For Rent!

This s completely anecdotal, but I think its worth sharing. Over the past 6 months we’ve been renting everything on our board before the month is out. This month we actually received no notices on May 1. That’s the first time I ever remember having this happen in over 20 years.  We just got a new multi-family account in Delta, and I ahve a new 1 bedroom in Abbotsford, so we do have some places we have to fill, but none of our existing tenancies turned over.  I don’t think anyone’s exaggerating how tight this rental market is becoming. 

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35 Comments

Filed under New Supply, Rentals

35 responses to “For Rent!

  1. Domus

    Yes, i think you are right there. Rentals are hard o come by. on the west side and kits they are almost impossible to find…….

    Why do you think there is such a shortage? More people than dwellings? Many units lying empty? What is it?

  2. Ken G

    I think this tight rental market is in large part due to less people buying homes more people renting. People are selling to get out at the peak and renting in anticipation, new buyers are holding out and or cant afford to buy. Because of the economics it makes more sense to rent which will translate into less buyers for homes.

    This is exactly what should be happening, it makes total sense. This is why rent has gone up so much in the last 10-12 months.

    Higher rent is going to translate into inflation issues and this is going to drive up interests rates.

    Its one big circle.

  3. Geezer

    I doubt that high rents in Vancouver will impact on global interest rates but perhaps Vancouver is different:)

  4. Domus

    More people renting, less demand to buy? Any evidence from previous down-markets?

  5. Ken G

    Domus, It only makes sense in my opinion people got to live somewhere and if they arent buying they are renting. You are seeing similar markets that are taking a beating have the same rental increases. San Bernadino is super tight as well I know from experience.

    As sub-primes and super loosely underwrittin A paper loans roll over at the rate of 100billion/mth for the next 24 months and defaults continue to sky rocket (Socal up 800% now) you will see more people move into rentals. Where else they gonna live?

    No Vancouver alone isnt going to effect global interest rates but do they have to? We are talking the bank of Canada here and to add, I dont think this is just a Vancouver phenom I think you can expect this is to happen in all the bubble cities across the US and Canada.

    I think anyone who thinks inflation is in check is not living in the real world, its just a matter of time before you see the signs of it hit the Feds and the freaks at the BOC.

    Inflation is at 3%? Think about where you spend you money, over the last 3-5 years your buying power is in check with 3%?

  6. VHB

    For the Bay Area, see here. Rents really spiked up just as the bubble peaked. Now that they’re past the peak, the rental market has calmed down too. So, patience.

  7. aetakeo

    Anecdotally, I know a number of renting families who are not giving notice because there’s a fear of losing what rent control they have.

    There’s a real shortage of rental units out there, and an even greater lack of affordable ones – and I’ve been watching inventory convert from rental to condos in the West End for 10 years, now.

    I think when rents are on the way up it makes sense that people become tied to their current dwelling – that can only go up at 4%ish per year. (Inflation + 2%, I think?)

    I suggest it’s a game of chicken: does more rental inventory open up? Or do people start leaving? Rentals really are where rubber hits the road, because people need a place to live that’s economically feasible, and gas prices where they are makes a long commute hard. (Plus, it’s not vastly less expensive in our bedroom communities anymore, either. I’ve a friend pinned in Richmond because the rents have shot up there.)

  8. jim

    I rent. I could easily buy right now. So could a number of my well heeled peers. My rent is actually comparable to payments on a mortgage-with 25% down. I would buy- if the inventory takes a sudden and dramatic plummet, or sales shoot up, or I find the perfect home for cheap.

  9. Ken G

    aetakeo, I am one of those families. We just gave notice because we grew tired of our commute (and we live our lives DT) Its interesting trying to find an affordable place right now. For us its almost more affordable to store our belongings and rent a smaller place then rent the size that we want/need? even including storage.

    Frustrating to the point that we just want to buy a place rather than rent (almost but notquite :)) than look for a place dt that will accept a family of 4 which has its own challenges…

  10. Domus

    VHB,

    do you live in San Francisco now??

    Just curious where life took you next……

  11. Ken G

    VHB, flat but still high from Oct, its hard to tell but would you say around 10+%?

  12. Domus

    Jim,

    your rent equals mortgage payments with25% down? Does not sound like a great rent deal right now……

    Have you factored in taxes and any maintenance/condo fee in the mortgage figure?

    I have done the math with many of my friends lately for the westside and on average rents are equivalent to mortgage with 37% down, when you factor in taxes and condo fees……this figure is based on a sample of roughly 14 people living downtown and in Kitsilano. It seems that renting is still much cheaper right now. It saves you huge outgoings in mortgage interest and condo fees……

    To reverse the usual say: why buy when you can rent ? Let somebody else pay for your mortgage interests after all and pocket the (large) difference….

  13. vanreal

    rents are increasing to come more in line with housing prices rather than home prices decreasing. the world is unfolding as it should

  14. Ken G

    Vanreal, rents dont increase because housing has gone up that is moronic. Rents go up because demand has increased over supply. End of story. No one will accept an increase in rent when they have other offers that are cheaper.

