February 23, 2009
San Francisco Rental Market Weakness: SocketSite Readers Report
From a plugged-in reader with respect to San Francisco’s rental market:
I do consulting and building inspections for major lenders for commercial properties (apartment buildings over 6 units are considered commercial in SF), and last week I did on site inspections of 8 properties owned by a major SF rental player.
All of the building managers told me that they are not getting any responses at all to new units listed, versus the outlandish amount of emails and phone calls they would receive just a few months back for these same buildings.
These include studios for around $1500 and 1 bedrooms for $1800+, in areas as diverse as Mission, Hayes Valley, and Nob Hill.
∙ A Rental Market Anecdote From A Plugged-In San Francisco Hipster [SocketSite]
∙ SocketSite’s Residential Real Estate Outlook For 2009 [SocketSite]
∙ Bay Area Rents Surge, But Housing P/E Ratio Remains Out Of Line [SocketSite 1/08]
First Published: February 23, 2009 8:00 AM
Comments from "Plugged In" Readers
That makes sense, in a deflationary environment, prices everywhere should fall. SF is not immune to that :)
Posted by: jessep at February 23, 2009 8:26 AM
Ten years ago 1 brs in the Mission were 600 dollars.
Posted by: anonn at February 23, 2009 8:48 AM
On thing that I am really starting to notice is all the for rent signs in windows. Haven't seen this for quite awhile.
We will be moving within the next 6 months and I am already starting to see some great deals and expect to see even more in the near future.
Editor- thanks for highlight this again as the last thread about it went way off track.
[Editor’s Note: We’ve noticed the resurgence in the window sign trend as well (along with new new crossed out prices), and we’ll do our best to keep this discussion on topic (even if it means suffering a few false "censorship!" accusations along the way...).]
Posted by: two_times at February 23, 2009 8:50 AM
Umm, no college kid wants to live in the mission. At least one with any money. Sorry, once I left school I headed right to the Marina...where it's safe and there is tail. Just being honest. As for the others, don't care much for Nob Hill nor Hayes. So give me some rental softness in areas people REALLY want to live: Pac Heights, North Beach, and the Marina.
To not sound ignorant (although I have already), I'm not arguing that rents are coming down, that said, in areas such as the Marina I haven't seen dramatic fluctuation. You still can't get into a ! BR for anywhere near $1500.
Posted by: bernielomax at February 23, 2009 8:55 AM
In late 1998 my (not yet) wife and I were trying to decide whether to keep renting or to buy a place. I remember looking at modest 1 BR places in the Inner Mission -- nothing fancy or remodeled or large. We looked at a lot of places, and gong rents were around $1500/mo and the competition was ridiculous -- 30 people at every open house. That was the dot-com heyday.
We ended up buying our place instead (3/2 in D5 -- now attic is finished as playroom) -- bought late '98, closed early '99. We came out ahead on day one in the rent vs. own analysis because places were so much less expensive to buy then. Rents have gone up in SF over the last decade(they took a big dip after the dot-com bust before rising again) but not nearly as much as selling prices, and while rents will fall based on the recession, my bet is they will hold up better than home prices simply because the latter have gotten so out of whack.
Posted by: Trip at February 23, 2009 9:01 AM
"not getting any responses at all..."
That is because some prop mgrs are putting outlandish prices on their rentals! When I listed my unit recently I saw many of the same ads relisted over and over and over. This is most severe on the higher end (rent > $3000). I'd say at least 30% of the ads had wishful thinking pricing.
But people should beware of anedotal info such as the OP, because it implies that there are few renters and that rents are crashing. They are not. Rents are down, my estimation, anywhere between 5-10% for most units, except perhaps crazy overpriced developers condos and pricy SFH's.
Also remember that rents shot up recently too. In my case up 20% from 06-08.
My prediction for 09 rents: prices will continue to soften but not crash. Maybe down another 5-8% for most stock at best/worse (depending on which end of the rental agreement you are on!)
Posted by: 45yo hipster listening2: Charles Lloyd at February 23, 2009 9:03 AM
Does anyone know how the strata is doing. I thought the asking rents were way too high.
Posted by: jimmythekid at February 23, 2009 9:03 AM
There are plenty of Mission hipsters that would not be caught dead in the Marina. The Mission is exactly where they want to be. Not everyone strives to be what you want to be. It is a pretty myopic comment to expect all college grads to actually want to live in the Marina.
