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
3/08/23 Matt Gouge Event TBD
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 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.
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.
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.
Questions: What other rental data source do you suggest? Anything to add? What did I miss? I’d love to hear your take.