    I posted what I beleive to be a major factor to this increase in demand in my earlier post. .

  15. bobo said

    Bobo said:
    “rents are increasing to come more in line with housing prices rather than home prices decreasing. the world is unfolding as it should”

    You can believe what you want. The reality is the current state is in line with what has always happened before a real-estate crash.

    Why do you refuse to see the huge glut of inventory that is building up.(more people becoming cautious, less fools?)

    Friend of my right on “the drive” has had her condo up for sale for 6 months-no takers.

  16. jim

    It takes calm nerves and 25 years plus buying and selling experience to believe prices will come down in Vancouver right now. I hash it out with my wife regularly. We are steadfast and even if this market has a year or 2 more to run-highly highly doubtful we will wait for the right house and right price.
    Domus we would be cash buyers and have the cash safely in a money market fund.. Trust me I know about taxes.utilities repairs, 2% of cap cost for miscelaneous etc.. My point was I would rather rent today and break even than buy.

  17. Deedub

    Friend of my right on “the drive” has had her condo up for sale for 6 months-no takers.

    Good friends of ours listed their condo a week ago and had a done deal after the first open house.

    YMMV….

  18. As I alluded to before in an earlier post, what sucks is the lifestyle taking a hit if you buy. But if you pay rent roughly equivalent to a mortgage, then why not buy? In 25 years its over, and if you’ve gotten used to a reduced fun way of living, then you’ll have lots of cash you won’t know what to do with. You can be generous to yourself and rent at a low rate now, or generous to yourself later and buy, but if you rent at a high rate and wait for the bubble to pop, then concievably you could be being stingy with yourself ad infinitum.
    Paying high rent is no more or less logical than buying.

  19. jim

    ceejay:
    I am neither bull nor bear. I rent because the odds, with a relentlessy rising tide of inventory, against lowered sales, is I will get better selection with each passing month. A bonus for me would be any kind of flatlining, or sub inflation rate appreciation, which means I could continue to wait for the perfect buy.

  20. thomas

    Vancouver Sun story saying celebrity realtors from around the world are coming to Vancouver to preview the new condos at the Hotel Georgia. Realtor for J.Lo., Saudi Royal Family, sports celebrities. Says they all see Vancouver being cheap on a relative basis. Guess this market has much further to run! Unlikely these globe trotters will be renting out their condos, so not going to help the over-heating rental market.

  21. $froma$ia

    BOBO is that you 2kt?

  22. ängstlich

    So given all of this, any suggestions for poor beggars looking to rent soon? Where to look? How to find a place in this market?

  23. Domus

    my guess: forget Craiglist and check newspapers’ ads. For some reason Craiglist carries more expensive rentals (which are not any better)….

    Rob,

    what are the magic numbers tonight? How is early May shaping up?

    Man, when this thing eventually crashes I will have nothing to look for in the evenings…..!!!!

  24. robchipman

    I love craigslist. We use it a lot. Do we have expensive rentals? I dunno. I do know we’re sold out.

    Domus, when this thing crashes why would you stop looking? I figured you’d be buying in then.

    VHB: Thanks for that link. Those Bay Area rents are outstanding, and I like the rest of that blog too. There really is nothing quite like California.

  25. News Flash

    The reason for a tight rental market?

    Same reasons for high real estate prices and a sellers market…

    Pent up demand + population growth + hot economy

    BTW a tight rental market means but one thing…higher rents in the future and…

    Can you imagine how tight it will get in 2009 just before the olympics? Any landlord with a vacancy will convert to a short term rental and cash in on the olympic tourists. Lock in your lease for 3 years if you can.

  26. Ken G

    Rob, it was hard to tell what the actuals were on the rents but they didnt look much different than here in VCR for a 2 bdrm 1200-1300sqft. for about $2500?

    Maybe you can find me a 2 bdrm for Sept 1? when i get back from NY and i need a place to live for me and my family?

  27. Ken G

    Newsflash,

    demand is what drives price yes i agree and it works both ways like a double edged sword…

  28. g

    Renting is still cheeper. We rent a 3 bdrm 2 bth house (main and 2nd floor) in kits (12th and MacDonald) for $1950 with rent increase coming in July of 4% going up to $2028. This house would sell easily for $900K (being conservative) Even with the rental income of the illegal basement suite (rents for $985) and 25% down your looking at $3515 and that doesn’t include upkeep which this house needs a lot of!

  29. robchipman

    domus:

    g provides another example of the premium that is paid for Westside property.

    g: I’m not sure how many Kits houses break even at 25% down. After all, why buy a rental property in Coquitlam, Maple Ridge or Surrey if you can get on in Kits with great metrics? The suburban properties would have to be even more competitive, right? I may be wrong, but imho concluding that renting in a premium area is a bargain because you don’t break even purchasing at 25% down is misleading. It may be cheaper for the tenant, as you point out, but does that mean its a bad idea for the owner? In your scenario the guy is losing approx. $600/month just on mortgage, but if its worth $900k, and it goes up 5% this year, that’s a monthly gain of $3,750 (and it may be subsidized somewhat from income tax considerations, depending on the owner’s situation).

