There is so much attention on home prices, but let’s talk about rents because they’re dropping too. Yep, you heard that right. Rents have been going down locally and in many markets across the country (not everywhere). Here are a few things on my mind.
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3/06/23 Matt the Mortgage Guy YouTube Live 3pm PST
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3/10/23 PCAR Market Update Lunch & Learn (detailed TBD)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
THE GOAL:
The goal of this post is to touch on the rent trend and paint the importance of looking to lots of sources for rental data.
THE PROBLEM OF RENTAL DATA:
It’s not easy to get data on single family rent values since there isn’t any one major robust data source. This is why it’s important to look to lots of different places to get a sense of the trend. Some big rental data sources only focus on apartment rent too (which I’ll talk about below). All that said, even though stats are sparse, the numbers right now are showing a decline in rent, and that’s something we need to talk about.
DATA SOURCES:
Property Managers: In my opinion, the best source of rental information locally is going to be property managers with lots of doors (rentals) because they are essentially the gatekeepers of information. Here is a video made by a well-known property management company, Tiner Real Estate Services. If you give it a listen, there are some nuggets in passing about days on market, vacancies, and softening rent values. On the company blog, John Tiner mentions their average days on market has gone from 14 days to 30 days before a lease is signed, and that certainly speaks to market change. Unfortunately, even though property managers are the best source of information, it’s not easy to find market stats from them, so if you find something, please share.
Apartment List: It’s not perfect to look at apartment rent, but my sense is the single-family market tends to follow rental trends for apartment data. This may not be true everywhere, but I’ve heard a number of property managers echo this sentiment. If you think otherwise, speak up. Keep in mind any rent stat isn’t going to perfectly capture the trend for every single property either. Just yesterday I gave a presentation and shared this visual below, and a property manager spoke up and said he’s seen lots of rents closer to -10% or more instead of -4% like the image suggests. Source of visuals: Apartment List.
Yardi Matrix: I’ve followed sources like Yardi Matrix for years, and their stats seem to line up with single family too. Here’s a link to their reports.
Jay Parsons: I really like following Jay Parsons on Twitter. He’s a rental housing economist, and I’m always learning something new about the rent trend. He seems to be on the cutting edge, and one of the things he’s been talking about is compressing rent in various markets.
Zillow Rent: Zillow has rental data, and it’s worth watching, but I wouldn’t put too much weight on the estimate. I’ve heard a few property managers recently call it a lagging indicator. In fact, in the video from John Tiner above (or here), he explains one of the problems with Zillow’s rental estimate for the moment is Zillow doesn’t end up knowing if the landlord took less money than the asking price. In a market with quick price change, this can be a big deal. Imagine in the resale market if we only had the list price and not the final closed price.
Zumper: This is another online source to tinker with to see what’s happening with apartment rent (which tends to correlate with single-family rents). I like how we can get instant data online and consider if it’s representative of the local market trend or not. It does look like there has been a sharp decrease lately, but we probably need some time to see where this line goes.
MLS rent: Our local MLS has some rental data, but it’s really only available if agents input the property’s rent. Here’s an example of how I exported rental data from a decade of Elk Grove sales. There is enough data to show an increase of rent over time, which is cool, but there really isn’t enough to show changes lately though. This is why I suggest looking to many sources instead of just MLS.
Websites: I like looking at Craigslist, HotPads, and Rentometer for general trends and listings too.
CLOSING THOUGHTS:
There is definitely a relationship between rents and home prices, and both of these markets are showing similarities lately with dropping prices, increasing inventory, and longer days on market. We’re also experiencing a similar dynamic with some sellers and landlords being out of touch and asking way more than the market will pay. Lastly, I think we’re in a place where lots of buyers and renters want to see more affordability after years of price and rent increases. Oh, and please don’t read into my post. I’m not saying rents are imploding, but I am definitely saying rents have gone down though based on the word on the street from property managers and data sources.
BUT MY RENT IS GOING UP: Rent prices dropping doesn’t automatically mean tenants are seeing relief with actual rent paid. I suspect new listings are most likely to be rented lower rather than existing leased rentals. I talked to a tenant the other day who noticed an identical unit sitting on the market that is listed about 10% lower than her current rent. I suspect when this tenant’s lease is up, there may be a conversation about adjusting rent. Will she be successful? Who knows.
I hope this was helpful.
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
Questions: What other rental data source do you suggest? Anything to add? What did I miss? I’d love to hear your take.
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I occasionally appraise small apartment buildings in downtown/midtown Sacramento. Met a property manager at a 20-unit building just before Christmas. They had one vacant unit, and it was actually nicely staged (surprised me for an older building). She commented that it had been available for a couple weeks and should rent soon, but they hadn’t staged in a long time…for the last couple years or more just clean and prep and choose best new tenant from the waiting list. Stats show Sac metro apartment vacancy dipped below 2% a year or so ago but has crept up to around 4%, still low by historical norms (5-8% typical and 10%+ in down markets). But I really think this is a gradual return to the norm and stabilization as affordability has hit its ceiling.
Excellent commentary. Thanks John. This fits so nicely with my post. And this is good for tenants to have more time to select a unit and not have to compete with 20 other people on every unit. The dynamic in the rental market has been far too lopsided.