This Pac Heights resident actually likes the Mission Hipster mindset--it is not stuck in the Pottery Barn/GAP world...
Posted by: Pumpkin Patch at February 23, 2009 9:15 AM
"Ten years ago 1 brs in the Mission were 600 dollars."
??? That is silly.
Ten years ago was close to the height of the dot com bubble, and rents were astronomical with incredible competition all over the city. My wife and I moved here in 1999 and it took us months to find a place, despite offering to prepay the full year of rent in advance. Every open house for every craphole was jammed with people.
We ended up lucking out and getting a modest 1 bedroom in the Inner Richmond with no parking and only interior views for $1800. Two years later we rented a huge one bedroom in the Marina with parking for $2100 that was $3000 in 1999-2000.
Posted by: MikeW at February 23, 2009 9:17 AM
bernielomax, you tried hard, but we can still tell you're a realtor shill. Either that or you're so out of touch with your fellow young adults, that I don't think you really did go to college (or went to a completely asocial one like Brown or Smith). You sound like you're 25 going on 60.
1. Young people haven't lived in North Beach for 5-6 years now. Too much B&T on the weekends for it to be hip.
2. Hayes Valley has a lot of young people spilling over from the Haight. Plus they can find cutesy Hayes Valley shops and start a whole new hipster kitsch trend right there.
3. Ditto for the lower parts of Nob Hill near Polk and Trendyloin. Have you seen how many fresh college grads live there?
4. Russian Hill anyone? It is a nice area and rents *are* coming down there. A bit boring, but not a bad area to live in.
Posted by: scurvy at February 23, 2009 9:21 AM
so if RE prices are crashing, and rents are crashing with lots of vacancies, is this thread trying to say that there is a mass exodus out of SF?
And I'm surprised no one has pointed out that the buildings in question are almost certainly some of the ones returned to the banks by Lembi (too lazy to look up the SS thread).
Posted by: sfrob at February 23, 2009 9:29 AM
You know what, you're right. Ten years ago was '99. More like '97 was the 600 dollar Mission one bedroom.
Posted by: anonn at February 23, 2009 9:30 AM
speaking as a younger person, i'd rather be in north beach than the mission or haight or hayes valley, but that's just me. everyone's taste differs.
anyway, i saw an older 2/1 in cow hollow asking 2k/month, no parking (on site for $250).
Posted by: yao at February 23, 2009 9:31 AM
If they can't move their units cut the rent. Seriously, if it sits vacant a month, it will take a year to make up that money. Makes no sense.
SF Rents wont crash. They will soften, but rent control will stave off any catastrophic decline.
Posted by: Eoral at February 23, 2009 9:32 AM
sfrob, just speculating, but I would bet that people are leaving SF as they get laid off -- and more are leaving than coming. And I would also bet we have more people doubling up to save money.
But you don't need a mass exodus (or a mass influx) to have an outsize impact on rents. Largely because of rent control, a pretty tiny number of units changing hands every year sets the "market." A relatively small shift in demand can thus have a huge impact on market rents.
Posted by: Trip at February 23, 2009 9:37 AM
It was a little more than 10 years ago when you could get a 1 br in the Mission for $600. Back in 1992 when I started business school and bought an Eichler in Palo Alto I was renting the two extra rooms for $500 each. I remember friends at the time were paying around $600 a month for a typical "room" in a Cow Hollow 2 or 3 br flat and you could get your own 1 br (that had not been remodeled since the 60's) in the Mission for about $600.
P.S. I agree with scurvy that bernielomax is not a recent college grad and/or is way out of touch with recent college grads (and this is coming from a guy that graduated from Cal almost 25 years ago)...
Posted by: FormerAptBroker at February 23, 2009 9:42 AM
As a renter paying $1600 for a 1BR, and rents falling in SF, how do I get my landlord (I am month to month and cannot afford to move) to LOWER my rent to new market rates?
Posted by: Justine at February 23, 2009 9:55 AM
Justine wrote: "As a renter paying $1600 for a 1BR, and rents falling in SF, how do I get my landlord (I am month to month and cannot afford to move) to LOWER my rent to new market rates?"
