The ads are running but our phones aren’t ringing.
Over the last few years we have been dealing with a serious housing shortage causing a steady increase in rental values. This is not new news to anyone, but we are now seeing this begun to change. Historically a hot market reaches a plateau where it flattens out and even declines. We may be experiencing such a market now.
In talking with other residential property management companies in Santa Clara County the consensus is that there has been an undeniable shift in the market. Here is some of the information they shared.
- Vacancy rates currently range from three to five percent.
- Companies started to feel a slow-down beginning in late July.
- Available properties are taking much longer to rent.
- Rents are no longer increasing. In some cases, rents are being reduced to below previous levels just to get more activity.
- Many property managers think that rents will go lower before leveling out.
- All predict a slower market through at least the end of this year, and possibly through spring of 2017.
While property management companies already have this information, the media is just now starting to report the slow down based on quarterly data. What most of the media doesn’t examine is an accurate reflection of rental values as it applies to the small multi-unit apartment buildings. None of the management companies that I talked to had any one-bedroom apartments renting for as high as $2,455 as reported in the press. The average one-bedroom unit is currently renting for $1,600 – $1,800 a month according to the property managers I spoke to. While this is still higher than many renters can afford, it’s nowhere near the extreme rents advertised by the large luxury apartment buildings.
The rental housing industry strongly supports new development to meet the growing need for housing in Santa Clara County. When in-place renters are discouraged from moving due to tighter rent control, it closes the door on low-income prospects and leaves them with even fewer options. Although the slow-down in the market will certainly help, the only long-term solution is more housing.