October housing data - yet more of the same

Submitted by Rich Toscano on November 19, 2021 - 5:43pm
Home prices were pretty much unchanged last month, as the market continued to digest early 2021's massive price increase. And months of inventory remains pretty much rock-steady -- and at a quite low level, albeit not so low as the frenzy months earlier this year. The usual charts below...




























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Submitted by sdrealtor on November 22, 2021 - 10:00am.

The quiet before the storm

Submitted by gzz on November 22, 2021 - 10:55am.

sdrealtor wrote:
The quiet before the storm

Yep.

While purchase prices take a short breather, rents are going up faster than anytime in decades.

What I noted for OB seems to be the case everywhere else:

Looks like we are headed for a 50-70% increase from Jan 2019 to Jan 2022. E.g. 1/1 of ~700sf going from $1300-1600 to $2100-2600.

CoreLogic says high end and detached are seeing the strongest rental growth. It says San Diego detached is up 12% YoY.

https://www.corelogic.com/intelligence/s...

Submitted by XBoxBoy on November 22, 2021 - 1:42pm.

gzz wrote:

While purchase prices take a short breather, rents are going up faster than anytime in decades.

These rent increases should put an end to any hopes that inflation is transitory. Rent and owner's equivalent rent are big parts of the CPI and so unless rent increase moderate significantly real quick, inflation is not going to slow down.

Submitted by gzz on November 22, 2021 - 2:44pm.

XBoxBoy wrote:

These rent increases should put an end to any hopes that inflation is transitory. Rent and owner's equivalent rent are big parts of the CPI and so unless rent increase moderate significantly real quick, inflation is not going to slow down.

Most of us here are tracking market-level rents, and I think that is largely what is reported.

BLS uses actual rents paid in its inflation stats. These are held down by landlords who let rents fall below market rates plus state and local rent control laws.

I get a glimpse of how much lower rents paid are than market rents are when I see rents paid get disclosed in the marketing docs for small apartment buildings for sales.

It isn't unusual to see something like
"complex with six one bedroom apartments, currently 100% rented at $900, $1200, $1300, $1500, $1600, $1800. Market rent believed to be $2000."

A former neighbor on my block rented the same 3-bedroom cottage with two-car garage for $1100 a month for 30 years. The family trust that owned the property (and many others since the 1960s) hired a new property management company, which raised it to $2500, which was still below market. She had to move to Chula Vista.

Submitted by XBoxBoy on November 22, 2021 - 4:00pm.

gzz wrote:

Most of us here are tracking market-level rents, and I think that is largely what is reported.

BLS uses actual rents paid in its inflation stats. These are held down by landlords who let rents fall below market rates plus state and local rent control laws.

I'm no expert on this, but I would presume that if rents are rising that data would show up in BLS data before long. (And indeed, last month shelter rose 0.4 per month, or 4.8 per year) Maybe not as quickly or as strong as market rate changes, but would still show up. And I would think with all the talk of inflation and rising rents, more landlords would be thinking, "You know, I should go ahead and raise rents."

I guess we'll see, but I stick with the presumption that if rent increases don't slow pretty quickly then inflation won't either.

Submitted by Escoguy on November 22, 2021 - 10:05pm.

Out of my 7, I only raised rent by 6.8% on average, and am still about 6% below market on average.

Given I'd rather have consistent 2% increases every year than a yo-yo effect.

I'd also rather play the long game, even if I could collect $20K more a year in rents, would that mean I turn around and spend that much more on repairs.

In the short term, probably not as landlords can be picky, but I think at some point even if it's five years out, things will normalize somewhat. But what do I really know? I appreicate the very specific tailored local data stream and the fact that it is comparable.

If one looks at the annual drop "San Diego Active Inventory", in a few years, we will have negative inventory. Meaning, a seller can sell the right to sell his house in the future, but no one knows when. Buyers and realtors will bid on the right to bid at an unknown future date. Thus negative inventory.

Reading my comments again, maybe I shouldn't have stopped by Mankind Dispensary on Miramar on the way home.

Submitted by sdrealtor on November 23, 2021 - 12:57am.

LOL

Submitted by gzz on November 23, 2021 - 12:37pm.

Esco, what do you reckon the increase in market rents for you inland detached empire, Jan 2019 to Jan 2022? My 50-70% increase for OB seems extraordinary, but I look carefully and it checks out.

Very long term, OB rents have not gone as much as you'd think.

When I moved here in 2006, a common 700sf 1/1 was about $1000-1200. So rents only rose gradually to my 2019 estimate of $1300-1600, about 33% over 13 years is well below 3% compounded.

