Bay Area Sweet Digs

April 29, 2008

SF: Are Renters Less Educated?

20050817 mr housing bubble SF: Are Renters Less Educated? Since the question never dies, as it’s not like 2+2=4, and the answer is never simple, I am revisiting the rent vs. buy conundrum facing San Franciscans who hope to trade in their “tenant” status for the hallowed title of “owner.”  Recently, a blogger on TheFrontSteps.org, aptly going by the name AlwaysBuy,  opined:

Renters are generally more pessimistic, less wealthy, less educated, and transient people with commitment issues. Anybody with 10 years of work experience and still renting is definiely behind the ball.

I feel sorry for people who were tricked into renting for the past 5 years while SF prices continue to go up.

Aside from being insulting, the comment isn’t very savvy, since we all agree that no blanket statements will correctly cover the disparate state of the market in SF’s different districts and neighborhoods. Equally annoyed, fellow blogger Submedian took up challenge here and came up with a list of recent sales showing actual depreciation.

Sunset Savaging
2100 27th ave
list: $674k
sale price 2006: $805k
diff: -$131k

Miraloma Park Mugging
24 Coventry St
list: $699k
sale price 2007: $754k
diff: -$55k

Bernal Depths
826 Peralta
list: $649k
sale price 2005: $655k
diff: -$6k

OH NOES!!1! in Noe Valley
169 Grandview
list: $699k
sale price 2005: $699k
diff: -$51k

Not So Excellent Adventures in Excelsior
940 Cayuga Ave
list: $580k
sale price 2005: $720k
diff: -$140k

Now sure, some areas are still showing appreciation, but keep in mind that the price increases will need to be substantial for you, the investor, to get back your down payment, monthly interest, closing fees, taxes, insurance, and maintence. And even if you are an uneducated and pessimistic renter, you should know enough to proceed with caution.

That said, the dream never dies either, the dream of owning. With that in mind, here are a few price reductions, and you’ll note they aren’t just from the expected struggling neighborhoods. This could be your chance then to get a bargain- if anything in SF can really be called that.

237 Greenwich, #A: Telegraph Hill studio TIC down from $529K to $499K

17 Abbey: 3/3.5 TIC in Mission Dolores down from $875K to $849K

68 Richardson: 1/1 SFH in the Marina down from $848K to $699K

2104 24th St.: 3/1.5 SFH in Potrero- this one is down, but not much- but note this is not the first time the place has been on the market, so bid accordingly. Was listed at $875 K on Feb 26, 2008; today it is listed at $874,500.

—

Picture credit: Bay Area Housing Bubble

Posted by anna.hibble on April 29, 2008 8:52 PM | del.icio.us | Digg

  • James
    infuriating!!
  • sorry Jerry: You've a right to your opinion, but your logic fails when you realize that many renters here could afford to buy elsewhere, but can't afford the standard they wish to live in as an owner in this particular city(thus they rent instead). Others make a better return on investing money and living in rent conrolled apartments, having done the math and knowing for sure they are better off renting.

    As Ron said, in a city with prices like SF, these "all renters are lesser" generalizations don't work. Only an elite percentage can afford to buy a place they actually enjoy living in without any thought, worry, or regret. If you believe then that such a small percentage are educated and optimistic in this city, why live here at all?
  • JerryC
    Renters are usually always less wealthy, and less educated than homeowners. Renters are also more pessimistic in life I find.

    If I was Adam at SS, I'd be so depressed living in the same condo as when he was 30, as now 40. He already stated he pays $3,000/month in rent. That's $5,000/month in gross income that gets flushed down the drain. Meanwhile, Pac Heights properties are on fire! Adam is a sucker.