As a landlord I can tell you that if the market rents really are lower (and you can prove this to the landlord) almost all of us will lower the rent to keep a good tanant (rather then deal with lost rent and turnover costs if the tenant leaves). You might actually have to give notice since many landlords (including myself) will not lower the rent until I actually get a 30 day notice (most tenants just say they will leave if I don't lower the rent but will not follow through)...
Posted by: FormerAptBroker at February 23, 2009 10:01 AM
Trip - your analysis on SF rents is only half correct wrt rent control. RC makes rents stickier on the down slope since there are so many units "off the market". But RC escelates rents disproportionately when demand is high. RC basically disadvantages new renters in both up and down markets.
Posted by: 45yo hipster listening2: Charles Lloyd at February 23, 2009 10:08 AM
How does rent control stave off catastrophic declines in market rents?
Posted by: SausalitoRes at February 23, 2009 10:13 AM
Too many rental anecdotes to share regarding rental prices and the downward trends. I've started watching CL for rentals and there is an incredible amount of stale listings that are over market. Logic would say that rents would climb as more chose to not buy, but rents are not falling due to stubborn owners/managers. I've also heard some chatter about a few owners that are trying to fill vacancies at higher rents so that they can flip sell the property and show a high rent roll. A common trick is to offer a free month, or require a low down payment/security deposit, in exchange for a higher rent. I expect to see more than a few MDUs hit the market over the next few months. There is a rental bldg in PH that just sold last year and the new owners are asking outrageous prices for an otherwise so-so building. I'm not 100% the bldg sold(it was featured on SS); but regardless they are asking very high rents.
Rents and Prices will come down when this is all said and done. There really is a Perfect Storm that is happening right now; and the depression in the economy is way worse than I could have thought; and I thought it was going to get rough -- just not this fast. SF will remain stubborn due to the strong economic base here, but I truly don't think we will escape the long term housing trends returning to their long time norms. It's starting to see possible that 6 or 7 years of RE appreciation could get wiped out in just 3 or 4 years. I was thinking that it would take more like 10 years, with -3 or 5% a year; but I'm starting to adjust my thought process as I see new real data points every week.
There is no question that this is going to go down in history as one of the "greatest" (i.e., worst) global asset bubbles of all time.
Posted by: eddy at February 23, 2009 10:15 AM
Please elaborate about there being "so many [RC]units 'off the market'".
Do you have evidence of this happening in other down markets in San Francisco?
In the event of a prolonged down market, how long would you expect LLs with RC buildings to hold their units vacant? Would you expect all landlords subject to RC to hold their units vacant in a down market, especially a protracted one?
I see no evidence that San Francisco style rent control hurts new tenants in down markets or up markets. New units are not subject to the rent control ordinance. A tenant leasing a RC unit during a weak market acquires a potentially valuable (non-transferable) leasehold interest when the rental market revives. How does that hurt tenants?
Posted by: SausalitoRes at February 23, 2009 10:21 AM
Say I was getting $2500/month or $30k/year for a rent-controlled unit and say I can re-rent it now for only $2000/month or $24k/year. Why would I hold out until rents get back to $2500/month? Three months of waiting and the difference income evaporates. Are owners of these 'off market' units expecting some sort of near-term rental boom?
Posted by: unearthly at February 23, 2009 10:22 AM
I won't answer for hipster, but fwiw I also think rent control laws moderate the downswing in rents because (just as on the upswing) they restrict supply.
At any point in time a large number of renters are paying below market rents (not all renters of course, but certainly a significant subgroup of tenants living in properties subjectto RC). At the margins, these rent controlled tenants are less likely to vacate units than people paying market rents, all other things being equal. The below market rent is a benefit - giving it up entails a large "switching" cost, and will therefore be resisted by its beneficiaries. This dynamic - constriction of supply that would otherwise come on line in response to the economic conditions - should moderate the fall in rents.
I also agree with Trip (prices will fall more than rents, on average) and eddy (rents AND prices will fall in this - minor quibble - the LARGEST asset bubble in history and probably the only one that can truly be said to have been global).
Posted by: LMRiM at February 23, 2009 10:41 AM
1. by 'off the mkt' i am not referring to empty units. i am referring to low rent RC units where the residents have no plans to leave the city, since they have a deal on their rent. therefore, the base # of potential rental units in SF is always a fraction of what it would be in an equivalent sized city w/o RC.