Ryan, once again great information. If only rental data for residential appraisers was centralized like MLS….
Thank you so much Joe. I think this is such an important topic, but it’s not one that gets much attention. Totally agree. I really wish there was a centralized system. There is a huge opportunity for someone to build something and make money.
Yes. The dearth of any Realtor organized commercial listings allowed LoopNet and Co-Star to wax huge. Their subscriptions run into 4 figures per month. Profit margins can be tighter in PM. Companies like Spree are looking to take market share in just the market you identified.
Thank you Jim. Four figures is no joke for a monthly fee. It seems like there is always a company trying to challenge the system and change the game. I’d love to see more rental data online (for free). 🙂
I have seen the evolution of real estate sale and listing data for commercial which all comes from public data. Late 70s was Damar books with sales by assessor’s parcel number, then Comps, Inc. with added income and buyer/seller phone and addresses, brokers, and comments. Then it sold to CoStar and it excludes smaller properties and has errors, but it is repeated by some like it is verified data. It is not worth the cost. I like hearing about new sources. Great analysis and presentation by Ryan, as usual, he proves what we feel in our gut.
Thank you so much Deborah. I appreciate the kind words, and I love hearing about the history here. It just proves controlling the data is lucrative. Moreover, the details aren’t always correct.
Great assembly of rental data. It’s always hard for us to get rental market trends in our market as well.
Thanks Gary. Yeah, the struggle is real. It’s like a puzzle with data where we have to look to lots of different pieces to understand the full picture. And it’s so insightful to hear property managers on the cutting edge talk about a trend that hasn’t permeated some of the stats yet too.
Hi Ryan, great post. Hope the torrential rain hasn’t left too much damage near Sac. Yes it’s tough to get recent rental data. It’s nice to know as well what factors/trends are actually most responsible for the drop. I like Zumper too. Great stats and they’re nice people too. I met them at NAA Apartmentalize. I was just reading a post on home prices in Encinitas near San Diego and their home prices dropped almost a million since last May. That has to help push rent prices down!
Thanks Gord. I think most people did okay through the storm, but it was disastrous for some. So many fallen trees also. Good to hear about Zumper. I’m going to start paying more attention to their stats. I think today I’ve encountered a bit of resistance to talking about rents declining because so many tenants are still getting increases from their landlords. But we are just at the beginning of change, and the market won’t feel rent declines the same everywhere either. I think lots of people need relief after insane rent increases these past few years especially. We’ll see what the market does. Please keep me posted with anything you see out there. Thanks for chiming in.
First off, I searched my garage and home and found no classified documents. Whew I am safe for now until HUD, Fannie, Freddie, VA and NFHA all decide that guys with Stetson’s can’t appraise for lending anymore.
Rental data. Just took a look at MLS for SFR rents and found between November and December a decline occurred of about 7% in Temecula. But that was after a sharp increase in October to November of 12%. Down but still not to the lows in August and October 2022. And still higher than the highest Avg rental price from 2021. So, it may be down up your way, but we haven’t seen the trend yet down south. Now that said there are a total 30 active leases in MLS. That isn’t high for the entire city. And no that doesn’t include apartments. As Gary said that is a big issue on figuring out rents. Can’t look in the want ads anymore as I don’t have a newspaper to look at for apartment rents. Don’t get me started on not having a newspaper in my hand. UGGGGGG not happy with all of technology. But hey what do I know.
Brad, I’m so glad you aren’t harboring top secret documents in your garage. Good for you. Haha. It sounds like your MLS might have more robust rental data. That’s great if that’s the case. And to your point, the market isn’t going to be the same everywhere. Preach. Though the rental market has more limited data, so it’s not so easy to see the market either.
Ryan,
Bigger Pockets has a rental pricing tool as well that provides another source of data as well , uses a positioning bar chart that lets you see the range that your property falls into.
Interesting Class Action suits are popping up against RealPage that show the power of controlling the rental market data between companies.
I am finding that answering the phone and being able to show properties quickly still makes a big difference between a property sitting or getting rented quickly.
Thank you Barry. I didn’t know about that. Thanks for the heads-up. I wonder what sort of underlying data BP uses. I’ll have to follow along with RealPage. I’ve noticed they have some fancy visuals here and there. I think your last point is key too.
Great post as always, Ryan. As a stats and data guy myself, I appreciate how you often remind readers of the “ecological fallacy” that assumes a broad trend applies to every individual. Just because the aggregate trend is lower rent doesn’t mean your your rent is going down, just like lowering Sacramento housing prices may not hit your house (yet).
Your post today was also helpful for someone (like me) considering investment/rental properties. While they are not huge downward swings, best not to assume overly rosy rental incomes with trying to finance a purchase.
Finally congrats on the mention in the NY Times! Looks like the world’s leading tech writers are also wising up to your excellent content: https://www.nytimes.com/2023/01/23/technology/tech-interest-rates-layoffs.html
Thank you Max. I appreciate your kind words and support.
And excellent commentary. It does seem wise to not use the highest rents ever in a rent value calculation, and we’ll see what happens with incomes too. Imagine someone making a purchase at razor thin margins, and then the numbers don’t work if rent takes a dip…