    After 18 years of spending $500,000 on rent, he's got nothing to show for. Meanwhile, mortgage payments stay the same, and rents go higher. Good job Adam and other renters! :)
  • Ron
    Any argument that ascribes lower status to some who rent rather than own, especially in San Francisco, makes as much sense to me as the question, "Where's your flag pin?"
  • David
    I've owned in Chicago. Chicago is far more livable than SF. Period. If the weather bothers you, well, the summers here are horrible. As I say, to prefer the weather here, you have to hate winter more than you love summer. Me, I like to actually be able to eat outside without a parka during long summer days. It's also nice to not freeze at an evening ball game. But to each his own. I've also mentioned Chicago on various posts on gov't waste, because, again, Chicago has FOUR TIMES as many people as SF (and significantly more schoolchildren, parks and oh, yeah, that snow plow thing), yet has a similar budget. And it's not like Chicago is run by "clean" politicians, i.e. there's plenty of waste to keep the piggy pols fat and happy in Chicago, how much waste must there be here?!

    I brought up Chicago again on another post, because it has a large publishing industry and is far cheaper to live, if you're set on buying. Heck, Chicago even has a neighborhood with some great condos called "Printers' Row." The other major publishing center is NYC. 'Nuff said on the ability to buy.

    Finally, just looking at the last bust and this current bust, THEY'RE THE SAME (except this one is bigger). What does that mean? The last time, just like this time, the "marginal" areas (Oakland, San Leandro, El Cerrito) went up far more on a percentage basis, and went up first, compared to SF/Peninsula. Then what happened the last time? The outlying areas blew up first, SF seemed immune...for about 2 years. Guess what's happening now? East Bay is blowing up, and everybody's talking about how SF is "special." You're going to be burnt if you buy in SF now. If you want to buy, buy a house at 50% off peak pricing in the East Bay.
  • david gordon
    @ Seeitdoneit,

    Yes, I have owned 2 properties in SF (see my 2nd comment on this thread). Bought/sold in 03/05 and then 05/07. I don't hide that fact. Not sure what your point is though.

    I am a voice against BUYING right now in SF, not necessarily owning. If you already own, hold it. If you don't own and are renting, hold out longer. It's really that simple. I would love to own a home in SF again someday, but at a price I am happy with and can justify. Unless I find another rocket-ship appreciation scenario and ride the wave again, but that ain't happenin any time soon.
  • Seenitdoneit
    Um, I believe David G. has been an SF homeowner, no? And the other David, always bringing up Chicago by comparison? As if Chicago and SF have some commonality? See one Midwest winter, you'll know they don't. Frankly, not sure why you two are the voices againt owning in SF.
  • david gordon
    @ Bob.

    I'm sure with the success of SocketSite, Adam isn't too worried about renting right now. He is probably waiting to buy at the bottom like the rest of us.

    Hopefully you don't focus only on "failures" (everyone has missed out on opportunities at some point, but hindsight is 20/20 now isn't it?).
  • David
    What could he have bought 10 years ago in Pac Heights for less than $3,000/month PITI? A 2 br condo in Pac heights cost ~$400K in 1998, at least, and interest rates were 7-8%.

    Never mind rent control. If he stayed in the same place for 10 years, his rent is probably $1500/month.

    Can you imagine not buying AOL in 1994? Hansen's soda in 2003? Are you reminded every day of your failure?
  • Bob
    Can you imagine being Adam at Socketsite being a 40 YEAR OLD RENTER though? I would hate my life if i could have bought 10 years ago, and now just rent a condo for $3,000/month in Pac Heights. Every time he walks out the door, he is reminded of his failure.
  • Tracy Howe
    Indeed.So this sort of confirms that in most cases, the most educated thing to do right now is be cautious. "AlwaysBuy" is hardly good advice.
  • Marcia F.
    interesting. If a glut of boomers try to sell in the next couple of years, that should really shift the supply/demand paradigm.
  • David
    Marcia, from today's issue of the Daily Review (the Hayward/Fremont/San Leandro version of the Oakland Trib)
  • The Bay Area isn't a very good place for retirement I think. Taxes are high, cost of living is high, and the traffic is bad. If I retire I'd move out of here too.
  • Marcia F.
    David, where does that info re: boomers come from? First time I've heard it.
  • David
    Hey, did you see that 200,000+ "boomers" left/fled the Bay Area over the past 6 years?

    But I thought everyone wanted to live here!

    heh.
  • david gordon
    Getting back to the original topic, I will comment directly on the quote posted @ theFrontSteps...

