6 ms·

> sudden drop in rents Curious, Why aren't properly prices droping to reflect the loss in population.

picture_view 4y ago
It’s possible most of the 6.3% did not own property and we’re not in the market to buy property, so there was no change in that market.
- okaram 4y ago
  And I'd assume house selling is fairly elastic in the short term. If property prices go down, people would decide to wait.
- tekknik 4y ago
  Even renters increase housing costs. Housing is finite and some people sit on the fence about buying or renting. An inability to find a rental unit sometimes tips them into the buying territory
lazide 4y ago
Speculators betting it will come roaring back afterwards, money still getting cheaper, folks with families that can’t move, inability to ‘just move’ if you own, all probably contributing. Housing prices have been out of whack with fundamentals (cash flow) since at least ‘12-‘13.
- jethro_tell 4y ago
  Here's another more bleak option. Just like in 2008 when corporations bought up huge swaths of the housing market for cash while no one could get a loan. (which is part of the current issue with not enough homes to buy) They aren't betting the market will come roaring back, they are betting that they can corner the market and housing will be a subscription just like everything else they sell. Rent seekers aren't going anywhere, and the cost is really immaterial to them for the most part. They don't need cashflow, they need a monopoly.
  - lazide 4y ago
    That assumes they'll get takers on the areas though. With remote work becoming more of the norm, what if the labor market doesn't move back? They'll have a monopoly that few ever pay rent on, and they'll go broke (while the houses rot).
    - heavyset_go 4y ago
      Urban areas are desirable even outside of the availability of high paying jobs. There are neighborhoods in America's desirable cities filled with the adult children of wealthy people who pay their kids' insane rents while they pursue arts, fun and wait tables or bartend on the side for petty cash or to keep busy. That section of urban residents are not dependent on high paying jobs and will continue to seek out cities for the lifestyle aspect.
    - jethro_tell 4y ago
      Sure, It's not a sure thing forever and not all areas are going to be winners, but if you have a big enough budget, you can just buy houses everywhere for a long time and probably make decent rent for a while. Heh, if not, or when it ends, they can just dump it and or the company and walk away. It's not like they are doing it with their own money.
  - marvin 4y ago
    This is a spooky narrative, but the rent seekers can't be the majority. My understanding is that many Californian real estate markets are kept artificially tight due to various forms of NIMBYism. If renters become the majority, it's suddenly no longer viable to limit new housing through regulation. Markets are nowhere near the fundamental limits of homes per square meter of the state that's good to live in.
    - jethro_tell 4y ago
      I don't think they are a majority and I think the main problem is lack of housing being built. But I do think that what housing is out there on the market faces stiff competition from companies not people. I'd assume there are a few people buying houses with cash but my guess is a lot of those stories you hear about people bidding 100k over ask and losing to a cash offer are mostly not people. Theres a good number of companies that are open about increasing their housing portfolios. Even construction companies that built thousands of starter homes per year converting to rentals only. These are long term changes, and not a quick cash grab at the bottom of the market.
chrisco255 4y ago
We are still in the early stages of the bubble deflating.
teebs 4y ago
Many of my friends who are tech workers who've worked at unicorns and tech giants for 5-10 years bought their first homes in SF during the pandemic. I would guess part of the drop in rents is a shift in demand from former renters to new homeowners. Also, there was a general increase in prices across all asset classes during the pandemic that continued to drive prices up. Finally, property prices have actually gone up less in SF than they have in the US as a whole, likely because of the general effect of people moving away - compare the change from January 2020 to today in this chart https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS vs this chart https://www.zillow.com/san-francisco-ca/home-values/ https://www.zillow.com/san-francisco-ca/home-values/
RC_ITR 4y ago
If everyone who left was living in a 2 bedroom with a roommate and now that space is a one bedroom with a home office, then why would rents fall?
- sokoloff 4y ago
  Presumably the willingness to pay a given amount from just one person’s income is lower than that of two people’s income. Add in additional temporary uncertainty in big parts of the tech market and I can see a lot of currently occupied units having a tenant not willing to renew as-was.
- IfOnlyYouKnew 4y ago
  Is the former roommate paying twice as much? If not, their rent has fallen, for statistical purposes.
seanmcdirmid 4y ago
The loss of population is directly caused by property prices, so if they were reduced, the loss would reduce or reverse and we simply would't be talking about population loss anymore (seriously).
- chiefalchemist 4y ago
  Yes, but probably not all. WFH has enabled those not interested in SF property to go for their property elsewhere. It's also difficult to imagine demand increasing again and prices falling or even staying level. The issue with SF, NYC, London, etc. is sqr miles are effectively fixed and zoning limits how many residential units you can add to the market.
  - jacobr1 4y ago
    One of the items that seems to be missed in these kind of discussions is the increased demand for what otherwise would be called sprawl. You hear about people want to stay in a big city, or want to move to $tier3 city, but there is also a large cohort that wants to move to within 1.5 hours of bigcity, so I can maintain my network/family/work in the office once a month/etc ... This "sprawl" space is't a limited as the cities proper ... but with commutes was effectively limited. That limit is gone for large groups of remote/semi-remote workers.
  - seanmcdirmid 4y ago
    Maybe? Just as many people are probably staying in or moving to SF because they remote work to a job in the valley (eg San Jose) and not commute that much. They aren’t so price sensitive and value being in the big city. Until SF is undesirable, demand will keep, rents will remain high, and people are going to be priced out.
IfOnlyYouKnew 4y ago
I don't know the answer but I do know that all the attempted answers currently posted get the basics of economics spectacularly wrong. My money is on either this census data or property value data simply being wrong. Housing is a famously inelastic market and a 6.4 % drop in demand should lead to a double-digit decrease in rents and values.
Schnitz 4y ago
Condos did drop, single family homes did not.
refurb 4y ago
Limited housing stock and people upgrading from rental to a home goosed demand and prices. I’d also assume people who bought a place are less likely to sell and leave than someone renting.

