Based on a RealFacts survey of “professionally managed apartment complexes with 50 or more units,” The Chronicle reports that average rents in San Francisco are off by a nominal 0.1 percent on a year-over-year basis and 95.8 percent occupancy (down 1.9 percent).
Unfortunately, and not too ironically, the RealFacts survey reflects the not so real market of asking rather than effective rents (after incentives). And keep in mind that over 700 units of new rental inventory has recently (or will soon) come on line in San Francisco and will need to be absorbed.
That new supply includes 192 units at Strata which offered a plugged-in reader a year of free parking and one month free rent, an effective discount of over 8 percent on a one year lease which wouldn’t be reflected in the RealFacts survery of asking rents.
As the Chronicle and RealFacts report today, the average asking rents that were down 0.1 percent on a year-over-year basis in April are down 5.6% on a year-over-year basis today.
∙ RealFacts Reports (Not So Real) Asking Rents Flat In San Francisco [SocketSite]
∙ Apartment market moving on up [SFGate]
Why is this site such a hot spot for doom and gloom, it seems that any time some good news about the economy comes out, you must twist the data to reflect that the sky is in fact continuing to fall
[Editor’s Note: If by “twisting the data” you mean providing context and an understanding of what the numbers actually mean rather than blindly reporting them, then yes, we do (and will continue on).]
I’m confused, anon. Where is the “twisted” data?
I agree that SS tends to focus on indications of market declines, but reports of falling rents is certainly good news rather than “doom and gloom.” Using the numbers in the article, the typical SF renter will save about $1500 this year on rent. That’s not good news? I suppose the landlords who are receiving $1500/mo less per unit this year are not happy about it, but there are many times more renters than landlords who are quite pleased with this trend.
Certainly not doom and gloom to have reasonable rents. I’m now paying more in rent, for much less space, than I used to for the home I formerly owned (left the state for work a few years ago). I prefer home ownership–even if it isn’t the best investment possible–but I will never pay current, and still outrageous, SF home prices.
reports of falling rents is certainly good news rather than “doom and gloom.”
I agree. Unless you are trying to do mental gymnastics to justify why owning cost 1.5x to 2x more than renting…
http://3.bp.blogspot.com/_pMscxxELHEg/SpPzIIPFZaI/AAAAAAAAGNE/6UaP8zBTRLw/s320/CaseShillerQ22009PriceRent.jpg
Asking sales price for a 1BR loft in my building is $669k(down from $720k) plus around $400 HOA. It would have to be around $400k to save money over renting.
Anon’s comment is so typical. The real estate and rental industries are full of ‘professionals’ who’s job is to SELL. The liscense required to be in this profession does not require a degree in economics, or even math. The trend therefore is to take ANY data that comes about, and product a conclusion that supports your agenda (SELL). Now-even those who do not have such an agenda hop on board and make up conclusions-without regard for real statistical analysis. Not just because of my own education, but for my wife’s, and colleagues, I can solidly say the real estate buzz generated by those in the industry is almost always completely misleading – or at least not logical or statistically based (BTW – quoting a piece of data is different than properly analyzing it). Doom and gloom all the time? Naw – just an attempt to right the wrong in this industry – perhaps you should consider doing the math yourself as the post indicates and you too will realize who’s bull*hit to believe.
If you want a more touchy feely summary of the economy, housing, and rental markets, because reading the truth here is too depressing; just call up your real estate agent.
Isn’t SF Rent Stats a better source? Crawling Craigslist data seems like a more reliable method than surveying large apartment complexes.
SF Rent Stats indicates that rents are down more than 10% in the last year.
http://mullinslab2.ucsf.edu/SFrentstats/data/time.html
For those who prefer their local real estate news sugar coated and realtor approved I hear thefrontsteps is nice.
I’m currently in the market for a rental, and anecdotally I’m seeing the rates come down substantially. OK, I know that means nothing…but I’ve seen several places where landlords put the place on the market at what they “thought” rates were (probably based on the last few years), only to see no one bite. Certainly makes me happy, because reductions abound.
Being a SF native for 52 years, I can tell you SF Real Estate has ALWAYS been high priced. Sorry, people want to live in this city for whatever the reason and there is a VERY limited amount of RE here. Simple ECON 101, supply and demand. Right now demand is being supported in the $800k and under bracket by the jumbo conforming limits. Above taht level is scary.
I’m not seeing the doom and gloom here either. If folks are saving money on rent, maybe they can be saving up for a down payment. 😉
Down rents are extremely bad for the housing real estate inventory. It further exacerbates the outlandish premium to own in this city. It’s mostly bad for condos and it certainly doesn’t help SFRs.
