Will the OC follow SD for rents too?

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No_Such_Reality_IHB

No_Such_Reality_IHB

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<p>For much of the bubble San Diego was the bellweather, leading up and then leading down the bubble. Now San Diego is jumping to a new bellweather position. Rents are falling. yes, going down. Down 5.6% Y-o-Y according to a report in the <a href="http://www.signonsandiego.com/news/business/20071203-9999-1b3rent.html">Union Tribune</a>. </p>

<p>Much like property prices, rents are never supposed to go down either. Yet, San Diego is already seeing it. The foreclosures have piled up and are yet to be liquidated which will likely suppress rents further.</p>

<p>So in the 36 months, are renters likely to see:</p>

<p>A) their rent going down</p>

<p>B) staying flat</p>

<p>C) rising to catch home prices</p>

<p> </p>

<p> </p>
 
If you live in irvine company apartments, they will always raise rents! they would rather have you move out and then rent the place at market value (typically lower than what you would pay if you accept the rent increase). Doesnt make sense to me but they do it.
 
If my informal experience around LA and OC is any indication, I'd say yes, downward.



1. In the nicer areas with homes we were looking to rent, there was a rather large increase in supply in the past 3-4 months. Much of it for sale, but not selling. Lots of it ticking slowly downward in rent price as it sits vacant.



2. In some of the lower-income areas I drive through, virtually every apartment building had a For Rent sign. This was not the case 1-2 years ago.



3. I've seen an increasing number of sign twirlers near the big complexes on weekends. Last weekend, there was one on each corner near a large mall, pointing everyone towards places with "First Month's Rent Free!"
 
As we were pulling into our IAC community this evening and once again observing how empty the parking lot was, my wife and I were able to tick off no fewer than 5 former neighbors who not only moved out of our community --- but left OC entirely. Two to Texas, one each to Florida, Illinois, and Sacramento. I know the Irvine Chamber of Commerce keeps touting the growing population --- but at least in our little corner of the rental world there seems to be a good share of out-migration, and their spots are not being back filled. Strange because I expected there to be a run on rentals with the bubble bursting, along with a big run up of rent prices. I wonder if the popping bubble also popped the hopes of a lot of renters, who just gave up on OC and are leaving?
 
<em>>>I wonder if the popping bubble also popped the hopes of a lot of renters, who just gave up on OC and are leaving?</em>





Yes. I know quite a few as well. Sadly, all that lost low and mid level talent is hurting businesses as well.
 
We live in an IAC Townhouse in Irvine, our lease expires in mid January and the rent just went up $125 pm.



CK, I'm curious as to why you'd expect rents to rise because of the bubble? In my opinion I think it will have the opposite effect.
 
I don't think rents are going down anytime soon. With owning being so expensive, landlords have no need to lower rents. Especially with more homeowners going into foreclosures, there will be more prospective tenants.
 
Peter -- as the housing bubble popped I expected there would be an increase in the number of renters in Irvine that were either forced out of a house or not buying into a declining market as they came to Irvine....and therefore IAC could drive up rents as a rental inventories dwindled. That theory does not seem to be coming to fruition, at least not yet...
 
In my lil' IAC area, finding parking hasn't been bad lately, compared to the summer....



Either b/c of the recent car policy "enforcement" or not as many renters or ..?
 
Scientist - It must be less tennants, because I have NEVER heard of IAC actually enforcing its own parking policies!
 
<em>I wonder if the popping bubble also popped the hopes of a lot of renters, who just gave up on OC and are leaving?





</em>Yup, it is a well documented fact, that OC has a net migration problem of 25-35 year olds. Businesses can't pay highly educated/skilled people enough to keep or bring them here. Personally, I think this poses a very serious economic problem, that goes well beyond housing.





<em>I don't think rents are going down anytime soon. With owning being so expensive, landlords have no need to lower rents. Especially with more homeowners going into foreclosures, there will be more prospective tenants.





</em>Sorry, but this is one of those myths that makes me laugh. No... landlords like tenants who pay their rent on time. If it means lowering the rent to keep them, then sometimes that happens. With regards to the foreclosures, I for one, will not rent to someone who has a foreclosure, and I am not in the minority on this. They are not prospective tenants, they are a waste of a credit check. Instead, what you have are less prospective tenants, and you are less likely to raise rents. And, if you realize this, instead of running 20 credit checks to find a decent tenant, then you might thank your tenants by not increasing the rent or lowering it for those who threaten to move. It is a whole different thing being a private landlord compared to a company like TIC. Just like housing prices, rents do not always go up.
 
"OC has a net migration problem of 25-35 year olds." As someone in this group, I would agree with you. Many of my peers either:


a) Don't live here anymore because they found they could make almost the same amount of money and pay half as much to live. Destinations include Florida, Arizona and Atlanta.


b) Make decent money and rent. This includes virtually everyone who is single, because they only have one income obviously. Most people don't even talk about owning a house- they know it's too expensive to make sense. For most, buying would kill their ability to have a life. Who wants to be a debt slave to your house (especially for the single people with one income) just so you can re-do the kitchen however you want?


c) Don't make as good a salary or are immature, but they don't care because many still live with their parents.


d) Did buy a small condo during the boom. They are frustrated and depressed - they feel stuck because of declining prices.





This is an interesting problem that many in the older generation don't seem to think of or care about. The main reason I still live here is because I grew up here and my family is here. Otherwise I probably would have left as well. OC's a nice place, but not nice enough to warrant putting a huge wrench in your financial stability by having to overpay for housing.
 
IMHO I think you will see the larger complexes that TIC owns stay flat or slightly higher. To me TIC markets many their properties as being lavish with exceptional amenities that are far above the rest. On top of that I think they would rather hold prices high and have vacant apartments then decrease the rent on it's properties...only to a certain extent.



