Where will rents go from here?

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muzie_IHB

muzie_IHB

New member
<p>I'd be interested in what you guys think about where housing rentals will go from here.</p>

<p>Personally, I'm one of those who considers houses as nothing more than dwellings and so have no problem with renting a home for 10 years if that happens to be the smartest/best bang for the buck option. The 'house as investment' argument also doesn't impress me much, since I believe I can get higher returns in more liquid markets such as stocks.</p>

<p>So, that being said, for me the question of whether house rentals will go up substantially in price is just as important as whether house prices will go down. If prices drop by 20%, but rents consistently go up 20%, then owning a home will become a valid proposition much sooner than if rents stay flat. I think the two go hand in hand, and I'd be interested in seeing more debate on that aspect of the question.</p>

<p>So, anyone have any analysis on how the housing bubble will affect the different rental segments? Will rents increase faster as all the foreclosed homeowners move to rental homes, or will they go down as the market is flooded with vacant housing? </p>

<p>-Muzie</p>
 
<p>Well, what I'm seeing on the MLS and Craigslist doesn't really match what the media is telling us. Rentals got a little tight over the summer but now they're plentiful, and rents don't appear to be increasing. Two years ago there were quite a few Irvine condos in the 1800-ish range and today they're still out there.</p>

<p>What I have noticed is that many of today's rentals are newer, nicer, and larger. The Woodbury and Turtle Ridge specufloppers are putting a lot of really nice stuff onto the rental market (compared to your typical 10-15 year old Westpark condo). If 2007's RE market has another Spring Sting instead of a Spring Bounce, I think we'll see even more of this nearly new inventory show up on the rental market late this year.</p>
 
Over the weekend I moved into a different rental. I was watching the rental market fairly closely over the last 2 1/2 months. I saw a lot of product languish on the market over the holidays. A decent SFD can be rented for about $1.45 SF. A nicer, newer one can be rented in Woodbury or Quail Hill for about $1.75 SF. I managed to find a large, older condo with updated interior for $1.17 SF. It was a bargain, particularly compared to the nearly $2.0 SF the Irvine Company wanted for the renewal on my 930 SF apartment. Granted, I went from 930 SF to a much larger place, so a drop in the SF price was expected, but that much?





I agree with OC_fliptrack, rents will probably fall after the spring sales season flops. I was prepared to go month-to-month and wait for a deal, but the one I found seemed too good to pass up. Be careful not to rent from an FB who may skim your rent payments. You may get thrown out due to foreclosure if you rent from the wrong person.





Rents generally do not rise while real estate prices fall, but that too may be different this time. Rents are strongly correlated with wages. If the housing bubble deflation does not derail the entire economy, rents may continue to rise, albeit at a slower rate.
 
I must admit that I'm kind of torn on the idea of renting from a specuflopper. The angel on my shoulder knows it's risky business but the devil on the other shoulder stands ready to throw wrenches into the foreclosure/eviction process while living rent free. I have little reservation about witholding rent from a defaulting landlord, and the potential for a cash-for-keys offer from the bank would be icing on the cake.
 
<p>muzie- Nice thread you've started here.</p>

<p>I am still torn between renting from the IAC vs. from a private party (pp). There are obvious advantages or pros in favor of renting from pp such as "more bang for the buck", but the cons are a little bit discouraging: possible sale, foreclosure, etc., outlined above. IAC, albeit an arm of the empire, offers a little more stability in that regard, and the newer units have some of the townhome style amenities such as garages, etc.</p>

<p>Our current lease runs out in May so we will be at a decision point (IAC vs. pp) soon... Thoughts anyone?</p>
 
<p>OC_fliptrack</p>

<p>Yes, but why even bother. I'd just short circuit the whole process and go directly to the landlord and bank and come up with a steelement. The landlord is in a precarious position, if they are smart and have had the painful experience of paying and empty house, they ameniable. The bank is ameniable also, thier job is to collect interest, not collect properties. Anyway I say give it a row and see what happens.</p>

<p>-bix</p>
 
<p><a href="http://forums.irvinehousingblog.com/account/40/">crucialtaunt</a>, </p>

<p> It just depends on what you want. For me, I like the extra layer of safety IAC offers, something goes wrong and its fixed post haste (Inmyhumbleopinon). As an example, we had MOLD in one of the walls of our apartment. They brought in a dehumidifier along with a chlorene (sp?) scrubber. We stayed ONE night before we got very ill. They put us up in a very nice hotel in the area, paid for our entire time away, comped us the days we were out of the apartment. Do you think a private party would do that? Maybe only after litigation.....</p>

<p>good luck</p>

<p>-bix</p>
 
<p>crucialTaunt,</p>

<p>I guess it really depends on what you can find as a rental from a pp. I've noticed the prices from TIC/IAC are very similar $/sq.ft. regardless of which specific community you live in. The pp prices, on the other hand, are all over the place, and I think there's a much greater likelihood of finding some gems in the rough on the pp side, especially if you go a bit more upscale (2500$+/mo)</p>

<p>-Muzie</p>
 
<em>"So, anyone have any analysis on how the housing bubble will affect the different rental segments? Will rents increase faster as all the foreclosed homeowners move to rental homes, or will they go down as the market is flooded with vacant housing? "</em>





These questions or variants thereof have been asked here and on other blogs. I thought I might attempt to answer it. First, the questions above identify the two competing issues related to rentals: increased demand due to foreclosures and increases supply also due to foreclosures. IMO, these are a wash. Unless these situations create a net in-migration or out-migration, rents will not be impacted. The number of owner-occupied houses will decline as some houses that are currently owner-occupied will become rentals, but supply and demand will be kept in balance due to the impact of foreclosures.





The hidden element of the supply situation that probably will cause rents to drop are the high number of vacant properties on the market. <a href="http://www.sun-sentinel.com/business/local/sfl-25vacanthomes,0,4982210.story?coll=sfla-business-headlines">Check out this article</a>. Vacancies always depress rental rates. It is a sign of how overbuilt the housing market has become. Reminds me of the BS line "they aren't making any more land." Well, they sure are making more houses: too many, in fact. I saw a statistic recently that we have built 1 house for every 0.8 jobs in Southern California. The normal ratio is 1 house for every 1.7 jobs. Basically we were building houses faster than job-holding, mortgage-paying people could buy them. The excess of vacancy bears this statistic out. It's also a reason why sale prices will drop.
 
There are some bugs with the forum (screwy HTML and links that don't work). I'm searching for a solution regarding the links. I've noticed that long links tend to not work. Not sure why
 
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