Rising Rents …

by on September 13, 2007

Dear Mr. Shaw,

Thank you for your article regarding the rising rents and the neglect in media coverage.

I do want to add an important trend. The rental market may be rising, but many studying economics believe that will be short lived for several factors.

One, is that many of the foreclosed and future foreclosed homes in SF will be Condos and TIC’s as well. Many of these are appearing on the Rental Market and at high rents because they are trying to meet their current mortgage payments. As witnessed, many of these are remaining empty. The rent is either too high and many who could not pay the mortgage cannot begin to pay the same rent. Eventually, these rents will have to be lowered, much the same as real estate. And as the same, it will take time for that to be realized.

Second, many of the commercial purchases such as Rental Apartment Buildings are also heavily leveraged. Thus, this will also be coming into play shortly as many economists are seeing a major drop in Commericial Real Estate purchases as well in the last two months. Thus many of these buildings are being purchased the same as many houses were being purchased (way beyond their actual value and highly leveaged), and thus, will begin foreclosures and mortgage lending crisis same as the family home real estate market is experiencing, i.e. the subprime mortgage crisis.

Third, this current subprime mortgage crisis will affect all parts of our economy. Major cities with high rent will be giving way to suburbs and lower cost communities, as inflation will continue to rise and affordability will again drive middle and low income tenants from these cities as they can obtain a lower rent, etc. elsewhere.

And finally, many accredited economists are not only predicting a recession, but perhaps a depression. This is not good for anyone, but will also force many rentals that are out of the luxury category, begging for tenants.

Again and unfortunately, it all takes time and those affected, like us, sometimes do not have that luxury and have to endure high rents, etc.

Thank you for your article, but I do believe their will be a “light” for us at the end of the tunnel.

Sincerely,
Nancy College
San Francisco, CA


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