2. newly available rental units is not the same as new construction units (which are off RC.) due to the constricted # of rental units (elaborated in #1 above), the rents are artifically high for a newly vacated RC unit. this definitely hurts new residents coming into the city, to the benefit of long term residents.
as for LL's choosing to hold vacant units off the market, it can make sense to long time bldg owners, who have low mortgages, and are cash flow positive with their current rent roll. these LL's probably had bad experiences with crappy tenants taking advantages of RC, and a city gov that is heavily biased against them. maybe they want to eventually empty their bldg out and sell as tic in the future? maybe they plan on selling the bldg and want to deliver it w/some vacancies? these equations were more lucrative prior to the recent economic picture, but i don't anticipate alot of these LL's changing their minds. if they are okay cashflow wise w/some empty units, that equation won't change now.
Posted by: 45yo hipster listening2: charles lloyd at February 23, 2009 10:43 AM
Ten years ago 1 brs in the Mission were 600 dollars.
Really?? Because nine years ago you had to pay almost 600 dollars just to rent a 500 sq ft room in a meat locker in Fruitvale. Guess rents must have shot up a few hundred percent between 1999 and 2000!
Seriously, anyone who has any experience with the Bay Area knew that 1999/2000 was near the peak of the rental market. As our old friend fluj would say, you don't know anything about anything. You think you do but you don't. Hmmm...I wonder where fluj is these days...
Posted by: anonm at February 23, 2009 10:48 AM
Question all: I have been living at a "luxury" rental high rise in SF for about 6 months now. My rent is $3000 for 860 sq ft plus $325 a car (x2) for parking. Does anyone think that I can negotiate a cheaper rent in this climate? If so, by how much? Just curious....thanks.
Posted by: Jim at February 23, 2009 10:50 AM
Oh, god, I heard all of these same arguments at the dot com bust: won't lower rents because of rent control, etc.
The reality is that rents fall to the market clearing price. The SF landlords might not LIKE the fact that they have to lower, but as the outlying areas and the non rent controlled units lower, they have to keep up to remain competitive.
The theory is great: rents will stay high and always go higher. The practice has to date been very different. And there are a LOT of newly built places that aren't selling that are coming on the market as non rent controlled units. Those units will fall in price just fine.
Posted by: tipster at February 23, 2009 10:54 AM
"The theory is great: rents will stay high and always go higher."
tipster- no one is saying that except you. why create friction when there is non? let's all play nicely now/learn to love each other/play hackey sack in the grass. peace out.
Posted by: 45yo hipster listening2: charles lloyd at February 23, 2009 11:04 AM
45YOH, I agree that RC can make rent-controlled rents a little sticky on the downward side. I.e. if you're paying $2000 and market rent has fallen to $1900, you might just keep paying $2000 to avoid moving costs and because of inertia. But if market rents fall much more than, say, 10%, the stickiness disappears. Then anyone paying above the new market price (i.e. anyone who rented since about 2003) has the market power to demand a lower rent or to move to similar digs at lower rent, and most will. We saw just that after the dot-com bust.
Posted by: Trip at February 23, 2009 11:08 AM
"As a renter paying $1600 for a 1BR, and rents falling in SF, how do I get my landlord (I am month to month and cannot afford to move) to LOWER my rent to new market rates?"
If you can't afford to move, you have no leverage on your landlord. The way to get a rent reduction is to find a similar apt for less, and tell your landlord that you will move if he/she doesn't lower the rent. However, if he/she refuses and you're bluffing, it can't be good for your relationship with your landlord. It's best if you are really willing to give notice and move, if necessary.
Even if market rents go down, most people are in rent controlled apts, paying below market rent already. And the landlord knows he/she will be locked into the lower rent if it is reduced. So few people in rent-cotrolled apts will actually get a rent reduction. However, rent reductions will be easier to get in post 1979 apartments, where tenants are paying close to market rates already, and the landlord has the flexibility to increase rents again when the market recovers.
Posted by: Dan at February 23, 2009 11:18 AM
Speaking of strategies for getting your LL to lower the rent: if you are currently month-to-month, how about offering to sign a 1 year lease in exchange for a reduction in monthly rent? Can any current or former LLs on board give input on whether this would entice you.
Posted by: jaywards at February 23, 2009 11:24 AM
@ Hipster 10:43
Point made about some long-time renters holding on to their good deals and those units staying off-market for many years. What is less clear is what percentage of the total population of rent controlled units is withheld from the market this way and how much this affects the pricing of the available units.
