Summary

Rents received are a directly proportional to job market strength. As jobs soften, so do rents and vice versa. In this market, renters are finding roommates or returning to live with family/friends to reduce costs and expenses.

Analysis

In the San Jose area, typically the highest rental rates for the Bay Area, brokers at a recent marketing meeting are praying for a strong employment environment. In the past 5 years, many apartment owners purchased with negative leverage in anticipation of appreciation, this overpriced asset combined with softening rents is a double hit for the owners who were caught up in the euphoria of teaser interest rates. Add to the mix a fully indexed interest rate and the situation becomes even more exciting. The fundamentals of investing which were ignored until recently are called fundamentals for a reason.
Pete Chrzaszcz, Broker, Commercial MasterMinds

This author consults with leading institutions through GLG

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