Wednesday, August 16, 2006

Did You Hear That? It's The Sound of a Renter's Nightmare

Yesterday felt very reminiscent of 1997. Recently, I met with a client over drinks, and she mentioned that she didn't understand how the housing rental market tightens up and slows down.

When more people can afford to purchase homes, there is less demand for housing rentals, so prices adjust accordingly. Conversely, when money becomes expensive to borrow, meaning interest rates on borrowed money (home loans) increase, fewer can afford to purchase homes and the rental market maintains a steady pace due to continued demand.

The rental housing market in San Francisco is reaching a point of high demand. Interest rates on loans are holding steady at the moment, but rates are still higher than they have been in the last two years. In addition, buyers looking at the lower end of the housing market are facing future uncertainty with some of the risky loans , such as interest only loans or 3 to 5 year adjustable loans, which allow them to enter the housing market. Many such buyers are staying put in their rental housing.

So begins the Renter's Nightmare. On Monday I posted a 1 bedroom apartment for rent, with an open house to show it yesterday. There was a line at the main entry when I opened the door, I received 11 applications in 1 hour, and enough hints of possible bribing and personal stories from strangers to hold me until the next vacancy. Which most likely, will probably be a long way off.

For the entry level home buyers that are still ready to buy, there is good news. Inventory on the lower end of the market has increased significantly in the last quarter, offering new opportunities by way of pricing rather than risky loan tactics. Additionally, rates for fixed loans are holding steady at nearly the same rates as adjustable loan rates. Because the market has slowed, sellers can be less picky about what type of financing is chosen by the purchaser, which means that a no money down or 5% down offer could still seal the deal.

Have more questions about buying or selling real estate? Ready to buy or sell a home? Contact me today for honest, experienced answers.

Amy Blakeley
(415)296-2173 Direct
ablakeley at


Anonymous said...

You have to look at the rental situation of 1997 in the Bay Area for what it was - a boom in the High Tech.

It did not matter if a Company had a product that sold. It was the potential that company could go IPO and Venture Capital money was pouring into start-up companies.

In turns, they hired anyone that could do two to three line of coding.

The 1997 to 2000 was a High Tech Gold rush, that brought about unheard of salary. The bay area was not ready for the in-rush of people coming into the bay area ready to "Dig for Gold" and it did not matter if it was just a room or a spot in a room that they could rent.

I am glad to heard that your rental had a long list of people, but that has to do more with Johnny come lately getting greedy again thinking they could milk the last dollar in the real estate boom from Apartment/Condo conversion.

However Johnny come lately did not learn his lesson during the tech boom when he trys to buy high price rentals and could not pay the mortgage after the rental price bottom out back in 2002 to 2003.

I don't see another industry that will produce type of job growth that will bring back the 1997 to 2000 rental market.

What I do see is the slowing of the real estate job sector, such as mortgage financialing, constructions, and real estate ageny.

Good Luck

Amy Blakeley said...

Anonymous makes a good point that the Teck boom fueled the high demand for housing back in 1997 - 2000, and I should have included that as one of the factors. It is true that the rental demands will most likely not reach the frenzy of '97... I was simply pointing out how changes in the real estate market create currents of change in other sectors of housing.