By Mike Bodeen · 15 January 2018
26% $/SF Rental Rate Increase in Less Than 4 Years!
We spent some time in recent issues looking at the residential real estate sales market prognosis for 2018 and now it’s time to focus on the very important rental market.
Most of us know someone who’s currently renting or trying to rent a home or apartment in the valley. The same issue of affordability continues to plague buyers and renters. Rental demand remains high. Many renters are seeing annual increases in their rent. Indeed, rates per square foot ($/SF) have soared from .68 cents PSF to .86 cents PSF in less than four years, an average of almost 7% per year increase.
Check out the Average Lease Price PSF chart below. It’s a dramatic visual statement of the uphill climb facing our renter market. This is most certainly good news / bad news. For landlords, the market continues to get better. For renters, the market continues to negatively affect their cost of living.
In a word, this market “shadows” what’s happening in the sales market which has steadily seen annual increases in its value. In fact both markets have “steadily” increased — rental appreciation (near 7%) has out paced home appreciation (6%) per year for the last 4 years.
And 2018’s rental prognosis? More of the same, including higher rents and fewer rental options. New home construction is not keeping pace with our rising population, which increases sales and rent prices. And that rising population will continue to increase, especially from California as the quality of life continues to deteriorate there. Yes, they have the ocean, mountains, weather and higher incomes. However, the “soul” cost (soul cost = growing traffic nightmares to get anywhere and the rising cost of living — are going through the roof). I spoke with a family member earlier today about the small 1 bedroom apartment they’re renting in SoCal — $2200 per month!
…you can know the answer to that question by speaking with a good mortgage professional now who can let you know where you’re at qualifying-wise and what, if anything you need to accomplish to get pre-approved. I will strongly tell you, it is money in the bank!
A tip for renters if you’re absolutely sure you won’t be buying in two or more years, ask the landlord for a two-year lease, that way you can at least lock-in the rent price for those two years. If there’s any thought about buying however, only lease for one year. Perhaps you’re not sure if you can qualify for a home in one or two years, you can know the answer to that question by speaking with a good mortgage professional now who can let you know where you’re at qualifying-wise and what, if anything you need to accomplish to get pre-approved. I will strongly tell you, it is money in the bank!