I am not sure how to explain that long period of weak rent growth, as it was also a period of gentrification rising property prices and incomes. There was also a decrease in units for long term rent due to: AirBNB taking over half the beach block, little crappy buildings being replaced by nice new construction, and larger crappy places getting gut renovated. The bottom of the market here are no-parking no-view unrenovated places of about 400-500sf. Used to be a lot of them on the market in 2006, but not anymore, and when they do hit the market, they get snapped up instantly.

Submitted by sdrealtor on November 23, 2021 - 7:47pm.

Heres a coastal data point.

In 2006 a complex I watch closely had 1/1 770 sq ft w/ 1 car for $1300. In 2019 that was about $2,000. You could probably get around $2200 now.

Typically speaking rents lag appreciation particularly on the low end in desireable spots. There is an ownership premium and its bigger on the low end. There is a price of admission due to land being so expensive so entry level homes are relatively expensive comparfed to nicer homes

Submitted by sdrealtor on November 23, 2021 - 8:19pm.

Here's another great data point. A guy bought 2 identical homes on my street in 1999 for his retirement. They are 3/2 2000 sq ft one story homes. He paid $330K for one and $340K for the other. Current Value is likely around $1.4M each. Back in 1999 rent was likely around $2500

He rents them out always through MLS so the data is there for many years. He always pushes rents to be above market and they can sit empty for a month or more sometimes. Here is the progression. Some of the differences from year to year are seasonality. You get more renting a house here in Summer than in Winter but overall a great data set.

2005 - $2900
2008 - $2950
2010 - $3400
2011 - $3700
2012 - $3500
2013 - $3650
2014 - $3900
2016 - $4100
2018 - $4000
2019 - $4250
2020 - $4350
2021 - $4900

He also has one more larger one here as well as a condo in Downtown, Carmel Valley and Mira Mesa. All were bought new construction. I think he has a house in Carmel Valley also. He's gotta be in his mid 80's now

Submitted by Escoguy on November 23, 2021 - 10:25pm.

[quote=gzz]Esco, what do you reckon the increase in market rents for you inland detached empire, Jan 2019 to Jan 2022? My 50-70% increase for OB seems extraordinary, but I look carefully and it checks out.

Very long term, OB rents have not gone as much as you'd think.

When I moved here in 2006, a common 700sf 1/1 was about $1000-1200. So rents only rose gradually to my 2019 estimate of $1300-1600, about 33% over 13 years is well below 3% compounded.

gzz
from Jan 2019 to Jan 2022: About 18%, but if would be fully at market 24%.

It's like $4100 (typical rent for 3/4 BR SFH with 2000-2500 sf) is the old $3300 (5 years ago) which 20 years ago was the $2000.

I had a decade (2003 to 2012 where I didn't change the rent at all), was probably under by $300/month but living out of the country, I was glad the house only had two occupants.

So I see two very different inflation periods:

2003-2013 of 0% (who knew a recession could be deflationary?)

2014-2021 of 7% (if you print it, inflation will come)

2022-4%
2023 down to 3%
Afterwards 2-3% range ( by then supply chain issues mostly worked out)

Submitted by Escoguy on November 23, 2021 - 10:28pm.

sdrealtor wrote:
Here's another great data point. A guy bought 2 identical homes on my street in 1999 for his retirement. They are 3/2 2000 sq ft one story homes. He paid $330K for one and $340K for the other. Current Value is likely around $1.4M each. Back in 1999 rent was likely around $2500

He rents them out always through MLS so the data is there for many years. He always pushes rents to be above market and they can sit empty for a month or more sometimes. Here is the progression. Some of the differences from year to year are seasonality. You get more renting a house here in Summer than in Winter but overall a great data set.

2005 - $2900
2008 - $2950
2010 - $3400
2011 - $3700
2012 - $3500
2013 - $3650
2014 - $3900
2016 - $4100
2018 - $4000
2019 - $4250
2020 - $4350
2021 - $4900

He also has one more larger one here as well as a condo in Downtown, Carmel Valley and Mira Mesa. All were bought new construction. I think he has a house in Carmel Valley also. He's gotta be in his mid 80's now

Notable how a few of mine would lag this by a fairly consistent $500-$800/month but they are larger but further inland.
Recent trend has been to have a more narrow gap.

Submitted by sdrealtor on November 24, 2021 - 8:53am.

As an aside from memory rents went up slowly with inflation from 99 through 06 maybe slower towards the end as everyone was able to buy. Then they were flatish in 07-8 freeze up/downturn in the market but started rising again in 09 quickly as lots who walked away from homes became renters then it slowed as markets recovered. This continued about 10 years and since the pandemic they've spiked with inflation like most things

Looking back at the same house numbers they seem to follow that trend too

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