My unscientific perusing of CraigsList postings for Russian Hill and Marina/Cow Hollow indicates no great shortage of units available for rent. Pricing doesn't seem that strong, though it's hard to say how much it might have fallen.
In your final paragraph you paint a *theoretical* picture of landlords withholding vacant units from market for an extended period.
A few months back, there was a SS thread about a building owner who cleared-out his building and left it vacant for the requisite five-year period. I'm not aware that LLs are withholding units from the market on any widespread basis. If things get as bad as many are predicting, then most building owners won't have that luxury.
On balance, rent control benefits tenants in San Francisco. The landlords know it and the tenants know it...that's why they continue to vote for supervisors who support the continuation of this policy.
Posted by: SausalitoRes at February 23, 2009 11:24 AM
Jim, you're stuck in the lease you signed. When your lease is up, or before it -- you will have LOTS of leverage and you should absolutley bring some comps and ask for a lower rent. Otherwise you should move because that is not a very good deal. $3700 for a condo w/ 2 car parking. Would need location to give a better opinion.
Posted by: eddy at February 23, 2009 11:25 AM
I got my rent reduced in a rent controlled apartment, and trust me, I had the meanest landlord in the city. He owned the building for well over 40 years, so he knew what he was doing.
He told me much later that he didn't want to lose a tenant that paid on time every month and was quiet (the owner lived in the same building), and when I showed him a stack of listings of comps, all cheaper, he lowered it just like anyone else would.
Again with the rent control argument! My former landlord knew if I moved, he'd be taking a risk with another tenant not paying or being as responsible, have some vacancy, and would have to lower the price to the market anyway. He didn't LIKE the fact that he had to lower the rent, but he lowered it just the same. It was like pulling teeth, but he finally relented. Better to lower it for me than for someone else who might not be as easy to deal with.
Posted by: tipster at February 23, 2009 11:27 AM
i agree w/your rationale for stickiness & -10% (+/-) reduction correlation.
but we're not anywhwere 2003 rents today. if summer 08 was the rental height, we're back to 07 rents now. if unemployment continues rising (rising, not stablizing) in SF in 2010, then perhaps we'll go to 03 levels. SF unemployment levels later this year and next, and the trendline is chiefly what i'm looking at to assess rent trends.
Posted by: 45yo hipster listening2: charles lloyd at February 23, 2009 11:28 AM
My partner and I pay 1425 for a very nice 1 bedroom in Ashbury Heights with no view. We've lived there 3 years.
I checked in early fall 2008 for rental comps in my neighborhood. They were over 2000 for a one bedroom.
I doubt rents have fallen below the three year-ago mark in many places.
Posted by: Eric in SF at February 23, 2009 11:34 AM
Can someone speak to the risk of being required to turn in a 30 day notice before a landlord will lower the rent, as mentioned above? That seems like an easy way for your landlord to rent the place to someone else on a verbal commitment to lower the rent for you.
Posted by: Eric in SF at February 23, 2009 11:37 AM
I'm simply expressing my opinion that I for one haven't seen dramatic rents decreases in parts of the city that I would be interested with.
While the flames about the Marina are true, I for one would be happy to avoid the Mission. That's not the topic at hand, we're talking rent prices. I imagine that a lot of rental behavior is driven by young adults or fresh grads...there are desirable places to live, the ones mentioned I don't necessary believe are the most desirable. Paint the whole picture.
Not a realtor, actually a 25 year old techie that owns in the city in none of the above.
Posted by: bernielomax at February 23, 2009 11:56 AM
My landlord offered to reduce my rent from $1800 to $1600 after the dot com bust when I told him I was moving to a bigger place. This was in January of 2002.
My next landlord (actualy the realty company) lowered my rent from $2300 to $2100 and upgraded my parking spot location after I repeatedly requested they do so based on market rates. This was probably late 2003/early 2004 give or take. I believe I signed a one year lease in exchange. They also agreed to my request for a new refrigerator. I was a good tenant for both, which I think made a difference.
Posted by: MikeW at February 23, 2009 12:04 PM
I would think RC makes the market more volatile, if anything. The change in vacancy rate will disproportionately effect non-RC segment and therefore larger rent fluctuation than what the over-all vacancy rate would suggest. In fact, SF market appears to much more volatile compared to the South Bay.
