Prices growth has been insane lately and that’s pretty much how the rental market feels too. Let’s talk about this and a few other things. Enjoy.
NOTE: Scroll down for the big market update
1) THE ASTERISK IN THE ROOM:
Home price stats are truly crazy right now across the country. It’s mind-blowing to see prices up 15-20% from one year ago, but there’s also an asterisk. Last year stats were starting to sag during the beginning of the pandemic due to buyers backing off the market. So when we compare today’s ultra hot numbers with last year’s lackluster figures it’s important to account for these sagging stats when talking about the market. I know, that sounds super anal, but it’s important.
2) THE RENTAL MARKET IS NUTS:
In the real estate space we often get so lost in talking about home prices that we simply don’t talk enough about rents. Here are a few things on my mind:
A) Lots of rentals: In California about 45% of homes are not owner occupied. That’s nearly one out of every two homes (duh, thanks bro). This is good to remember as we often focus on buyers and sellers while ignoring the other half of the population. And in case you wondered, the most recently published homeownership rate in the United States is 65.6% as of Q4 2020.
B) Hefty rent growth: Rents have seen a dramatic increase lately in many markets across the country and that’s something to watch. My advice? If you work in real estate, talk to local property managers and find some big data companies to follow. In the Sacramento region, for instance, Yardi Matrix reports 8% rent growth from one year ago.
(props to Steven Thomas for the idea on the nuts image)
C) Feeling the rental shortage big-time: The rental market is extremely tight as we are feeling over a decade of not enough new construction in the midst of population growth. Thus when trying to rent we are seeing multiple rental offers on almost every listing and some would-be tenants are even trying to get creative by offering incentives to the landlord such as a year’s worth of rent at one time. Of course some sellers are wondering, “Where am I going to find a place to buy or even rent?” Also, every time I log on Facebook I see another real estate agent post saying, “I have a client who needs a rental in (insert city) up to (insert dollar amount).” Ultimately we often focus so heavily on having a shortage of properties for buyers to buy, but the rental market is suffering from a lack of available units too.
3) WHEN POLITICIANS SHARE HOUSING DATA:
Okay, I have an important non-partisan take involving a viral real estate example. Here goes. This week two mayoral candidates in New York were asked if they knew what the median price was in Brooklyn, and they said $100,000, which was $800,000 too low. Look, one guy said he misunderstood the question and there’s grace for being imperfect if that’s what happened. But here’s the bottom line regardless of political affiliation. If you’re running for office you’re going to look out-of-touch if you’re off by that much. And then you’re going to get dragged online by people who definitely know the cost of housing.
My unsolicited advice? If you’re trying to get elected, you need to be in touch with home and rent prices enough to understand what constituents are dealing with right now. Or if you’re just trying to win a debate, at least be prepared to answer this question with stats from this century. Look, most citizens don’t expect candidates to be real estate experts, but there is an expectation of having enough understanding to shape policy in the midst of a glaring housing shortage. That’s the big issue. If you don’t even know the numbers, how can we expect you to create policy to deal with the issues? By the way, if you don’t know where to look for data, find a local Realtor association in your county or state – or scour online for professionals and data firms who know their stuff.
NOTE: I almost never mention politics, but this is such a vivid example to show the importance of accurate housing data. Moreover, we’re in a severe housing shortage and our politicians need to up their game, so I’m good with speaking up in a non-partisan way. Please no red or blue comments.
Anything to add?
———————- (skim or digest slowly) ———————–
BIG MARKET UPDATE
For those interested, here’s a big Sacramento market update:
THE SHORT VERSION:
Here is a highlight reel to talk through some of the bigger themes right now. In short, the stats are sensational and we’ve seen rapid appreciation in recent months. See comments below on slowing down though….
LONGER VERSION (SORT OF):
The good news is I finally had my second vaccine shot, but the bad news is I lost two days of work this week because I felt awful (yeah, it was Moderna). In short, my market update is going to be a little on the brief side today in terms of having fewer images. Please check my social channels in coming weeks for stats. I can’t wait to share more on Facebook, Twitter, and LinkedIn. Oh, and sometimes Instagram.
SUBTLE SLOWING? Price stats have been on fire lately and they’re poised to continue being hot, though I’m starting to hear things like, “I’m getting 8 offers instead of 12” or “My buyers are having a slightly easier time getting into contract.” This makes sense as we have a few hundred extra listings on any given day now compared to a few months ago (we still don’t have enough listings).
In short, the market typically starts showing seasonal slowing around this time of year, so let’s watch for typical signs of slowing in the midst of a market that still feels like an auction. Look, I’m not saying the housing trend is slow or dull, so please save your hate mail. All I’m saying is in the midst of glowing stats let’s keep our antennas up and look for a change in the stats or sentiment among buyers.
What are you seeing out there?
NOTE: I included 90 days of sales for El Dorado County and Yolo County because both areas have few monthly sales. In short, if you use only one month of data stats are going to bounce ALL over the place and not be meaningful. These are both brand new visuals though. I’m thinking about doing them every month if I get enough positive feedback.
Thanks for being here.
SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.
Questions: What are you seeing out there in the rental market? What about the resale market? What would you say to those politicians? I’d love to hear your take.