years. No degree, no job, lazy, bratty, full of love for sure but a pain in the butt. WTF did I do wrong???

So what did you say about overpaying because of living with a dog??? :).

bmwman91 says

People like E-Man & SFace that got in a while ago should be fine, but today's "investors" are going to find their returns to be dwindling I think.

I don't know...I think the saddle goes on the other way; the later investors typically undercut the earlier ones. To put it another way, the second mouse gets the cheese!

donjumpsuit says

So there is about $425k in those payments alone. At some point, I need to fix a roof or redo a kitchen or replace a fence. I think I can scrimp here, and only pay ~$25k.

SO you take $100k out of my pocket in 1998, and I get the priveledge of owning a home for 15 years, that I put 1 million into,

How do you go from $100k + $425k + $25k to $1m? I'm not seeing how you are in 1 million after 15 years, what am I missing?

Also, what could you rent the same place for over the course of 15 years? Add that in to the equation, either in terms of rental income (now you get to depreciate the house, too, I think) or in terms of rent that you are saving (if you live there).

And, yes, if you can time the market well with gold or whatever, you are going to do well. You really think you could have timed the top as you suggest?

Also, gold doesn't taste very good.

bmwman91 says

today's "investors" are going to find their returns to be dwindling I think.

Based on my observation, some investors are looking at return of capital rather than return on capital. This is true on the high end market. These investors are buying the location, not the yield.

We also have some new investors chasing this market and are happy with break-even PITI. They're happy that the tenant is paying off their mortgage. They're looking at the long-term goal, and it's part of their diversification. This helps to put a floor on home prices in the $500k-$600k range.

As of now, it appears that there are competition on all price levels. Multiple offers are the norm, not the exception. I'd hate to be a buyer. If you have the cash, the courthouse steps is the place to buy. You can do a cash-out refinance after you bought it. 80% FMV all day long baby. You might get lucky and get it for 75% FMV.

I was out there last week. It's not bad. An investor got a 3/2 SFH home in East San Jose for $318k. My guess is that it will be flipped for $425k. Another investor got a 2/2 condo for $266k. It will probably be flipped for $340k+.

Buster says

So, added up, this boy has made 500+K in 7 years. No degree, no job, lazy, bratty, full of love for sure but a pain in the butt. WTF did I do wrong???

So what did you say about overpaying because of living with a dog??? :).

Everything in life happens for a reason. Buster is your lucky charm. The fortune Budha knocked on your door. Congrats.

E-man says

I was out there last week. It's not bad.

As an investor you can always find a bargain, you can always find a deal, some markets are harder than others.

There was a time when investors fed properties that they intended to keep. It's done by averaging the income to price, and what can be paid off.

You've outlined that pretty well here.

E-man says

I was out there last week. It's not bad. An investor got a 3/2 SFH home in East San Jose for $318k. My guess is that it will be flipped for $425k. Another investor got a 2/2 condo for $266k. It will probably be flipped for $340k+.

The can flip it all they want again and again as long as when the musical chairs stop once again - and they inevitably will - the last sucker holding the bag will NOT get bailed out by any means.

CDon says

RentingForHalfTheCost says

I rented for $800/mth and bought two places out of the area and invested in

gold. 15 years ago at a salary of 60K and not much savings I would have been

looking at a 300-400K house.

So its true then - even 15 years ago, Patrick's "wait" for rental parity was false in the SFBA. Good to know.

CDON, you are absolutely right. there hasn't been rental parity for at least 20 years in sfba, at least in relatively good neighborhoods (Santa Clara and up). Perhaps in cheaper places.

even now, in the Fortress, if you assume 1% appreciation, owning is cheaper after 10 years or so. So if you look at month to month, renting is cheaper. But if you have a longer horizon, owning can still be cheaper.

Buster says

So, added up, this boy has made 500+K in 7 years. No degree, no job, lazy, bratty, full of love for sure but a pain in the butt. WTF did I do wrong???

So what did you say about overpaying because of living with a dog??? :).

Thanks for sharing. Let me know if your dog needs a new home. With his/her relaxed work ethic and luck I might throw caution to the wind and buy. ;)

robertoaribas says

RentingForHalfTheCost says

I couldn't afford a 600k house 15 years ago. A 300K house would have made me cash poor for years. That alone would have meant that I couldn't buy elsewhere. I guess the math is too difficult for the professor. ;)

A $300K home would have made you cash poor? So... let's see:

1. you barely would have had $60K. for a downpayment...