Posted by: jj at February 23, 2009 12:39 PM
For those who are looking to lower their rent, this is what I would suggest:
1. Do the research. Pick a few places that you like and negotiate. That'll get you an idea about the real market rate.
2. Make an offer to your current landlord. Back it up with the offers that you got from other places.
3. If your landlord is not willing to lower the rent to your satisfaction, give him 30 day notice and move.
If you don't want to go through all that trouble, just ask anyway. He may lower the rent just to avoid the hassle of getting a new tenant, if you are a good tenant in particular. But you will certainly get a better deal if you are willing to move.
Posted by: jj at February 23, 2009 12:47 PM
"He (landlord) told me (tipster) much later that he didn't want to lose a (rent controlled) tenant that paid on time every month..."
Isn't a rent controlled tenant who doesn't pay on time a blessing in disguise for the landlord ? A delinquent tenant violates the terms of the contract and gives the landlord grounds for eviction. The vacant unit can then be re-rented at market rate (though still subject to RC), right ? This assumes that the current rent is far below market rate.
Maybe I just don't understand the RC rules though.
Posted by: The Milkshake of Despair at February 23, 2009 12:59 PM
"I would think RC makes the market more volatile, if anything. The change in vacancy rate will disproportionately effect non-RC segment and therefore larger rent fluctuation than what the over-all vacancy rate would suggest"
JJ I haven't a clue what that means. I believe RC helps stabilize the market because it restricts demand. A significant number of RC units in the city are held by long term tenants - people who have been in their units for over 5 years. Rents have a long way to fall before those people are going to move. People also get attached to their places, and saving a few bucks isn't worth it for them to leave their home. Apartments are not clothes, you don't just change in the morning. If the LL keeps the place clean, fixes things, the rent differential needs to be higher before tenants bolt.
Posted by: Eoral at February 23, 2009 1:23 PM
Milkshake - I know my landlord values many things in a tenant, not just their ability to pay a number. Further, the process for evicting a RC tenant who becomes difficult is pretty brutal. The deck is firmly stacked in the favor of the tenant. So having a nice tenant paying less than the most current market rate is considered a Good Thing by most landlords.
Posted by: Eric in SF at February 23, 2009 1:35 PM
I am a landlord, and I agree with Eric
Posted by: Eoral at February 23, 2009 1:38 PM
I know rents at the Fillmore Center have gone down significantly. A one-bedroom that was going for 2.0k six months ago is not advertised on Craigslist for 1.5k. And I know of people who have negotiated that down to 1.4k.
I'd imagine the FC isn't the best example since it's a huge corporate owned complex and they must really want to fill units in this market. But I sensed that they are pretty desperate right now as the lay-offs are drying up the type of people who can afford to live in SF.
Posted by: gaga at February 23, 2009 1:44 PM
A landlord will bend over backwards for a good tenant (pays rent on time, quiet, clean, able to change light bulbs and smoke alarm batteries on own, gets minor things fixed without asking LL to do it, promptly reports major problems). Some, in fact, deliberately price their properties below market in order to get a larger pool to chose from.
So when you start negotiating with your LL ask yourself what kind of tenant you are. Landlords love seeing the bad or so-so ones move on. So I'd be wary of giving that 30 day notice up front.
Posted by: Salarywoman at February 23, 2009 1:49 PM
"most people are in rent controlled apts, paying below market rent already"
Really? I'm not arguing, but that just doesn't seem right. Does anyone know what % of the city's housing stock is subject to rent control? I guess another key factor would be in how long the average tenant stays in an apartment. Are there any stats published on this?
Posted by: Dude at February 23, 2009 1:52 PM
"This assumes that the current rent is far below market rate."
MoD, if your rent isn't ABOVE market, it's considered bad form to ask for a decrease.
Posted by: tipster at February 23, 2009 2:13 PM
Eoral - I think the fact that RC restricts demand, as you point out, is exactly why it exacerbates rent level volatilities. Let's say that with RC prices need to drop 20% (I am just making up this #) for people in RC apartments to consider switching. In the absence of RC those some renters may consider switching at 10% drops, thereby stabilizing the rent market. On the upside, people in RC apartments keep supply off the market by staying put so people looking for an apartment where a lot of people are locked into RC apartments will be chasing a smaller pool of available properties, bidding up rents on the apartments that are available and increasing upside volatility.
