Have rents finally peaked?

by Rob Regan on February 12, 2013

In February 2010 we wrote a post entitled “Rents dropping like a rock in San Francisco.”   About a year later San Francisco rents bottomed and started a huge run up that may have just come to an end.  After the initial run up in rent rates we wrote this post about a couple of our one-bedroom condo listings that we thought looked like pretty good investment deals based on the purchase price to rent ratio.  Since then rent rates have gone even higher, but so have purchase prices.  Interestingly one of our old listings is back on the market, and at $429,000 for an empty condo that may well rent for $2,500 or more, it still looks like a good deal.  However, this just in that as of Q4 2012 rents appear to have plateaued, and one of the reasons the article speculates is that lots of would-be renters ended up buying.

I would say the jury is still out on this as being a new trend.  But it is something to keep an eye on, and if you’re in the market for a rental you just might be able to negotiate, whereas that was largely a waste a few months ago.  And if you’re a landlord, and you’re not getting the traction you thought you were going to get, you may want to adjust your expectations.  Hey, you’re still commanding a rent FAR higher than 2 years ago.  As for future investment purchases, with record low interest rates, and a long term horizon, you can still lock in a largely fixed payment for what is likely to be a steady to uptrending overall rental market.

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