Private landlords are a completely different animal. I would have to agree with Graphix that finding a tenant that will pay in a timely manner, especially with how bad times are getting, will be extremely important. Also, as a renter I am not really that excited about giving a landlord the first and possible last months rent as a down deposit knowing I don't control him / her paying the mortgage.
 
I am approaching the time for renewal of my lease, so I have been paying more attention to the rental market lately. I have noticed an improvement of the quality of rentals in my price range. It hasn't been so dramatic to prompt me to move (I am getting a good deal,) but it does tell me that rental rate pressures are building in the marketplace. The landlords sitting on older properties with very small mortgages are the ones lowering their prices to get good renters. I suspect the floplords out there will end up with the flaky tenants who will damage their depreciating asset.
 
<p>I just did the same rental search that I did approx. 4-5 months ago (specific zip code, So OC, single family rentals) </p>

<p>I wish I had written down the exact numbers then, unfortunately I'll have to rely on my memory... but but I believe there were maybe 5 or 6 properties listed at $4,000 per month or more last July/Aug. Out of my price range btw... </p>

<p>Today there are 17, and I recognize many of them from the MLS updates I've been getting re: properties for sale. Looks to me like more than a few sellers have decided to take the landlord leap; trying to wait out the market, rather than dropping their astronomical asking prices to effect a sale perhaps? </p>

<p>If enough people go that route, I would assume it would have to have some effect on rent prices. Instead of competing for buyers now everyone is looking for that 750+ credit score, pays on time every month, never complains, ultra clean, no pets, no kids, no parties, high $$$ income tenant to lease their 3,000 sq ft million+ dollar luxury <strong>tract</strong> home. </p>

<p></p>
 
<p>I'm 29. I'm Asian. Most of my friends are still living with family. Orange County is such a terribly expensive place to live in. But I do notice something though... Asians and Hispanics are more likely to live with their family well into their 20's. It used to be that kids would move out once they are college age, but now, I don't think anyone really have to until they live with a significant other or get married. I think White kids feel awkward living at home past 20. But for Asians and Hispanics, they don't feel that way until after 30. But I guess we're all adjusting. I have friends who came from out of the state who used to rent their own place, but now, they have to simply be living with roommates. I think the most common living situation for someone in their 20's are:</p>

<p>1. Living at home with family - most common for Asians/Hispanics - basically half the population.</p>

<p>2. Sharing a room with others - common for college students.</p>

<p>3. Sharing an apartment/house with roommates - common for workers.</p>

<p>4. Owning a condo - not as common, but still there. I think that with the way things are, most first time buyers now will be over the age of 30.</p>

<p>I have a friend who's a pharmacist making over 140K still living at home with his parents to save money to buy a house... perhaps in a few years.</p>

<p>I have another friend who's a pharmacist living in her own condo - she bought 3 years ago. So timing does matter.</p>

<p>Point is, also housing is a huge expense in the OC, there are people (non-Whites), who don't mind making adjustments by living with family or roommates.</p>

<p>My assumption is that White kids grew up in wealthier families so they expect to have just as much or more than their parents.</p>

<p>Non-Whites come from lower socio-economic backgrounds, and are more content with living in limited space. Then there are those who are just too cheap to move away from home even though they can afford it.</p>
 
<em>"who don't mind making adjustments by living with family or roommates."</em>





Do you think they really don't mind, or do they feel they have no choice because the prices are so high?





Is this the way everyone is going to live in OC from this point forward?
 
"If you live in irvine company apartments, they will always raise rents! they would rather have you move out and then rent the place at market value (typically lower than what you would pay if you accept the rent increase). Doesnt make sense to me but they do it."



Which apartment complex(s) are you referring to? I live in Woodbridge meadows and my 10 lease actually went down by $5 this year and $80 last year.
 
Does anyone remember August issue of the Business Connection, a publication of the Irvine Chamber of Commerce? They were a little late to the party, but correct enough:





http://www.irvinechamber.com/newsroom/business Connection/August_2007_Final.pdf





“Businesses have been telling us for the


last five years that they cannot find enough


skilled workers,” said Dunn. “Forecasts


estimate we could lose up to 20 percent


of our young adults in the next 20 years,


mainly due to the lack of entry-level housing.


Losing these additional young workers hurts


the county’s businesses and threatens our


economic future...


Currently, Orange County


is the fourth most expensive place to live in


the United States according to the OCBC


report. To afford the median price of a home


in Orange County ($710,920), the annual


income needed is $145,680, however the


typical annual income of an Orange County


elementary school teacher is $57,782 and


$70,052 for a nurse."





<strong>caliguy:</strong>





"Many of my peers either: a) Don't live here anymore because they found they could make almost the same amount of money and pay half as much to live. Destinations include Florida, Arizona and Atlanta."





Same here. I have several friends that have moved out of state specifically due to the economic conditions to establish one's self; and I'm not talking about unskilled laborers pouring concrete or flipping burgers. I have one friend that was an IT genius, great at everything from large-scale network design, windows & unix system administration, and .NET programming to cat 5/6 and fiber wiring and server building. Another friend was an accountant with a B.A. Both were in their mid 20s before they figured out that they couldn't live the lifestyle they wanted in the OC with the wages they were being paid. The former is now working for a helicopter manufacturer in Phoenix with a higher salary and significantly lower housing costs, and the latter took a hiatus and went to live with family in Europe and get out of the rat race completely.





Personally I am an IT professional who owns two businesses and I plan on moving out of California in the next few years, after I grow my businesses and save my 20% down plus a nice cash cushion, unless housing comes down drastically. In fact, if it weren't for my businesses, significant other, and a well of patience, I would have left the state about a year ago for either OR or CO.
 
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