Rentals: the future of California real estate?
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California’s homeownership rate continues to fall in the fourth quarter (4Q) of 2012. Today’s homeownership rate is 54.1%. That’s down from 54.8% last year. Since non-homeowners still require shelter, the rental vacancy rate decreased to 5.4% in 4Q 2012. This is down from the vacancy rate of 5.9% a year earlier.
Homeownership was at its highest in 2006, at 60.7%. Since then, it has quickly decreased. California homeownership will likely drop to 51% by 2016 and remain at that level for about a decade as interest rates rise.
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Carrie B. Reyes
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Once again, First Tuesday has a pretty good idea of what is going on in the real estate market. To begin with, it has been predicted that over the next 12 months according to the Mortagage Bankers Association, that over 10,400,000 homes will enter foreclosure and according to the Heritage Foundation, another 10,000,000 will lose their jobs between NOW and the end of the FIRST QUARTER OF NEXT YEAR (March 31, 2011!)
What is the cause of this? The current administration in the White House and their belief that more government spending along with HIGHER TAXES will stimulate the economy! However, the opposite is true.
As an example, we only have to look to the GREAT DEPRESSION and how President Roosevelt passed the HIGHEST TAX INCREASE in U.S. History at that point and unemployment went from 15% from President Hoover and the STOCK MARKET CRASH of 1929 to 25% in1933 once the ROOSEVELT TAX INCREASE WAS PASSED! The same thing will happen next year!
More and more economists are predicting that the United States is about to enter a DEPRESSION, one of which this country has never seen or felt because this time it will be more global than the last one.
Watch the real estate market and pay close attention to the REAL unemployment rate, not the White House figure, (it is closer to 17.3% than it is to 9.5% as the White House wants you to believe!)
Remember, the President said that if the stimulus bill was not passed that we would see unemployment above 8%. My question is, now that the stimulus has been passed, why is the unemployment rate above 8%?
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I read your article with great interest since Property Management is our core business – and the majority of our managed properties are single family homes or condos/townhomes. H.M.S. has been around since the early 70’s so it has seen the rental market up’s and down’s – which used to follow a seven year cycle.
I agree that all the foreclosures have not increased substantially the demand for rental housing. As your article points out, these families are moving in with family or leaving for other states where there are jobs and housing that is more affordable.
Very interesting that you see rentals as a move for the future — especially with Generation ‘Y’ — that is a very good point.
We still find that having a rental that is clean, updated, and priced at market will rent. Landlords that have a poor image of renters and don’t fix up their properties are having their investments sit empty. Pointing out that the renters of today include professionals, teachers, white & blue collar workers is important. Over the years, we have found that over 95% of the tenants leave the property in a condition that it can be rented out again with minor work.
Right-on about not needing more apartments built at this time!
Hmmm – when you discuss Section 8 housing — did you know that Section 8 policy is different depending on the county? Some counties in California have frozen rents for the last 2 years. In addition, some have not taken applications to get on the waiting list for the last 2 years; nor added anyone to the program. As in other government programs, HUD has had to cut costs as well. I have not researched government financing for Section 8 landlord upgrades to improvements; but I haven’t seen these being available either in the last couple of years.
We, in property management, are beginning to look at what landlords can do to be more energy efficient – i.e. replacing old appliances/furnaces with Energy Efficient ones.
Anyway, thanks so much for the informative article — looking forward to 2012 and a better economy!
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From what I hear from friends in California, the housing seems to have stabilized already. New homes in desirable cities and towns are once again being snapped up fast. Same is the case with distressed homes even in the bubble-bust cities and towns. Multiple offers is the order of the day. Low interest rates definitely seems to have had a positive effect on housing. Jumbo loans that had become extinct, have reportedly made a comeback. Hopefully, with the new regulations, we don’t go back to the 2004 – 2006 style irrational exuberance!!
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I live in Lodi just a few miles from Stockton. Stockton has been hurt big time with homes built between 2003 to 2008 showing 60 to 80 % lost to forclosures. Most of these homes were sold to owner occupied families uisng ARM loans with pick your payments that would give negative loan reductions or growing loan amounts due to added unpaid interest to the loan each month. Values in Stockton are still going down. For the first time in a long time we have 2 and 3 families pulling together to rent or buy homes. Rents are also going down in Stockton. All the money given by Government has not changed this.The same Banks that got money from the Government are not working to help the buyers who used good loans to purchase their home but are now paying the price for the Bank Loans that were pushed on most buyers during this time that did not really understand what a pick a loan payment was all about. I can not believe anyone would use this loan product if the loan product was really explained to the borrower in the first place.
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