Observations from the front lines of the Irvine housing market?

[irvinehomeowner]

Well if they are bringing more apartment units to Irvine, that will definitely cause downward pressure on rents.  And if there are downward pressures on rents, then it will eventually make some impact on housing prices as it becomes more and more cheaper to rent than buy.

As USC said, it depends on the stock.

Lower 1-2 br apartment rents aren't really going to affect the price of 4br homes.

That's actually interesting... do the new home builders even build 1 or 2 br homes anymore? I know that Woodbury had a few 1br, 1br w/den, 2br products (some were even detached IIRC).

 

[meccos12]

Well if they are bringing more apartment units to Irvine, that will definitely cause downward pressure on rents.  And if there are downward pressures on rents, then it will eventually make some impact on housing prices as it becomes more and more cheaper to rent than buy.

As USC said, it depends on the stock.

Lower 1-2 br apartment rents aren't really going to affect the price of 4br homes.

That's actually interesting... do the new home builders even build 1 or 2 br homes anymore? I know that Woodbury had a few 1br, 1br w/den, 2br products (some were even detached IIRC).

So are rents for 3 and 4 beds climbing then? 

 

[Kings]

Well if they are bringing more apartment units to Irvine, that will definitely cause downward pressure on rents.  And if there are downward pressures on rents, then it will eventually make some impact on housing prices as it becomes more and more cheaper to rent than buy.

As USC said, it depends on the stock.

Lower 1-2 br apartment rents aren't really going to affect the price of 4br homes.

That's actually interesting... do the new home builders even build 1 or 2 br homes anymore? I know that Woodbury had a few 1br, 1br w/den, 2br products (some were even detached IIRC).

there are a few new 1 br/2 br coming in the gp, but larger units = bigger profit margin for developers

 

[paperboyNC]

Disagree about 1-2 bedrooms prices and the relationship to 3-4 bedroom rents. Once you get renters used to paying $2400/mo for a 2bedroom apt, it's not a big jump to $3500/mo for a 4bedroom home.

Sometimes single renters are comparing the cost of splitting a 2bedroom two ways versus and 4bedroom four ways versus having their own studio or 1bedroom.

IMO flatenning rents is likely to relate to flatenning prices.

I'm on the side where flat real estate prices are a good thing if the cause is that we finally built enough to balance supply and demand at current prices.

I don't want to see real estate prices escalate to a mega bubble.

 

[Kenkoko]

Agree with paperboyNC.

I get that 3-4 bedrooms are less affected than 1-2 bedrooms. But 3-4 bedrooms are still going to affected by the overall rental market.
It's quite contrary to what I am seeing personally and frankly I am not seeing any data showing 3-4 bedroom rents are bucking against the flattening trend.

Irvine also has a ton of supply of 3-4 bedroom from private landlords. A quick look on Zillow shows over 250 3+ bedroom homes for rent in Irvine. For a quick comparison, Santa Ana has 25 3+ bedroom homes for rent.

 

[Funkie]

TIC would not build apartment homes if it didn't think they would be rented.

TIC apartment home's vacancy rate is extremely low, especially in areas where there is employment nearby. 

As long as they are building new office buildings, I see 3+ bedroom houses will be in higher demand, since there is no TIC products in that category. 

 

[Hugo Township]

I really wish they would stop building.  The congestion is getting really bad in my opinion.  I really think the 91 fwy traffic is better than the 5 and 405 in Irvine now.

We need local housing options for our new employees with all the job growth we have. It's difficult for us to hire entry level and mid-level employees with continuous rent increases. They end up having to drive in from more affordable locations which certainly doesn't help traffic either.

Unless of course you hate new jobs!

 

[nosuchreality]

Thats because we keep thinking of OC as suburban.  The reality though is Orange County has twice the population density has the New York - New Jersey MSA.  While NYC is massively more dense, their MSA isn't.

Employers and employees need to adjust their expectations that we are part of an extended mega-city and many of the employers are located in the most expensive parts.

 

[irvinehomeowner]

Well if they are bringing more apartment units to Irvine, that will definitely cause downward pressure on rents.  And if there are downward pressures on rents, then it will eventually make some impact on housing prices as it becomes more and more cheaper to rent than buy.

As USC said, it depends on the stock.