I’ll take this opportunity to again point out the insane behavior of Mazal, Coombs, Wavro on Craigslist. They continually post up the same rentals at outrageous prices anywhere from 15-25% above what the market will bear. And they post up the same things redundantly ad nauseum multiple times a day. Paragon is starting to do the same. It gives the other rentals marketed on CL a false sense of hope as they desperately seek to attain these higher rents. These are the ones you actually see get dropped to market levels and eventually rent — costing more landlords at least a month in lost rent as they wish away at these lies. Oh, and to top it off, and non-cartel listing that does get posted gets called repeatedly by these characters who then promise to find a renter at these crazy rentals and start posting multiple ads in competition with each other. I seriously loath these people. Oh how I wish SFCL would charge for these rental postings.
This news is not doom and gloom. It seems rental prices are holding up better then housing prices. Not unexpected in a market where 2/3rd’s of people rent. Housing prices are falling faster then rental prices, so the premium on owning versus renting is falling. The market is correcting the imbalance that existed. The government continues to try to slow the correction so that it doesn’t destroy the banks.
I think a year ago the forecast was doom and gloom, today it is just mildly painful and overcast, with no sign the sun will break out anytime soon. But we will survive.
The real numbers are the fact that rents went up 26.4% over the last 4 years but only gone down 5.6% in the last year.
I see that myself in my neighborhood. We got our place in fall 2005 and comparables today to our place are still waaaaay more than our rent.
eddy: to be sure, one of the conditions of using craigslist is to use the “flag” links up on the right corner to help get rid of bad ads. it takes a lot of flags to bring an ad down, but the more all concerned work to keep craigslist clean the better it will be. in addition, craigslist’s flagging facility is adaptive, so the more their ads are flagged down, the lower the flag threshold becomes until it only takes one flag to remove one each ad. beyond that, they will not be able to post at all.
I’ll take this opportunity to again point out the insane behavior of Mazal, Coombs, Wavro on Craigslist. They continually post up the same rentals at outrageous prices anywhere from 15-25% above what the market will bear.
From reading some of the comments above, it seems this is intended to inflate the asking rental prices as tracked by sites such as SF rent stats. So it seems even SF rent stats is not completely indicative of the scale of rent drops.
“Being a SF native for 52 years, I can tell you SF Real Estate has ALWAYS been high priced. Sorry, people want to live in this city for whatever the reason and there is a VERY limited amount of RE here. Simple ECON 101, supply and demand. Right now demand is being supported in the $800k and under bracket by the jumbo conforming limits. Above taht level is scary.”
True but I wonder if the disaprity will remain as high as it has been. That is SF prices vs other cities.
The job situation in California and SF is not going to be good for a long time relative to other emerging cities. If people can’t find work here they will move. I have neighbors who were unemployed for over a year and found a job back east and reluctantly moved.
I have a friend couple. He is unemployed. She has a good job with Schwab but it sounds like she will be asked to transfer to NY. Native SFers they would never have left before the downturn but are seriously thinking of leaving. Its like they don’t have a choice almost.
Land will remain scarce but the job base will no longer grow in any significant way. After a decade of that I could see SF still being more expensive than other cities but the premium being less than it has been. The demand it seems is going to fall off going forward.
Being a SF native for 52 years, I can tell you SF Real Estate has ALWAYS been high priced. Sorry, people want to live in this city for whatever the reason and there is a VERY limited amount of RE here. Simple ECON 101, supply and demand.
Yes, that explains why SF costs more than Oakland… It does not prevent a weakening in demand as a result of rising unemployment.
You need to have income for rent.
Thus, rents tend to track income over time. (among other things)
Most homes are bought using mortgages.
Thus, home purchase prices tend to track lending patterns. (among other things)
Thus, I anticipate that future SF rents will track income/employment statistics.
“From reading some of the comments above, it seems this is intended to inflate the asking rental prices as tracked by sites such as SF rent stats. So it seems even SF rent stats is not completely indicative of the scale of rent drops.”
They’ve been doing it for years. Unless the behavior of the posters changed recently and substantially, sfrentstat still is a useful source of info for the percentage of rent drops. I would certainly trust it more than RealFacts.
I’ve got friends on this side of the hills in the East Bay who are in buy now mode — though, thankfully, they are waiting until after their baby arrives. They’re currently in an apartment, and I decided to check Craigslist to see what was available. I found a 4/2 house for $2000 per month. An older home, for sure, but it was less expensive to rent than the homes in newer developments. And, of course, PS indicated the owners had a nice Prop 13 basis of around $200k. Long time owners (like FAB’s parents) are going to be determining market rates (or at least cherry picking the good tenants), and I think this will happen even in Ess Eff, to some extent. The collapse of the Lembi empire, and lesser developers and wannabe landlords will hasten this trend.
honestly_now wrote:
> Being a SF native for 52 years, I can tell you SF Real Estate has
> ALWAYS been high priced. Sorry, people want to live in this city
> for whatever the reason and there is a VERY limited amount of
> RE here.
I was born in SF 46 years ago (and I’ve been keeping track of rents and sale prices for over 40 years when I first started cutting apartment ads out of the Chron and the Times for my parents).
SF real estate has “always” been “high priced” but (other than a short time in the 70’s and a few bubble months in 1989-90) it has not been “crazy no connection to income high priced”.
