If you are going to analyze it using price-to-rent ratios…yes.
Price ratios of 15 or so are generally fair purchases. Certainly, less than 20. What’s San Francisco? A whopping 37.
As CBS Moneywatch reports, 5 Best Cities To Rent Your Next House
For those who aren’t ready to buy a home, the good news is that there are plenty of rental units available, many with great amenities and in great locations. And some come along with fabulous perks, like free rent and a furniture allowance, depending on the length of the rental. (The very best perks are for long-term leases.)
…
#1: Best City to Rent: San Francisco
Rent Ratio: 37
1475 Fillmore Street San Francisco, CA 94115
Monthly Rent: $3,200-$3,300 for a 3-bedroom, 2-bath unit
According to Abkemeier, it can cost twice as much to own in San Francisco as it does to rent.”It varies by neighborhood, but renting could be a much better decision financially than buying.”
In this rental property, you’ll get all the modern amenities in this 3-bedroom, 3-bath rental unit, in a fantastic location with great views (depending on the way you face) of the city. The development offers a bunch of great amenities, including a clubhouse, fitness center, game room, pool, racquetball court, spa, hot tub, and parking.
Following San Francisco were New York, Los Angeles, Honolulu, and Tuscon (???).
Do high rent ratios mean that prices are still too high?
It’s a strong indicator. Here are three reasons why the situation is precarious:
- Investors are willing to accept terrible annual returns on their money…presumably in exchange for above average price appreciation in the future. This is speculating, not investing. Highly bubbly.
- Buyers are willing to pay a huge premium to own versus rent the same thing. For some at least, part of the thinking is that prices may never come down, so they might as well buy. This has certainly been true most of the last 15 years. But, if buyers, en masse, begin to doubt the invincibility of the San Francisco market, that shifting psychology could feed off of itself. Any market propped up so high on confidence should suffer greatly if confidence erodes.
- Current homeowners are paying heavy costs. It’s a wealthy city for sure, but many owners are struggling, just barely hanging on, hoping things get better soon. If they don’t get better, we may start to see a lot more high-end short sales and foreclosures. The stock market is a key factor in San Francisco…and it’s had a huge run-up. Risk is high.
The headline is, 5 Best Cities To Rent Your Next House, which could just as easily have been re-written as the 5 worst cities to own one.
May 21, 2010 at 11:41 am
automobile insurance rates are astronomical in SF
parking is terrible and costly
drivers run stop signs….
crime, congestion, chaos,
NOT an environment to raise kids.
SF is very volatile……..when times are good its heaven…….when things go bad……..it completely sucks
Unless your between 25-35…….and want to meet women…..see zero reason to live there.
May 21, 2010 at 1:03 pm
Yeah…I have a lot of 30-something friends that live there. Those without kids generally love it. Those with are mostly planning to leave.
May 21, 2010 at 2:32 pm
The ‘Dollar Menu’ at McDonald’s range from $1.29 – $1.89.
May 21, 2010 at 2:33 pm
Don’t forget to mention the 2 times per year of changing the window on your car simply because you don’t park in the garage – regardless which neighborhood.
May 21, 2010 at 2:34 pm
And women age 25-35 leave San Francisco because there are too many weirdos such as that
May 21, 2010 at 3:41 pm
Schools in SF are awful too, which furthers the exodus of families to some extent.
And expect your car to get broken into, even if you live in a really nice neighborhood.
May 21, 2010 at 11:29 pm
Have kids, renting in SF, leaving in 2011. We love SF, but it costs too much to buy (including Bay Area) and I’d rather save for college now than spend that kind of cash for private school kindergarten! If you have kids and want a wonderful place in SF to rent for your last 1-2 years, check out the Presidio.
May 22, 2010 at 5:29 am
Ditto for Brooklyn amigo!
May 22, 2010 at 10:24 am
It’s not Honalulu – it’s Honolulu. Sheesh – don’t you have any proof readers? It’s one thing for some ditsy young San Francisco blonde to make a mistake because her parents are paying so much for their house that they can’t afford to educate her.
Seriously, we all make typos but media folk should take more care with proper names.
May 22, 2010 at 10:35 am
Thanks for the catch andyc!
May 22, 2010 at 7:31 pm
1475 Fillmore Street Is not exactly in the nicest part of town. I lived a few blocks from there and had holes in my house and car from all the flying lead.
Amazing what people will put up with to rent and buy here.
May 22, 2010 at 7:35 pm
We are native San Franciscans that moved in 2003. I agree with Mr. Appraiser, after the dot com bomb things got pretty ugly and weird. DH got a chance to transfer to Austin, Texas and we packed up and left. I cannot overstate how valuable a sense of community is. Since we moved to Austin, I have come to appreciate the sense of belonging I feel here. People are very kind and considerate and go out of their way to be neighborly. I never felt that in the 40+ years I lived in the Bay Area!
May 22, 2010 at 10:32 pm
Bob is correct; 1475 Fillmore is about 3 blocks from the ‘hood’. Not an especially good location to use for an example of affordable rents in SF. And the 37x multiple is way off as a result. It’s closer to 25-30x. Still high, but not even close to 37x. For example, a 2 bedroom, 1 bath flat in the marina district sells for ~$1.2-1.3MM. An identical place rents for ~$4,000-4,200 or ~25-27x. I suspect other neighborhoods are about the same.
May 23, 2010 at 10:32 am
San Francisco has always been absurdly expensive, even before the bubble. It is, without a doubt, one of the most overpriced cities in the United States. The only one possibly higher is Manhattan. I was never clear who could afford to live there. It is an amazing city, but as others have said, it has some big-city problems that are really hurting the quality of life.
May 23, 2010 at 10:43 am
Bob & Marco,
What are the rents and values like in the “hood” near Filmore? I’m imagining that rents can’t be too high, yet values are probably very bubbly…
I wonder what the ratios are there.
August 6, 2010 at 4:21 pm
I love how Mr Appraiser says
“Unless your between 25-35…….and want to meet women…..see zero reason to live there.”
Don’t you mean unless you want to meet men? San Francisco is full of homosexuals dude, most of the women you’re probably trying to meet are likely dating other chicks already.
November 22, 2010 at 5:07 pm
Standard status elite or professional class salaries. Board of Supervisors need to address were
the middle residents. Since economic downturn even the elite. Has decide to appropriate there.
Finance annoying mannerism: better than mean. Attitude assuming before you even say anything. I glad I left San Francisco and save so much. Returing to Europe only thing miss.
Beaches and Ocean Beach the people majority. Manic depression hey, this demeanor of San Francisco. City by the Bay for Elite or those attempting. To compete ego’s are horrible! Classless!
January 19, 2011 at 3:34 am
When historical opinions and guidelines of life are taken away, the loss can not perhaps be approximated. From that second we have no compass to govern us, nor can we know distinctly to what port to steer.
April 25, 2011 at 7:22 pm
Wowzas, I was considering moving to SF until I read these comments. Haha I guess staying in a hotel is completely different than actually living there and owning property.. Just the view is so captivating