Lower 1-2 br apartment rents aren't really going to affect the price of 4br homes.

That's actually interesting... do the new home builders even build 1 or 2 br homes anymore? I know that Woodbury had a few 1br, 1br w/den, 2br products (some were even detached IIRC).

So are rents for 3 and 4 beds climbing then? 

Since I'm not in the rental market, I would not know nor would I predict. But similar to what you said earlier, I would assume that higher bedroom count rentals would be less affected by more 1-2br units being built because they are not the same demographic.

Just by optics alone, I think 4br SFRs have a higher premium for rent because many people would prefer to live in a house vs apartment for privacy, space and density reasons.

What are the rents of a 2br apartment vs a 4br house? I think the 4br house can maintain a higher rent point because math favors it even for singles or college students splitting the cost.

Using paperboyNC's numbers above, $2400 for a 2br is more expensive to split than $3500 for a 4br split 4 ways. Using that same scenario, you could even charge $4000 for the 4br because it's still cheaper.

This is one of the reasons why I think 4br rentals aren't as affected. Even if 2br rentals get down to a point where the split cost is comparable, there are still benefits to living in an SFR vs an apartment complex (and yes, this is debatable as many prefer the urban apartment scene).

 

[irvinebullhousing]

Well if they are bringing more apartment units to Irvine, that will definitely cause downward pressure on rents.  And if there are downward pressures on rents, then it will eventually make some impact on housing prices as it becomes more and more cheaper to rent than buy.

As USC said, it depends on the stock.

Lower 1-2 br apartment rents aren't really going to affect the price of 4br homes.

That's actually interesting... do the new home builders even build 1 or 2 br homes anymore? I know that Woodbury had a few 1br, 1br w/den, 2br products (some were even detached IIRC).

So are rents for 3 and 4 beds climbing then? 

Since I'm not in the rental market, I would not know nor would I predict. But similar to what you said earlier, I would assume that higher bedroom count rentals would be less affected by more 1-2br units being built because they are not the same demographic.

Just by optics alone, I think 4br SFRs have a higher premium for rent because many people would prefer to live in a house vs apartment for privacy, space and density reasons.

What are the rents of a 2br apartment vs a 4br house? I think the 4br house can maintain a higher rent point because math favors it even for singles or college students splitting the cost.

Using paperboyNC's numbers above, $2400 for a 2br is more expensive to split than $3500 for a 4br split 4 ways. Using that same scenario, you could even charge $4000 for the 4br because it's still cheaper.

This is one of the reasons why I think 4br rentals aren't as affected. Even if 2br rentals get down to a point where the split cost is comparable, there are still benefits to living in an SFR vs an apartment complex (and yes, this is debatable as many prefer the urban apartment scene).

Half of the applicants for 4BR homes are from college and young professionals who looking to share the cost with roommates, the other half is from families sometimes with grandparents as well. When breaking in down and all of the bedrooms are occupied, it comes out to be better deals than renting a 1 or 2 bedroom townhouses or apartment. Rent has been increasing in the last 4 years and it doesn't show any signs of slowing down. Now that rates have skyrocketed and homes prices stagnant, the pool of renters actually increase in a foreseeable future, couple that with institutional investors on wall street pulling for inventory for sale homes off the market as indicated by SLGP

Another article to enjoy on the subject:
https://macromon.wordpress.com/2018/10/03/alea-iacta-est/

Although my favorite part was this truth bomb:

Even the housing market suffers a dearth of supply.

Private equity, now the largest single holder of single-family residential real estate, has taken a massive supply of homes off the market and converted them to rentals, partly due to the lower cost of capital caused by the manipulation of the Treasury yield curve.  Will these investors start to sell down their inventory as rates move higher, or just continue to raise rents, which could create a real political problem?

?one-fourth of the country?s single-family rental homes are now owned by institutional investors, with more than 200,000 families paying their rent to just nine giant Wall Street-backed firms. According to a report by the Harvard Joint Center for Housing Studies, the majority share of all U.S. rental units (52.2 percent) are owned by institutional investors, and the investor-owned share of single-family homes increased by nearly 40% from 2001 to 2015.5 ? ACCE

As it's been said before - "May you live in interesting times." - and these certainly are some of the most interesting days I've seen.

