June 5, 2007
JustQuotes: No Surprise, Bay Area Rents On The Rise
“In San Francisco proper, average occupancy now exceeds 97% and monthly effective rents have increased 7% in each of the past two years….In San Jose, average occupancy is in excess of 97% and average effective rents rose 7.8% in 2005 and 10% last year, marking the highest rent increase in the US.”
∙ Bay Area Apartment Market Healthy, Strong [GlobeSt.com]
First Published: June 5, 2007 3:00 AM
Comments from "Plugged In" Readers
As someone who rents in San Francisco I've recently been looking for a different place to move to. This only confirms what I've been seeing. Landlords are still charging top dollar for their properties.
In SOMA, I would at least expect the flood of new properties to translate into reasonable rents. Not so. I see 1 bedroom/bathrooms listed for rent at $2,800+ a month! Isn't that as much as the mortgage?
I don't know who can afford these properties. Prices have stayed this lofty for some time so maybe people are paying these prices (Side note: These must be the young professionals who deal drugs on the side to make the rent)
Posted by: anon1 at June 5, 2007 6:50 AM
Last Tuesday there were over 500 places listed in SF on Craigslist. This Monday, 411 listings. When you see the number of listings drop below 300 near the first of the month, rents tend to rise more than the rate of inflation.
What you see now is a LOT of remodeled units, and no surprise, people ask more for those. So while asking rents are up, the rent for similar places is up only about 3-4%. The Case-Shiller like rents are up, but not as much as asking rents because so many places are new or newly remodeled.
What's hilarious is that the real estate market is ON FIRE with multiple offers on EVERY PROPERTY because NO ONE IS RENTING, THEY'RE ALL BUYING, when you talk to real estate agents, but people who make money by being rental consultants will tell you that the rental market is ON FIRE because NO ONE IS BUYING in the real estate market: THEY'RE ALL RENTING.
Posted by: tipster at June 5, 2007 7:09 AM
"the rent for similar places is up only about 3-4%"
Any data to back that up?
Posted by: Dan at June 5, 2007 8:16 AM
End of May/early June will throw off your stats since this is a transition period for a lot of students. SF State, City College, SFU, Academy of Art students tend to move in/out right after finals.
Posted by: yuppie at June 5, 2007 8:30 AM
Quick, pass more rent control legislation!
Posted by: M at June 5, 2007 8:35 AM
"I see 1 bedroom/bathrooms listed for rent at $2,800+ a month! Isn't that as much as the mortgage?"
Uhh....hardly. If a one-bedroom sells for $500K, your monthly payment (PITI) with 0 down is $3,800 a month. That's excluding HOA fees. If you put 20% down, your monthly payment is still $3,000 excluding HOA.
Of course, you COULD take out some zero-down, interest only loan to make the purchase. But then you're essentially renting with unlimited downside exposure, as the recent thread on short sales pointed out.
Posted by: Dude at June 5, 2007 9:06 AM
I'm wondering how much of the rise in rents can be tied to the loss of rentals to TIC/condo conversions. The Globe article certainly implies this is a factor, although the figures I've seen on TIC sales (~600 last year) would imply it's not even a drop in the bucket in terms of the overall supply.
Posted by: zzzzzzzz at June 5, 2007 9:08 AM
there's nothing like living within walking distance of your job .... no gasoline, no tolls, no sitting in traffic, no traffic agitation, no MUNI Metro cluster bobs, etc... yeah, I think the landlords in the City can raise rents without worry because a lot of folks have a much greater appreciation for the value of personal time and happiness. :)
Posted by: Jamie at June 5, 2007 9:13 AM
Even though rents are going up passing more rent control isn't the way to go. Tenants HAVE TOO much control as it is in San Francisco. If you can't afford it then look in the mission or Bayview.
Posted by: Jason at June 5, 2007 9:15 AM
Yes, certainly no one is renting. Everyone is buying. That's why the rental occupancy rate is 97% and more than 400,000 San Franciscans live in rental units.