    As an owner and renter, I am "transient" because I choose to be. I like to live in and try out new neighborhoods and cities. I have had 9 addresses in almost 9 years in the Bay Area. It's a helluva lot easier to move around as a renter than a homeowner!

    And I do have commitment issues, but that is personal, so I won't get into that!

    Tricked into renting the past 5 years? Who tricked anyone? The buyers who bought in the past 2 years were more likely tricked than any renters. I feel sorry for most people who are buying now and don't understand what is coming down the pipe in the coming years.
  • Exactly as Mark said, this blog post is obviously highlighting a personal attack against renters. How could you not expect a personal response on the other end? Besides, I don't think I was being extremely snarky. I'm just highlighting some of my observations.
  • Gogo
    I rent because owning a home is not my American dream. My dream right now is to travel the world. With the American dollar being as weak as it is, I'd probably be better off digging a hole, er buying a home.

    Please don't think that everyone *always* wants to own a home just because you do.
  • Mark
    the comment is personal, so reactions are going to be personal. Relax. Better reading this way.
  • While, as the editor of this blog, I encourage comments and dialogue, I do want to warn you against disparaging and hurtful comments. Everyone is entitled to an opinion, but I encourage you to state it, and your differences, in a courteous tone. There is no need to get snide and snarky on a personal level.
  • I would argue that some of the F--ed Borrowers we have seen in the past few years are less educated than the renters of the San Francisco Bay Area. With more education you would know to read your contracts more carefully and not get in over your head. Most of my coworkers are renters, and we are all very educated young engineers who make good incomes but do not want to slave over a ridiculously priced shack.
  • David
    over 400K? Private school?
  • Amy
    We rent for a very specific reason: the loveliness of the lottery system that is used by the SFUSD. Until both kids are in the same school, we're not putting serious buyer roots down anywhere.

    Oh, and our demographics? Masters degree and another one pending, earn well over $400k yearly, and possess an average of 15 years of work experience. Now didn't we just skew the stats? :)
  • David
    Troll!
    :)
    Don't feed 'em.

    Speaking of saving money on rent. A serious strategy for consideration is renting here, saving the difference and buying a decent house in a college town, like Madison, WI or wherever you like (I happen to like a lot of smallish college towns), rent it, and have a place for summer vacations and eventually retirement.

    Just something to daydream about, when you're not whining about SF R.E.:)

    Anna reminded me of that idea. And Anna, you have summers off -- buy a house in Madison, WI for $180K, rent it 9/12 months and enjoy your warm summer out there instead of freezing here. And once you've been to Madison's farmers' market, you will cry at how inferior the markets are here. Seriously. It's worth taking a trip to Madison just to see it.
  • Juan
    If you'd like to take on the merits of my education/intelligence (formal and/or otherwise) on the basis of wheather I rent an apartment or own a home, I suggest you first pull your head out of your bank account/ass and think about the why people come to this city to live in the first place.

    Many of us come here to simply live and be a part of a very unique city, regardless of whether we write a rent check or a mortgage check at the end of the month. We come to meet new and interesting people, to share ideas and get a taste of differing cultures, to laugh a lot and do it with friends and sometimes strangers.

    i've lived here for over 15 years, in more neighborhoods than most people have visited, and I've met educated renters AND owners all over this town, uneducated ones too. If you think that number of degrees beneath a person's belt or skirt is a good way to guess if they own a home around here, then you're the type who probably doesn't realize that you're surrounded by renters (like me) when you make your appearance at the opera, the symphony, the theater or wherever it is you appear (yes we invade those pricey cultural events too), and you probably get a little annoyed and nervous when all the hot chicks gravitate towards the ratty looking rocker dude while failing to notice your Armani tie and the new pecks your sporting after 6 months of personal training. You would also probably never hop over to Bender's or Dylans or the Trophy Room to have a few beers and talk it up with people who live and think a little bit differently than you. After all, talk is cheap and money is the name of the game! Isn't it?
  • anna
    Of course, if I didn't believe education is tied to success, I couldn't really be telling the college students I teach to stay in school so they have a chance of making it. But the comment that ties education to renting in a city like this is generalized to the point of ignorance, when a) prices are so incredibly high and b)we have rent control and c)you have a vast majority of renters in the population and d)that population consists of so many EDUCATED professionals who either don't make enough, or for whom the stretch, financially, required to buy is not investment sound. We could all have the same jobs, and same incomes, in a city like Chicago, or Portland (OR) and be easily able to afford a home. So now your renter is suddenly a buyer. Thus the qualification to own are not so much set by the renter him or herself, but by the city itself.
  • MikeW
    My wife and I have been renting in SF since 2000. We were first ready to buy in 2003, and considered in then, but ended up waiting. By late 2004, we made the decision to wait the bubble out. We currently rent a SFH in the Richmond with separate in-law unit for guests in SF for $2750. The owners paid just over a million three years ago.