It’s possible most of the 6.3% did not own property and we’re not in the market to buy property, so there was no change in that market.

okaram 4y ago
And I'd assume house selling is fairly elastic in the short term. If property prices go down, people would decide to wait.
tekknik 4y ago
Even renters increase housing costs. Housing is finite and some people sit on the fence about buying or renting. An inability to find a rental unit sometimes tips them into the buying territory

lazide 4y ago

Speculators betting it will come roaring back afterwards, money still getting cheaper, folks with families that can’t move, inability to ‘just move’ if you own, all probably contributing. Housing prices have been out of whack with fundamentals (cash flow) since at least ‘12-‘13.

jethro_tell 4y ago
Here's another more bleak option. Just like in 2008 when corporations bought up huge swaths of the housing market for cash while no one could get a loan. (which is part of the current issue with not enough homes to buy) They aren't betting the market will come roaring back, they are betting that they can corner the market and housing will be a subscription just like everything else they sell. Rent seekers aren't going anywhere, and the cost is really immaterial to them for the most part. They don't need cashflow, they need a monopoly.
- lazide 4y ago
  That assumes they'll get takers on the areas though. With remote work becoming more of the norm, what if the labor market doesn't move back? They'll have a monopoly that few ever pay rent on, and they'll go broke (while the houses rot).
  - heavyset_go 4y ago
    Urban areas are desirable even outside of the availability of high paying jobs. There are neighborhoods in America's desirable cities filled with the adult children of wealthy people who pay their kids' insane rents while they pursue arts, fun and wait tables or bartend on the side for petty cash or to keep busy. That section of urban residents are not dependent on high paying jobs and will continue to seek out cities for the lifestyle aspect.
  - jethro_tell 4y ago
    Sure, It's not a sure thing forever and not all areas are going to be winners, but if you have a big enough budget, you can just buy houses everywhere for a long time and probably make decent rent for a while. Heh, if not, or when it ends, they can just dump it and or the company and walk away. It's not like they are doing it with their own money.
- marvin 4y ago
  This is a spooky narrative, but the rent seekers can't be the majority. My understanding is that many Californian real estate markets are kept artificially tight due to various forms of NIMBYism. If renters become the majority, it's suddenly no longer viable to limit new housing through regulation. Markets are nowhere near the fundamental limits of homes per square meter of the state that's good to live in.
  - jethro_tell 4y ago
    I don't think they are a majority and I think the main problem is lack of housing being built. But I do think that what housing is out there on the market faces stiff competition from companies not people. I'd assume there are a few people buying houses with cash but my guess is a lot of those stories you hear about people bidding 100k over ask and losing to a cash offer are mostly not people. Theres a good number of companies that are open about increasing their housing portfolios. Even construction companies that built thousands of starter homes per year converting to rentals only. These are long term changes, and not a quick cash grab at the bottom of the market.