That is my take on the "RC increases rent volatility" argument...if anyone sees it differently please feel free to explain.
Posted by: The Drizzler at February 23, 2009 2:24 PM
"JJ I haven't a clue what that means."
Eoral, here is another example: let's say that 50% of the market is RC and RC market is locked in at 0% vacancy. If the over-all vacancy goes to 10%, that means 20% vacancy for non-RC. Which means non-RC price should fall much further than it would at 10% vacancy. Likewise, if the over-all vacancy falls by 5 percentage point, then, non-RC vacancy should be go down by 10 percentage point. That means non-RC rate should go up higher than the change in the over-all vacancy rate would suggests.
Posted by: jj at February 23, 2009 3:45 PM
Tipster- you mentioned that your LL lowered your rent to have you stay. I also understand that you both live in the same bldg. Have you been in that unit only a short time with above mkt rent? (somehow I thought you had a really low rent and didn't want to buy because of that).
I live in a 2 unit bldg and just hate turnover here, since I have to live with these people below me. So far I have been blessed with good tenants. But I'll tell you, it's much easier for me to rent one of my other units- you pay on time, are not a psycho, have good income & credit, and we're done. (f*ck if I care about your personality and personal pet peeved.)
So yes, it's worth it for a LL to negotiate with quality tenants, especially if they live in the same bldg.
Posted by: 45yo hipster at February 23, 2009 4:08 PM
I was talking about a different building than my current place.
I'm under market by quite a bit where I am now, but I doubt that situation will last. Business conditions are deteriorating much more broadly than the dot com bust, so I suspect I won't be under market for long. Rents held steady from 2004-2006, then zoomed up so quickly, I can see them falling back to 2004 levels pretty easily.
I saw an office sublet advertised at Hills Plaza for $1.50 psft per month. Office space of that caliber never made it below $2 during the bust. If offices are empty to that level, it means people sure aren't planning on hiring any time soon. And that's going to put significant pressure on residential rents.
Posted by: tipster at February 23, 2009 4:43 PM
tipster - my question had drifted from the query of asking for a rent reduction to an entirely different question : whether a delinquent renter paying far below market gives the landlord an advantage if they want the tenant out. In many cases the unit could rent for triple or quintuple the cash flow with the RC tenant. Isn't failure to pay rent one of the most clearcut contract violations ?
Posted by: The Milkshake of Despair at February 23, 2009 8:13 PM
I think I see your point. Because RC decreases the supply of units, that smaller supply of units is more subjected to market forces that are influencing rents. I would agree that volatility is increased in that pool, but I would argue that because RC influences tenants to stay in their units, a majority of the total/aggregate amount of rental units in SF remains fixed and therefore allows for greater stability in multi unit buildings.
Posted by: Eoral at February 23, 2009 9:01 PM
I am with your argument now JJ, thank you for the reply. But I think the point I made with Drizzler above applies to your contention as well.
Posted by: Eoral at February 23, 2009 9:08 PM
currently I live at Duboce Triangle. It's very convenient but I don't really like my landlord much. They are not very responsive. I can understand why... because everyone in the building pays below market rent except me. One bedroom for $1950. The building is kinda run down and the unit is only about 650 sqft. It's an ok size for me but recently I've been having hot water problems. Hot water seems to run out very quickly lately. Landlord had supposedly sent people out several times to look at the building but problem hasn't been fixed yet and it's been month and a half. Sometimes I can take 10 minute showers and sometimes 2 before water turns luke warm. I have seen some new SOMA units renting for $1900-2000 for one bedrooms. I'm thinking about moving there once my lease is up. I think it really sucks to live in this kind of building where everyone else is paying totally below market (some of my neighbors have been in the building for 10, 15 years +) and landlord only do the minimal maintenance for the obvious reason. I hope by the time I move, those SOMA units will come down to $1800 or less.
Posted by: CannotWaitToMove at February 23, 2009 10:50 PM
Landlords are required by law to provide you with adequate Hot Water. Tell your landlord to get off his lazy ass and fix the @#@# problem or you will call the rent board.
I am a landlord, and stories like these piss me off.
Posted by: Eoral at February 24, 2009 9:06 AM
"Not a realtor, actually a 25 year old techie that owns in the city in none of the above."