2. you rented something comparable for $800 (yeah... sure!)

3. we are to believe you bought two investment homes somewhere else, PLUS enough gold to make a small fortune.... while you barely had $60K???

Don't waste your time arguing with Renting For Half The Cost, he's just a troll. Even by his own numbers in this thread, he lost by not buying once you add in 15 years of rental costs he ignored. For example, if his rent averaged $1000/month over those 15 years, he is behind $180,000 by not buying, and his average rent has to be higher than that based on his own comments.

JFP says

Don't waste your time arguing with Renting For Half The Cost, he's just a troll. Even by his own numbers in this thread, he lost by not buying once you add in 15 years of rental costs he ignored. For example, if his rent averaged $1000/month over those 15 years, he is behind $180,000 by not buying, and his average rent has to be higher than that based on his own comments.

What on earth are you talking about? Say RFHC bought a house in 1998 for $400k with 20% down and a 7% APR.

Property tax: 15 * 1.25% * $400k = $75k
Mortgage Interest: 12 years @ 7%, refi in 2010 @ 4%: $271k

We'll ignore any maintenance costs, fire/flood insurance, small property tax increases due to appreciation + Prop 13, refi fees and HOA dues. RFHC would have thrown $346k down the toilet on property tax and mortgage interest in the last 15 years. Remember, interest rates were double what they are now up until only a few years ago.

Now, I think that RFHC said that his rent was considerably more than $1k a month, so he probably has paid more rent than what he would have thrown away if he bought. But, if you are going to make an example, do a fact check first.

bmwman91 says

ut, if you are going to make an example, do a fact check first.

Take you own advice, and read the thread. I was just adding in the 15 years of rent that RFHC left out of his own example given above. By RFHC's own calculation in this thread he would have been $50 ahead buying in 1998. Add in the 15 years rent he left out of his calculation and he is at least $180,000 behind as I said.

Mick Russom says

donjumpsuit says

Your only opportunity to lower housing costs is to refinance. Now that interest rates are bottomed out, tough luck using that to lower your housing cost.

Now all thats left is debasing the currency. Oh, wait. They are doing that.

because of inflation alone, a house today costs 2.6 times what it costed 30 years ago.

forget currency war(s). inflation is at least 2% a year. the moment you buy is the moment you start saving by locking in your low interest rate for the next 30 years.

Out of curiosity, I checked the prices for the first apartment that my family stayed in when we came to california in 1989. Back then, the price was $790 for 2 bd/2 bath in fremont. Now, they want $1895 for it. Also, back then gasoline was $.86 per gallon, now it's $4.15. The cost to cross bay bridge was $1, now it's $5. All in a matter of 23+ years. Again, that's why it's a mistake to do a buy vs rent analysis for year 1 only. It needs to be done via lifetime housing costs or at the very least for the likelyhood of expected stay in a primary residence purchase. You will find that given comparable properties buying will beat renting easily within 5/7 year period unless there's serious depreciation like occured between 2006-2009. However, most of the time the serious depreciation will not be the case as that was a case of bubble popping and defaults.

E-man says

Of course, god has a plan for me too. We'll see how it will all shake out.

God's away on business.

Mark D says

because of inflation alone, a house today costs 2.6 times what it costed 30 years ago.

Yep it is just inflation that has caused home prices to rise for 30 years.

Mark D says

because of inflation alone, a house today costs 2.6 times what it costed 30 years ago.

In Santa Clara... between 1997 and 2000 prices went up 100x .. and than 100% on top of that.. yet we havent corrected for the long term inflation trend of 30 years which is 1.3x not 2.6.. What cost $1 in 1982 would cost $2.34 in 2012.

evilmonkeyboy says

Yep it is just inflation that has caused home prices to rise for 30 years.

LOL! yet rates have fallen as prices have equally fallen from 1989 to mid 90s as was the case more recently since the peak years of 2006...

Double in 5 years

Plus the interest rate will go back to normal, this will double the mortgage.

Can you afford $10k+ a month rent or mortgage? Buy NOW.