    Add property taxes, maintenance and management to the mortgage shortfall, and be generous on the cost side. Make the monthly gain only $2,000 (more than $1,000/month added on). That’s still $24,000/year, and if he bought with 25% down (225,000) he’s making just over 10%. (Remember, we’re over-estimating costs and using 5% for appreciation).

    If we use some different numbers (i.e, he bought with 25% down 4 years ago, rents have since climbed and appreciation has been well over 5%), you can see why some investors consider a place like yours a winner, and why they’ll tolerate some down years. That of course, is my point: rental property can be very good for owners while being very attractive to renters. Its not necessarily win/lose either way.

  30. g

    Rob,
    Here is were affordablitiy comes in. We have $225,000 to put 25% down but then our monthly payments would be more than double what they are now. We started with a condo on kits beach in 2000. Well 4 years later with 1 child and other on the way we went to upgrade but found out we had a leaky condo so we rented it out during repairs and moved into a rented house. Repairs completed 2 1/2 years later and condo sold even after assessments we made 210K but if we want to buy a SF house in the same area it would be impossible to swing such large monthly payments. Option of moving to the burbs is not an option for person preferences. So that’s when renting is cheeper than buying, IMO.

  31. robchipman

    g:

    Point well taken. You want to rent in Kits because you need more space (kids grow, dammit!) and because you like the area. One reason is super solid (more space); the other is mere preference (location). Before anyone concludes that I’m dismissing your preference as unimportant, let’s remember that this is a free world and its achieving our preferences that make freedom worthwhile. If you want to rent and live in Kits, good for you, but there is more to the story (full disclosure: I pay a premium to live where I do, and I make what are arguably foolish expenditures on my personal residence).

    How do you think you look to the landlord? Young family who recently sold and have a lot of equity, but who want to stay in Kits for personal reasons, and need the room for children? Based on that you sound like prime tenants. I’m sure he’s happy.

    He’s happy+ you’re happy= win-win.

    Here’s something you may or may not have considered, but which is a time honoured tactic. You continue to live where you think its the best deal for you. Meantime, buy investment property where you can do it wisely. There is a flip side to the investors who like paying a premium for Westside places, and its people who say “I wouldn’t live anywhere other than Kits, but I own rental property in Maple Ridge”. Usual riders apply (buy with good metrics, etc), but you already know that investment property can be great (you got a leaky condo and still made money, right? Imagine if you bought something solid).

  32. Ryan

    Speaking of investments. I think if you can’t get 15% out of the real estate market, cash on cash, then stay out. There are better places to put your money if you are a long term investor.

  33. g

    Rob,
    quote “He’s happy+ you’re happy= win-win”

    I would say he’s happy but were not “happy”. We want to have our own house. I think that it’s more important for me than my husband. We have not ruled out buying we just are holding off for the next 6 months to a year. We are in the mind of thought that a correction in prices has to happen sooner or later (hopefully sooner) Investing somewhere else would make sense if we didn’t want to buy at all but I don’t want to have our large downpayment tied up when that perfect house for the right price comes along. So renting makes sense till that time comes.

  34. robchipman

    g:

    Your concerns are legitimate, and common. However, remember this (and I realize that the current market isn’t ideal, but…):

    You sell in Kits and rent. You buy in Maple Ridge and rent it out. You continue doing your regular stuff, waiting for the moment to arise when you can find what you want to live in on your terms.

    The day comes when you do. You either sell your investment and buy your own property or you re-mortgage your investment, make it negative cash flow, and write off interest on your personal residence.

    The downside is that if you do that today the market may drop significantly and you’ll lose some of your downpayment. That might hurt, but it may not be fatal, as the proeprty you want to buy to live in may becoms available. On the other hand, if the market continues to rise you make money on your investment property at roughly the same pace as your dream house recedes on the horizon. In other words, it doesn’t recede – you just need to work harder to catch up.

    That sounds bad, but the alternative it to leave the money somewhere else and actually lose ground. I know that sounds like “Watch it, you’re being priced out of the market”, but we’re all big enough kids to be able to weigh the validity of that fear (and there is some validity, clearly).

    Another option is to put the money in investment real estate, arange an LOC/re-advanceable mortage at todays values and rates but don’t draw it all down. If the market drops you keep the investment property, increase the mortage, and buy your preferred personal residence accomodation.

    Obviously personal preferences and circumstances come into play, and there are other valid places to park your equity right now. I can’t advise on which of those places is best, but there are pros out there who can.

    Taking your equity out of all games (and I’m not saying you’re doing this, but simply bringing it up for discussion) and waiting for the market to drop is probably more risky than any other course. Bottom line is that you can have your downpayment realtively liquid in many ways, so the fear of having it tied up, while legitimate, is easily handled, leaving you more options.

  35. realitycheck

    Bobo, even in a seller’s market, homes can be overpriced and therefore not sell.

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