No one actually working in tech would describe themselves as a "techie." Busted.
Posted by: scurvy at February 24, 2009 9:49 AM
Yeah. I just had to spring for two hot water heaters and an oven. It sucked. But when it comes time to collect the rent each month it definitely all feels validated.
Posted by: anonn at February 24, 2009 9:57 AM
Landlords are always going to say prices are not going down in SF. We are moving in 6 months and have been casually looking and REALLY overlook places that have high rent still that are really old and even lacking proper heat etc.
Years ago places that were dumps could be rented at super high prices, now if we are supposed to be paying $2400 or more for a 2 bedroom it better have heat and some amenities. Otherwise we will just move out of the city like everyone else.
For a Victorian flat with no heat, no parking, no yard, no washer dryer, water bill not paid by the owner and nothing ever fixed anything over $2000 is ludacris. We saw one place for $1995 (decent rent I think) with no heat and were told that the landlord would essentially not fix anything unless it was an emergency so deal with it.
Greed has so distorted SF landlords realities they now don't even see $2,000 a month as high rent($24,000) lets keep in mind that in a building with 5 units they are making $120,000 a year 10 units $240,000 a year. And this is with low overhead. And that is only $2000.
Rents are going down and there still are really nice landlords out there who are normal and don't gouge, we met one last night. They might be hard to find but they are out there. And still making alot renting for only $2000-they are the ones who deserve it, not the greedy ones. Sorry landlords but not everyone in SF is rich, I am a social worker and my husband is a teacher- and we refuse to be driven out by a bunch of rich people who are ruining the very heart of this city.
Posted by: Angie at February 25, 2009 1:01 PM
Does anybody know the median prices for studios in San Francisco and/or if studio prices will keep going down.
So far i see studios for $1000 ie lower nob hill, tendorloin..
I dont make much money so i was wondering if i should just suck it up and pay the 1K or wait and see if rent will go down a bit more.. any help?
Posted by: Christopher at February 25, 2009 2:42 PM
"I dont make much money so i was wondering if i should just suck it up and pay the 1K or wait and see if rent will go down a bit more.. any help?"
As opposed to what? Living in your car? Renting a room?
Everyone has got to live somewhere. I would recommend finding the best place you can afford and if things have changed in a year you can move then.
Posted by: diemos at February 25, 2009 2:59 PM
Here is an interesting offer:
"FREE GIFT @ move in of a 42" flatscreen TV. Completion of a 12 month lease will be required. This a limiited time offer!!"
I am starting to wonder if it is even worse out there than I thought. Although they may be moving and don't want to bother putting in any effort to move/sell the tv... but still.
Posted by: two_times at February 25, 2009 3:00 PM
What I notice is how many units are being offered for rent "fully furnished".
Posted by: diemos at February 25, 2009 3:04 PM
CannotWaitToMove: Sounds like you live in my building in Duboce. Corner of 14th and Sanchez? Managed by CitiEvilApts?
Here's a question for the rental experts: My building has central steam heat, which works fine, but they put the damn thing on a timer (on only between 7-11am, and 5-11pm), and a calendar (off between May and November). Apparently the tenants are all supposed to work day shifts at "the plant" and SF is supposed to have traditional seasons.
Is this legal? Can us tenants all sign a petition and get some legal sharks to scare the pants of our do-nothing landlords and their do-nothing "management" company, like in some feel-good 80's movie?
Oh, and as to the original topic, I'm in a 1BR RC unit, moved in April 2007 at $1900, identical units in the building peaked in 2008 at $2450, and now are sitting vacant at $2100. So one data point that says at least one building is about to slide down to early 2007 rents in another month or so of current economic conditions.
I too, have been seeing a lot more "For Rent" signs which would show indicators of anxiety if subjected to handwriting analysis.
PS Bernie as a self-described "techie" who likes the "tail" in the Marina. Snort. This place is some serious entertainment.
Posted by: Kurt Brown at February 27, 2009 12:36 AM
Bernie lotza folks strive to live as far away as possible from people who use the word tail.
Stay living in the fault zone baby!
Posted by: kathleen at April 20, 2009 6:27 PM
The buildings turned over to the bank by Lembi are run and managed by Lembi.
Posted by: Kathleen at April 20, 2009 6:30 PM