Ended up taking an apartment there for $1400/month six months later, and it stayed at that level for 3 years. (And then shot up rapidly afterwards - I left when it hit $2400/month 5 years later, and it's currently renting for $2900/month.) It had gone down so rapidly that its price was underneath the less-swanky complex a block down the street which normally rented for ~$300/month less and had itself cut rents from about $1800/month to $1450/month over those 6 months.
Rents are sticky - landlords try to avoid cutting if they don't have to. But when there's a choice between letting the apartments go vacant and servicing your debt payments, they have to cut, and if there's a shortage of tenants at that time (because everybody's left and gone home) the cuts can be pretty drastic.
I wonder if house prices will also behave similarly. Right now, the "mainstream" market (i.e. the house that working professionals can afford on income and mortgage without being independently wealthy) tops out at about $2.8M-$3M in Mountain View or Los Altos, but there are a lot of houses selling in the $4-6M range that presumably are being bought with stock options. Could perhaps see a collapse of the top end of the market down to the mainstream real estate market if the stock market collapses.
Is this true in markets where people can legally squat for months? Or as in Seattle where landlords are required to indiscriminately house the first qualified applicant? $0 deposit would make this very exploitable.
Given Housing is now primarily an investment rather than a home for everybody. I would guess most government would likely not pass such proposal.
- A month (or year) of time in the apartment for cost $x.
- An option on purchasing more time for cost $y/time unit.
What these "tricks" do is make $x less than $y. That makes sense in the short term when you expect to be able demand higher rent/unit time in the future. When that expectation is no longer likely, it makes sense to lower $y to $x because other landlords will, and they will have less turnover (costs) and the same amount of income.
I look at it like: the fair value for rent is x. The current rent is y > x. If the landlord nominally lowers the rent, they cannot raise it to as high a value next year, and they do not want to do this. Therefore they are incentivised to (effectively) give the tenant money along with the rent to decrease y without changing the nominal rent and giving up on the right to increase it.
It maybe looks like the landlord is selling a years rent for x and buying a put for the next years rent at y (and recursively options for the later years), but it isn’t really like a put either because it’s really a right-to-try-to-sell rather than a right-to-sell.
Theoretically in a rent controlled market the landlord can't cancel the call option. In practice they might be able to by jumping through some (expensive) hoops, but it should be a reasonable approximation still.
I'm not quite sure what sf/Cali law looks like so I am just taking in generalities about rent controlled markets.
No one is going to click on a $2000 apartment with six months free when the listings are full of $1500 apartments.
Small mom and pop landlords play it differently. They will just rent you outright without these tricks.