The price of the average home in SF went up about 10x from the 30’s to the 80’s and so did the average income. In recent years the price of real estate went up faster than income and it is now coming back in line.
Having rented in San Francisco in ’02 after the dotcom bubble imploded and finding deals galore, I actually find it surprising that rents only came down 5.6% in the past year considering how chaotic the job market has been. Anecdotally it sure seems like my friends’ companies are hiring again and people are starting to move to the city. Doesn’t seem like it will take long for the rent crunch to start all over again, particularly given how (relatively )few construction projects are in the pipeline.
(and I’ve been keeping track of rents and sale prices for over 40 years when I first started cutting apartment ads out of the Chron and the Times for my parents).
So you would have us believe that you cognizant of rents and sale prices when you were six years old?
A decent number of condos were bought as second homes. Why bother renting a hotel room for 10 nights per year when it was cheaper to buy a condo, use it ten nights per year, let it double in price and sell it, making back all of the mortgage payments.
Now those places are slowly being rented out as people realize that they are not going to make the mortgage payments back when they resell. They don’t want to bring $100K-$300K to the closing, and so they take the lesser of two evils and simply pay out $500-1000 per month above the rental income they can get. $500-1000 per month for a couple of years to see what might happen seems cheaper than $200K. And for those people, holding on to their good credit seems worth the $18,000-$36,000 they are paying to do it.
The job losses are a factor to be sure, but people generally stay in their apartments while looking for something else, and use up savings, borrow from the Bank of Mom and Dad, etc. These are people who want to be here and want to stay until they feel they have no real choice. The rent declines are more a function of supply increases from owners who are renting their second homes out, though people moving away or moving to cheaper digs is a big part of it too, especially at the higher end.
The dot com bust was different: you had a bunch of people who didn’t really want to be here, but came for the money. When it was clear the money wasn’t coming back, they left as fast as they could. So vacancy rates shot up much higher than now.
They don’t want to bring $100K-$300K to the closing, and so they take the lesser of two evils and simply pay out $500-1000 per month above the rental income they can get. $500-1000 per month for a couple of years to see what might happen seems cheaper than $200K.
And this goes on for 2 or 3 years while they try to “wait out” the downturn. Then, in 2012, they talk to their accountants who tell them mortgage debt forgiveness expires at the end of 2012. Decision time. Jingle mail, jingle mail, jingle all the way…
Rents don’t come down much in SF due to rent control. As a landlord, I’m always going to ask as much as I possibly can even if my property sits for a while because when I lower the rent to a more reasonable rate in a down market and rent it, I will NEVER recoup when rents rebound until the tenant moves (which will likely be never).
I would think that professionally managed buildings would be larger, newer buildings that are not rent controlled. Those corporations can lower rents more because when the market rebounds they can raise the rent as much as they want.
“The price of the average home in SF went up about 10x from the 30’s to the 80’s and so did the average income. In recent years the price of real estate went up faster than income and it is now coming back in line.”
The home I live in was built in the early 50s and sold for 7500 then. We know as there are still 2 of the original owners on the block.
I’m told these homes went for just under 90K in the late 80s – so that would be about a 10 fold increase. A bit more.
Today however, even in the down market, my home is work 800K (down from just under 900 at the peak). That is more than a 100 fold increase over the original price and most all of that came in the 90s and early 2000s.
Still not affordable for most especially as wages are flat. A lot of the unrealistic increase from the 90s and recently is still built into the prices here. Will they drop more? I think so, but only time will tell.
I think this depends on what part of town you’re in. In North Beach, Telegraph Hill rents are in a free fall. Nobody is applying. In my units in the Mission, I still have multiple applicants who are paying higher rents than last year.
Some neighborhoods are hot, some are not.
For the late Fall, I’m finding lots of takers for my places in the Mission. Strange; normally this time of year is sloooooow.
Robin, clearly I am making an assumption from the neighborhoods, but would it be fair to say your expensive places are sitting and your cheaper places are renting, and still appreciating, rent-wise?
I’ve looked at several places to rent in Pacific Heights and Russian Hill in the past few months (large 2/2s), and every one was willing to negotiate down from asking by *at least* 15% (yes, fifteen. not a typo). It feels to me, as someone who is looking, that rents in northern SF are in serious decline — possibly even more in individually owned units than in the large buildings cited by RealFacts.
Now, having only come to SocketSite in the last few months, can someone please define “Real” SF and “Prime” SF for me? I laugh every time I see those designations.
Real and Prime change all the time. Just ask our local RE folks. Marketing 101.
The “realSF” is where prices will never fall.
Keeps getting smaller all the time.
If you listen to most of the housing bulls on this site, “Real SF” and “Prime SF” are where they think prices are still at boom prices. Most of the housing bulls here think these places are immune to market price drops. Fake SF and Subprime SF(?) are apparently where prices have demonstrably dropped from boom prices.
Things that people consider Real SF, just from a casual read here:
Pacific Heights
Marina
north slope of Bernal
Noe Valley
There are probably other Real SF places I missed.