So, I know it has been a long time since I have done an update. I sincerely apologize. The last few months have been very exciting. I will try to do a "catch-up" update. Several significant one-time and ongoing occurences have taken place recently that are significantly impacting the rental market here in Santa Clarita. Let's take a look at a few:
- Positive and Negative Propaganda Regarding the Resale and Rental Markets
- Extreme Volatility in Interest Rates, Terms, and Qualifications for Home Loans
- Difficulty in Obtaining Investor Loans for Residential Property
- Sharp Drop in Quality of Rental Applications
- Extreme Number of Foreclosures
Ok, that should keep us busy for a bit. Remember, I state some "facts" and some opinions. I put facts in quotes, because statistics are extremely susceptible to manipulation and are often cited as fact. I will try to deliver to you only relevant statistics and ones that I believe hold true. Remember, we are talking about Santa Clarita, CA in particular. It may be vastly different just a few miles away. (It is totally different in Lancaster/Palmdale, CA.) Let's break the above bullet points down even further:
"Positive and Negative Propaganda Regarding the Resale and Rental markets". This is referring to your garden variety newspaper, Yahoo!, Google, etc... "news". I love that they call it news. We all know what it is, so let's call it what it is. Sales. Take a moment to read some of these and then ask yourself, "What expertise does this writer have in the field they are writing about?". Probably little to none. They were probably hired because they know how to write, not because they know the rental market. This propaganda has driven a popular perception that the rental markets everywhere are going up at an alarming rate. Not true. We have seen a trend in Santa Clarita that rent prices are actually going sideways and sometimes even down a bit year over year from January 2007 to January 2008. THE RENTAL MARKET REMAINS STRONG IN SANTA CLARITA, BUT NOT AS STRONG AS THE POPULAR PERCEPTION.
"Extreme Volatility in Interest Rates, Terms, and Qualifications for Home Loans" AND "Difficulty in Obtaining Investor Loans for Residential Property". I am grouping these together because they are having a similar effect. Both types of home buyers - investors and those who intend to occupy the home - are having difficulty obtaining loans. Of course, this isn't new, but it is still sharply affecting the resale and rental markets. "BUT JOHN, SHOULDN'T THAT DRIVE THE RENTS UP?" Not necessarily. You have to take into account the number of sellers who are placing there homes for rent as an alternative to selling. The current rental inventory seems to be enough supply for the demand. But the flip-side is also true. Although there is a larger inventory overall, there are more renters overall. Right now, it seems to be in balance. Rents are not moving very much.
"Sharp Drop in Quality of Rental Applications". This one is something that it seems not a lot of people are thinking about. We are seeing a significant percentage of our applicants (We will see over 300 applications this year) with poor credit (sub 600) and mortgage defaults. We are telling more applicants that they are not approved than we have in the past. Where do they go to rent? They go to one of two likely places. 1) Homeowners who are trying the renting game on their own and don't know how to screen tenants properly or 2) apartments. This may be why the news media is reporting that rents are going up. Apartments can "spread the risk" and take lower quality applicants. This allows them to charge a higher rent. Typically the media will call apartment complexes to compile rental data. Just speculation, I haven't done the research.
"Extreme Number of Foreclosures". This is a big one. There are a lot of people moving these days. The supply is there, but the turnover is fast. The foreclosures are hitting from two sides. One is the owner/occupant who is losing their home. The other is the owner/investor who is losing the investment property. Both result in someone moving.
So, here is what we are seeing. The number of rentals is going up. The number of renters is going up. They currently seem balanced. The quality of applications is going down. Buyers are still struggling to buy. Investors are still struggling to buy. Foreclosure are up. Infalation is probably on the rise which means rates will probably go up. Resale prices are dropping. We are in a recession (debatedly).
I hope you enjoyed this. I really do not intend to sound negative. I think this market presents an unbelievable opportunity for those who are willing to swim upstream, against the flow. But this is not the place to discuss that. Perhaps I will do another post about that very issue. For now, I gotta get to work. There are lot of houses to be rented, applications to be processed, properties to be listed, and people to help. Let's get to it!
Comments(4)