    No matter how you examine the numbers, deciding not to buy in late 2004 has saved us a tremendous amount of money, at least using our house as an example. The home has increased in value maybe 100k to 150k over those three years. The rent vs. buy differential over that same period alone would make up that difference alone, plus I get to keep the use of my 20% down, plus no maintenance, etc... The tax deduction on the mortage would be limited by the AMT, as it is for many high wage earners in SF, only making the differential greater between buying and renting.

    Sure, there are houses in the upper ranges in the Marina and Noe that have increased in value substantially, but we were never in the market for those in the first place.

    My take is, unless you have money to burn, any first time buyer would be absolutely insane to buy right now, given the state of the market. If you waited this long, wait a little longer, as things are just now getting interesting in the areas many thought would never be subject to reductions.

    Perhaps the comments re renters are too generalized, and there probably is an education/income distinction between those who decided not to buy, as opposed to those who never could even if they wanted to. On average, more education leads to greater income.
  • Frolic
    We rent because it makes more financial sense to do so. We could either cram our four-member family into a 1,000SF 2/1 for $3000/month in mortgage payments, or continue renting our 1,800SF 3/2 for $2,200/month.

    Of course, if we owned our home, I could be enjoying a nice peptic ulcer flare-up as I read the SF Chronicle's headline this morning, "Bay Area values plummet 17% in February."

    Maybe I'm just not smart, but it seems a lot like, as renters, we're enjoying a lot more for a lot less.
  • @ Randal,

    Are you one of those over-educated people? Too "smart" for your own good with a comment like that? Please.

    And I hope you are not one of these people you refer to engaged in bidding wars in North SF. Cuz that would truly show your "education" of the current RE market and the direction things are headed.

    As Anna mentioned, SF has a highly-skilled and highly-educated pool of renters. Lots of people actually continue renting because of a thing you may have heard of - rent control? Your comments are truly ignorant and short-sighted.

    You do realize there are a lot of educated people sitting on the sidelines (with money) waiting for a good time to buy around here, don't you?

    I had a feeling this post would generate some interesting responses...
  • anna
    Wow, Randal. I can't speak for all renters, but I know they make up the vast, vast majority of SF. Yet, strangely, this is a very educated, erudite city. How do you figure?

    Myself, renter, I have 3 degrees. Unfortunately, I decided to go into education- for passion- instead of real estate or corporate law or whatever might make more money. If I can't make a real living here, ever, then yes, I'll eventually move. So will other teachers, professors, firefighters, cops, and similar civil servants. If you think all these people leaving the city is a win-win, I'm afraid I can't trust your judgement on much else.
  • Randal
    It would be great if all the renters who keep on crying and complaining about not being able to afford SF, MOVE to Antioch, Vallejo, and the boondocks! Win win for all!

    Anybody who is shopping for a 2,000sqft+ SFF in the north end of SF knows how crazy the market is. Bidding wars galore.
  • Randal
    I think it's true that renters are generally less educated than homeowners. Those who did well in HS, went to good colleges, generally have better jobs and more money to build assets and wealth.
  • David
    Heh. For comments like that, my usual bid of list -10% should become list -20%. Someone (or some bank) is going to hit that bid, and I'll be laughing at all the "R.E. always goes up crowd." Just like stocks reaching a permanently high plateau in 1929.
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