Posted by: Brutus at June 5, 2007 10:02 AM
Totally agreed, Jamie! And also, rents are still a relative bargain here in the City - they really aren't much higher than San Jose or the Peninsula, if at all. And of course, they are a steal relative to buying a place.
Posted by: Brutus at June 5, 2007 10:07 AM
I've been looking for a new 1BR too and have been kind of bummed out as the rents have gone up since I last looked. I'm getting evicted (Ellis Act) and am actually looking forward to a change, but I wish the rates had dropped a bit recently. . .
Posted by: eltejano at June 5, 2007 10:41 AM
"the rent for similar places is up only about 3-4%" Any data to back that up?
No one collects such data because there isn't any money in collecting it. You just have to watch things.
What I can tell you is that the stats cover average asking rents. When that suddenly starts including brand new units at the Odeon (there's been one on Craigslist for over a month), the Lansing, and near new units at the Met and the Brannan, even if rents were static, the average would rise just from those types of places alone.
Now add into the mix a BUNCH of remodeled places, that you couldn't even find two years ago, and you need to figure, that accounts for at least SOME of the average asking rent increase. The same tired place 2 years ago that is now completely remodeled and beautiful can get 20% more. So again, even if rents were static, the average asking rent should go up from that impact alone.
Landlords hear that rents are up and think: "Jackpot". Rents ARE up, but understanding the stats and the market will tell you a great deal.
Posted by: tipster at June 5, 2007 10:58 AM
I just grabbed a nice two bedroom two bathroom rental at the Avalon in Mission Bay for $2200. They started high, but with a little work came down $600 to that price.
Rents may be going up, but there are still some steal around.
Posted by: tom at June 5, 2007 11:32 AM
A bit of craigslist reality on rentals: almost all of the rental listings you see on craigslist are overpriced. The ones that are correctly priced get filled and removed from craigslist, quickly. Since it costs nothing to list a rental on craigslist, why not overprice and see if you get lucky?
Posted by: Delancey at June 5, 2007 11:34 AM
Although I place no value on what a rental or sale broker says to close a deal, the ideas that "everyone is buying" and "everyone is renting" are not incompatible, so long as you realize that the pools of "everyone" are different in each case.
The majority of families in the city cannot afford to buy any listed property, so that "everyone" is renting. Those who make significantly more than the median price, and those who cannot afford to buy but who have bought anyway via dangerous loans, have been buying their heads off.
Posted by: David at June 5, 2007 11:42 AM
Delancy: Is there a better resource for rentals than craigslist?
Posted by: Stu at June 5, 2007 12:40 PM
The info about Avalon at mission bay was interesting. Anyone else have rental negotiation information?
I have in the past (2 years ago) been able to negotiate either free parking for 1/12 months free at golden gateway apartments and 2/15 months free at avalon i mission bay & paramount over by the sf moma.
Posted by: Jay Thomas at June 5, 2007 1:36 PM
$2,800 for a one bedroom is not typical - there are plenty of one bedrooms available in the city for $1,500 to $2,000. Sure, it's going to be $2,800 if you want a new/modern unit or a big loft in a better than average location with parking and a view, but $2,800 for a one bedroom is closer to the top of the market for one bedroom apartments, not the average.
As for the TIC effect reducing the supply - I don't think so. Look at the number of applicants into the condominium conversion lottery over the last 3 years and you're only seeing a gain of about 300 net new units entering the lottery each year from 2004-2006. That's not enough to move the supply/demand equation, especially considering the increase in condominiums put up for rent by investors in town. And again - with the recently enacted legislation penalizing Ellis Act evictions for condo conversions, the number of Ellis Act evictions and new TIC conversions should drop considerably.
Posted by: Miles at June 5, 2007 1:56 PM
tipster wote: "What I can tell you is that the stats cover average asking rents. When that suddenly starts including brand new units at the Odeon (there's been one on Craigslist for over a month), the Lansing, and near new units at the Met and the Brannan, even if rents were static, the average would rise just from those types of places alone."
The median rent data that are most widely reported are derived from surveys of rents at large apartment complexes. This data obviously misses large segments of SF's rental stock, including small buildings and condo rentals. However, it is not skewed by the much higher rent of, say, a condo at the Brannan.
