Q3 Rental Real Estate Market Update

The below is transcribed from The Accidental Landlord podcast's episode on October 2, 2023, discussing the Q3 Rental Real Estate Market. 

Welcome to another episode! Today, we're going to have a solo episode. We're actually going to do a market update. This is designed to educate our listeners on what's happening in the market in our area right now. We're in Ventura County, and things have been changing. Unfortunately, they haven't been the most beneficial changes. We're committed to bringing you accurate information, even if it's not necessarily the information that landlords necessarily want.

Just a recap of what's been going on in the last few years. Pre-pandemic, things were going as they normally go. The pandemic hit, and everyone was curious about what was going to happen. The stock market crashed, and there were a lot of unknowns.

Quickly, we found out that housing went haywire, rapidly appreciating, and rents followed suit. This was definitely outside of the normal parameters that we normally see, which kind of messed things up for everybody. That's what happened after the initial effects of the pandemic.

Year two, we saw a migration out of many metro areas because remote work became a thing. People were getting used to it and comfortable working from home, so they fled the cities. Prices and rents in those cities dramatically increased, including in our own area. We had a big influx of people from LA looking to escape to the beach.

We saw an unbelievable demand for rental properties, with rent prices going up unsustainably. Year three to now, things have returned to normal, especially in the rental market. The sales market is different, and we're not experts in that area.

Two totally different things, and our expertise is on the rental side. Everything changed when the Fed started raising rates. People wondered what that would do to things. Many in the property management industry thought that when the housing market softens, the rental market gets better when interest rates go up. It typically softens the sales market. However, prices haven't really slowed down in the sales market, which is counterintuitive.

It's having some effects on the rental side. Fewer families are being formed, and some people are struggling financially. There's talk of a recession, and there are many unknowns in the market. People aren't moving as much, which means it's taking us longer to fill our vacant properties.

We're also seeing a natural correction in rent prices. After the pandemic, rents went astronomically high, way beyond the norm. Now we're seeing them start to correct a bit. We got used to raising rent prices and instantly filling vacancies, but that's not the case anymore. Our vacancies are taking longer to fill. During the pandemic, we were renting properties in days, but now it's close to 20 days on average.

Renters are savvy, and they know they have options. They know there are more properties on the market. Increased supply leads to decreased demand, giving renters more options. Landlords need to make their properties show well by fixing what's broken, updating, upgrading, or giving a fresh coat of paint. You're now competing against other landlords trying to rent their properties.

Another factor is the number of new construction apartments coming on the market. Some big projects in Ventura have come online recently or will in the next 12 months. These units are brand new with all the desired features in good locations. This further disrupts supply and demand. In short, landlords need to be more realistic with their rent prices.

We're still up in 2020 compared to 2023. According to the Apartment List dataset, rents are up about 4.4%. However, prices have come down somewhat in the last few months. We started making price reductions of $50, $100, or $200 to generate interest and fill properties. We don't anticipate a dramatic change in the near future; we hope they level off and remain stable for a while.

Another thing we're seeing in the market is concessions, though not widespread. Larger corporate-owned apartment complexes might offer move-in specials or spread out rent over 12 months. These are mainly for properties in less ideal locations or those not generating enough interest.

Now, this is our experience in Ventura County. National and state trends may differ. All real estate is local, so it only matters where your property is and what's happening around you. Conditions are changing, and we aim to keep our listeners, clients, and tenants updated with market realities.

If you like our content, please give us feedback. We want to hear from you about your struggles, the topics you want to hear, and even if something wasn't helpful. Reach out to us at podcasts@renconmanagement.com, and we'll get back to you. Thanks for investing your time in our podcast, and we hope to continue bringing you relevant episodes to help you on your landlord journey.