Rentals redux.
It's hard to describe today's rampaging rental market without sounding like an old-time radio reporter covering King Kong as he scales his way to the top of the Empire State Building, Fay Wray in one hand, swatting buzzing fighter planes with the other.
Yes, something very big is out there, as I said in my last newsletter, something with profound long-term implications for local real estate. Nothing I've seen since has changed my mind. On the contrary.
Get hundreds of phone calls and emails for a rental single-family home that just four years ago got nothing more than polite applause, and it's obvious that something is up: demand for rentals, and rents along with it. This chart, based on MLS data, confirms it:
And it's not just my rentals that are going quickly and for top dollar. A quick check of the Sharon Green Apartments Web site reveals that, aside from a handful of always-hard-to-rent 3-bedroom/2-bath units, only two of their (very expensive) apartments out of 296 are even on notice, and none are vacant. Their vacancy rate is effectively 0 percent. 2 percent is great.
What's happening? That regularly recurring feature, the Silicon Valley recovery. Compare the steep price curve of 2006 with that of 1995 and you'll see why I say this feels a lot like Spring 1995, when the new hires of a resurgent Silicon Valley's beat the bushes for rental housing.
Something else is going on too, and it's ironic when you consider that the rental boom of 1995 set the stage for the hot sales market of 1998 to 2000. Today, many who only a year or two ago would've been first-time buyers are scared away from the sales market by rising rates, rising prices and rising bubble hot air. That's ironic because, if our market holds true to form, many of the new hires now driving up rents will, in a few years, be driving up home prices. That's how it's always worked.
Oh yeah, I forgot, this time it's different. Think Redd Foxx as Fred Sanford, clutching his chest and hollering "This time it's the big one!". Plummeting home values will send over-extended homeowners to the soup kitchens, anarchy will prevail and armored cars will patrol our strife-torn streets.
"Then I'll buy."
Well, keep a good thought. By the way, I wonder when they'll start calling this a rental bubble?