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Press Release
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Have Local Rents Reached Their Peak?
Have local rents reached their peak? When we last wrote to you at the beginning of the year, we were looking back at 2018 and applying our expertise to the data that we had been creating over the past three years about the single family home (SFH) rental market, primarily in Marin County. Having updated our survey with first quarter 2019 results, we feel confident that the trends that we identified and the influences on the market are continuing in the directions that we predicted. So How is The Rental Market? Last year was strong - and 2019 will perform well - but with some softening already in progress, 2019 is requiring that we, as property and residential investment managers, and you, as owners, remain diligent and commit to marketing residences in optimum condition with realistic rental expectations. In January we wrote “we are seeing signs that rental rates are peaking, or beginning to peak, and savvy property owners and agents are paying attention.” We see no reason to alter that observation. As we studied the first quarter of 2019 data, we saw that the underlying trends continue to signal a change in the market. Again, as we noted in January, the normal Q1 seasonal (late winter/early spring) slowdown occurred, with some key indicators (days on market [DOM], price per square foot and average price) already reflecting the softening. The key statistics for 2019 first quarter are:
A Deeper Dive Reveals in the Entire Marin SFH Segment, Price Per Square Foot Stayed Flat, Year Over Year. General DOM increased significantly from 40 DOM in 2018 to 57 DOM in 2019. While high-end rents were up an average of over 10% across Marin, by comparison, last year's the DOM were 63, with most high-end homes taking an average of 23% longer to rent. Tiburon in particular is having a difficult time with rents up less than average, at about six percent, but DOM was over double (43 DOM in 2018 vs. 98 DOM to date in 2019). As a result, an average rental in Tiburon rental is spending 55 days longer on the market, costing the average Tiburon landlord an approximately $18,000 in lost rent. The first quarter 2019 study also revealed a continuation of trends which began in 2018 and somewhat reflect what led up to the housing crunch of 2008. While not as alarming as the conditions of a decade ago, the indicators suggest that homeowners be vigilant. We are urging our clients to pay particular attention to pricing vs. expectations of days on market (DOM). There are exceptions, however. We recently rented the 2,600 sq ft penthouse at The Cove for $16k/month. We are also still leasing some of our prime listings off-market. On the sales side, we also note that home sales are down slightly with DOM also increasing. We are not alarmed, but we urge those of you who have rental renewals coming up over the next several months sit down with us to discuss alternative strategies, pricing and expectations. The bottom line is preparation. High-end markets like Marin change as rents adjust. While your time is best spent pursuing your own business interests, having the right management team on your side gives your rental asset the proverbial leg up. It is why we have built our business from scratch to a firm that leases $30 - $50 million in homes each quarter, with more than $150 million of residences in our local management portfolio over the past decade. We understand that time is your most precious commodity; and we only thrive if you do. Our team is always available to talk and welcome your questions. We look forward to seeing you at one of our upcoming MVP Client events in 2019. |