chrisco255 4y ago

We are still in the early stages of the bubble deflating.

teebs 4y ago

Many of my friends who are tech workers who've worked at unicorns and tech giants for 5-10 years bought their first homes in SF during the pandemic. I would guess part of the drop in rents is a shift in demand from former renters to new homeowners. Also, there was a general increase in prices across all asset classes during the pandemic that continued to drive prices up. Finally, property prices have actually gone up less in SF than they have in the US as a whole, likely because of the general effect of people moving away - compare the change from January 2020 to today in this chart https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS vs this chart https://www.zillow.com/san-francisco-ca/home-values/ https://www.zillow.com/san-francisco-ca/home-values/

RC_ITR 4y ago

If everyone who left was living in a 2 bedroom with a roommate and now that space is a one bedroom with a home office, then why would rents fall?

sokoloff 4y ago
Presumably the willingness to pay a given amount from just one person’s income is lower than that of two people’s income. Add in additional temporary uncertainty in big parts of the tech market and I can see a lot of currently occupied units having a tenant not willing to renew as-was.
IfOnlyYouKnew 4y ago
Is the former roommate paying twice as much? If not, their rent has fallen, for statistical purposes.

seanmcdirmid 4y ago

The loss of population is directly caused by property prices, so if they were reduced, the loss would reduce or reverse and we simply would't be talking about population loss anymore (seriously).

chiefalchemist 4y ago
Yes, but probably not all. WFH has enabled those not interested in SF property to go for their property elsewhere. It's also difficult to imagine demand increasing again and prices falling or even staying level. The issue with SF, NYC, London, etc. is sqr miles are effectively fixed and zoning limits how many residential units you can add to the market.
- jacobr1 4y ago
  One of the items that seems to be missed in these kind of discussions is the increased demand for what otherwise would be called sprawl. You hear about people want to stay in a big city, or want to move to $tier3 city, but there is also a large cohort that wants to move to within 1.5 hours of bigcity, so I can maintain my network/family/work in the office once a month/etc ... This "sprawl" space is't a limited as the cities proper ... but with commutes was effectively limited. That limit is gone for large groups of remote/semi-remote workers.
- seanmcdirmid 4y ago
  Maybe? Just as many people are probably staying in or moving to SF because they remote work to a job in the valley (eg San Jose) and not commute that much. They aren’t so price sensitive and value being in the big city. Until SF is undesirable, demand will keep, rents will remain high, and people are going to be priced out.

IfOnlyYouKnew 4y ago

I don't know the answer but I do know that all the attempted answers currently posted get the basics of economics spectacularly wrong. My money is on either this census data or property value data simply being wrong. Housing is a famously inelastic market and a 6.4 % drop in demand should lead to a double-digit decrease in rents and values.

Schnitz 4y ago

Condos did drop, single family homes did not.

refurb 4y ago

Limited housing stock and people upgrading from rental to a home goosed demand and prices. I’d also assume people who bought a place are less likely to sell and leave than someone renting.