We’ve heard it over and over as people lament the high price of housing in the city: that the theory of supply and demand doesn’t apply when it comes to the San Francisco real estate market.
Tell them that in South of Market.
SoMa, and particularly Mission Bay, have experienced dramatic development, adding thousands of units of new rental housing. And the result?
“It’s basically a tenants’ market right now,” says Climb Real Estate agent Elizabeth Kim, who says she has an unprecedented 20 vacant units she’s trying to rent. “Usually at this time of year we’re really busy. But now people are not snapping things up. We’re not getting the multiple offers.”
Didn’t I say this was going to happen @manch? You kept on saying that is the high end of the market but my point was that eventually some lowering of rent and sell pricing would occur and it would impact other markets. And it apparently is happening. Too much of anything is no good.
When you are talking about a city that is predominantly renters, housing supply is choice E: “all of the above.” People don’t care if it is a SFH or a condo. They just want to know how much out of pocket they are each month. Amenities, neighborhood safety and convenience all play parts of course in the decision making and pricing. But nevertheless, if you increase housing in the form of the condo supply sufficiently, all bets are off because renters will begin to have options. The thing is, there is still way, way more development coming and the supply is no where near being absorbed as it is. That is not an equation any mom and pop owner of rental property would and should want to see.
Why isn’t it being absorbed? Is it because it’s too high end for the people being displaced? There’s a lot of stories about people being evicted and moving out of SF due to high rent. If there’s not enough high income people to fill the luxury market, then price drops will eventually trickle down. I wonder if Oakland becoming hot is another factor.
It will trickle down, to some degree. But it doesn’t help that it’s concentrated in just one small area of SF. If you don’t like that area for some reason all the glut in that area doesn’t help you much.
But I suspect the supply and demand will soon balance out. We still have a lot of demand with extremely limited supply.
Guys and gals, you have to admit these rent levels are ridiculously high. I am sure most if not all of you have mortgages for freaking SFHs that are half what some people are paying to rent for some apartments. At some point, these supposedly smart people’s smartness will reveal itself, no? Uh, hon, why are we exactly paying $40k-$50k for rent??? Uh, don’t know…let’s set up some a webinar meeting next Tuesday to do a deeper dive… ok
Look at the South of Market line. It shows a clear down trend. It peaked in Dec 2015 and has been going down since. It seems it has gone down from 4,300 to 4,200? So a drop of $150 or so? But how low do people expect it to go? That condo costs almost $1M. If rent goes below 3,500 I suspect the owner would rather sell and get the fast cash up front.
The entire SF rental market is flat. It’s dropping in SOMA so that means it’s still rising in some other neighborhoods.
Sound correct but is in fact wrong. Let’s me illustrate through a thought experiment,
Say there are 5 identical houses at exactly the same location, one of them manage to rent at $5000/ month, it doesn’t follow that the other four is able to be rented out at $5000/ month. If affordability remains the same, the second one might be rented out at $4900, the third at $4800, fourth $4700 and fifth $4600 i.e. lower and lower.
Of course, there are no such thing as identical houses at same location .
SF rents may have plateaued but nationwide they are still going up. .Min wages going up forcing all wages up. Supply cant keep up with demand…Millenials prefer renting…Have student debt, want an urban lifestyle, don’t want a long term commitment and arent willing to go where shfs are cheap…Thus rents are going up in desirable areas…Builders are still building less than half as many homes as in 2005. …I am talking to lots of millienials that are moving to Tahoe for the lifestyle. .Dont care about the job just want to ski hike bike kayak…Plenty of service entry level jobs…Many come without even a job with parental support…Plenty of boomer money keeping them afloat…One guy we sail with is camping…nowhere to stay…