Posted by: Dan at June 5, 2007 5:52 PM
Rents up, prices up.
Posted by: b at June 5, 2007 7:56 PM
Why is it a mystery that both rents and prices are up in a strong economy? They are not mutually exclusive. The winner is the landlord.
Posted by: b at June 5, 2007 7:57 PM
The median rent data that are most widely reported
Ha ha, Dan, that's a great point. You're right!! The most widely reported statistic IS a survey of large apartment complexes.
And that would have doomed my argument. Except for one thing. The quote is from a real estate agent! And I'm shocked, shocked that she used a different statistic.
Where did that real estate agent get her stats from. Hmmm, it appears to be the Lusk Center for Real Estate in So Cal, where everything is rosy, rosy, rosy, all the time: http://www.usc.edu/lusk . And can you guess which methodology they use. The most accurate one? Hmmm, they don't seem to.
I couldn't find the article to which she refers, but here's an older one I could find:
"Average asking rents and occupancy rates in Southern California's multifamily markets will continue to improve at a steady pace "
So I don't know for sure what their source was for the most recent figures, but it looks like asking rents, and that matches with my perception that average effective rents are not up 7%.
I'm sure with Avalon Bay, and the general upgrading of apartments going on all over to compete with all that new stuff in Mission Bay even those rents are up, but again, because of the increase in quality, not some enormous increase in rents for the same place. The wage data doesn't support it. And a lot of the new jobs in the city are coming from Biotech, and wages in that field are awful.
With average wages headed flat to down, gas and food prices up, an insane amount of new housing coming on line every day, it's going to be tough to get 7% per year. But rents were so flat for so long, that things could change.
Posted by: Tipster at June 5, 2007 8:29 PM
What evidence is there of a "general upgrading of apartments" in SF? True, it would stand to reason that landlords would seek the maximum possible rents in vacant units in a rent-controlled environment - something that could be accomplished through upgrades as apartments are vacated. But I don't know how anyone could determine that such a trend is in fact taking place.
Posted by: zzzzzzzz at June 5, 2007 8:41 PM
The answer to "is there a better resource for rentals than Craigslist" is "no". Although you'll see the same undesirable apartments on for weeks at a time, viewing the apartments that have been listed in the last two days or so in a given category (e.g., two bedrooms west of Van Ness) gives a fairly good idea of what the true range in the city is. Desirable stuff is gone within a day or so.
In my opinion CL also features a lot more of the sort of apartments that don't find much favor with those who post on this site (e.g., 2 bedrooms in the Richmond, 1 bedrooms with no parking near Polk and Taylor, and older stock in general). This is where the majority of the market is.
Posted by: David at June 5, 2007 10:19 PM
Loving the craigslist rental discussion. Can we get a topic started on what exactly is the deal with "Mazal" and "JWavro"? It always seems they flood the rental listings with overpriced stuff and I've even seen some examples of them relisting another proerty that's already on the market? How do those agents work exactly. Maybe i'll post this in the forums, but I'll see if it gets going here.
Posted by: eddy at June 6, 2007 9:53 AM
As someone who is moving to San Francisco from New York this summer and planning on renting a 2 br, I'm finding this discussion interesting. I'm looking forward to escaping the absurd and sleazy NYC rental market after years of renting and paying 10-15% broker fees. I've been looking at SF listings on craigslist for a few months to get a read on the market and it seems to be at least a little more reasonable than NYC.
In addition to craigslist, I've heard that another way to find rentals in SF is to walk around a neighborhood looking for "For Rent" signs. Is this not really a great option anymore due to the tighter rental market?
Posted by: Brian at June 6, 2007 2:13 PM
Yes, in between looking at Craigslist listings, walk around neighborhoods you prefer, looking for "For Rent" signs.
You may find an apartment that way (I did, years ago, before Craigslist), but even if you don't, you'll get a better sense of the feel (and amenities) of the various neighborhoods.
Posted by: Dan at June 6, 2007 4:09 PM