My .02c

 

[Kenkoko]

TIC has done a great job at boosting their apartment rents. The new TIC larger (1300 sqft+) 2 bedroom apartments are going for close to $3500 a month.

But TIC's success at boosting rent has not really carried over to private landlords. For about the same price of a new TIC 2 bedroom apartment you can rent a new or almost new million dollar home in great park neighborhoods.

Like IHO,I see renting apartment as a downgrade to renting a SFR. But TIC is proving us wrong. Maybe they are able to do this by manipulating supply and demand. Or maybe Irvine renters simply prefer the apartment living life. Either way, the rental market for 3-4 bedroom private homes in Irvine remains weak. It's simple supply and demand. We have a ton of supply of 3-4 bedroom private homes for rent and the success of TIC has not boosted demand for 3-4 bedroom private rental homes.

 

[Cares]

Must be Google Fiber at TIC apartments winning them over!

Let's not forget most single family rentals don't come with fridge/washer/dryer. Maybe renters don't want to deal with buying one and then figuring out what to do with it.

 

[heverlee]

this is the thing I don't understand coming from another state.

Why the SFR rentals don't include these appliances? When I was trying to rent 2 months ago, 95% homes I see don't include these. In my own state, without fridge/washer/dryer, no one would rent the home.

 

[Cares]

this is the thing I don't understand coming from another state.

Why the SFR rentals don't include these appliances? When I was trying to rent 2 months ago, 95% homes I see don't include these. In my own state, without fridge/washer/dryer, no one would rent the home.

Just a generalization and I can be completely off base but I'm thinking Californians have a higher disposable income. The cost of these appliances are a much smaller fraction of their income so they prefer to get something they want.

 

[irvinebullhousing]

this is the thing I don't understand coming from another state.

Why the SFR rentals don't include these appliances? When I was trying to rent 2 months ago, 95% homes I see don't include these. In my own state, without fridge/washer/dryer, no one would rent the home.

Just a generalization and I can be completely off base but I'm thinking Californians have a higher disposable income. The cost of these appliances are a much smaller fraction of their income so they prefer to get something they want.

Agree here, renters have their own preferences when it comes to furnishing. They like to buy their own stuffs.

 

[irvinebullhousing]

TIC has done a great job at boosting their apartment rents. The new TIC larger (1300 sqft+) 2 bedroom apartments are going for close to $3500 a month.

But TIC's success at boosting rent has not really carried over to private landlords. For about the same price of a new TIC 2 bedroom apartment you can rent a new or almost new million dollar home in great park neighborhoods.

Like IHO,I see renting apartment as a downgrade to renting a SFR. But TIC is proving us wrong. Maybe they are able to do this by manipulating supply and demand. Or maybe Irvine renters simply prefer the apartment living life. Either way, the rental market for 3-4 bedroom private homes in Irvine remains weak. It's simple supply and demand. We have a ton of supply of 3-4 bedroom private homes for rent and the success of TIC has not boosted demand for 3-4 bedroom private rental homes.

Their secret sauce, a month free rent. They also offer painting the wall any color of your choice. They have a large maintenance crew and roll out the red carpet for you when you move in. IAC are generally nicest when it comes to rental and maintenance request. The investment they do for you will come at a small cost to gain your signing.

 

[superbobbay]

They recoup their money when they gouge you on moving out fees deducted from your deposit.

 

[usctrojancpa]

They recoup their money when they gouge you on moving out fees deducted from your deposit.

+1

 

[usctrojancpa]

this is the thing I don't understand coming from another state.

Why the SFR rentals don't include these appliances? When I was trying to rent 2 months ago, 95% homes I see don't include these. In my own state, without fridge/washer/dryer, no one would rent the home.

Most rentals have at least the refrigerator but not a washer/dryer. 

 

[akkord]

Our tenants got lucky then? We included the fridge, washer, & dryer...TBH if I was renting I'd want all those included.  I don't want one extra hassle of dealing with "what to do with the appliances" when moving out. 

this is the thing I don't understand coming from another state.

Why the SFR rentals don't include these appliances? When I was trying to rent 2 months ago, 95% homes I see don't include these. In my own state, without fridge/washer/dryer, no one would rent the home.

Most rentals have at least the refrigerator but not a washer/dryer.