The Real Estate Market and Rentals

Not a day goes by that I don’t get at least one email plea from a fellow Realtor looking for an available rental for a client.

Rentals have become hard to find and landlords can demand top dollar. Moving to town and want to rent before you buy? Makes sense but it might be tougher than you think — especially if you are bringing the family dog and cat. Landlords can be picky and “no pets” is a likely place to start.

If you are considering selling your house, you may want to do the math and see if it makes sense to hold onto it in this attractive rental market. Please refer to this calculator I found on Forbes.com.

Even more interesting to consider is the correlation between the rental market and homes for sale. Clients of mine moving here from Hawaii are planning to make an offer on a house sight-unseen because they have decided it makes more sense to buy than rent.

As she said, “We looked into renting but the best we can find online is at least $2,600 — and our mortgage will be less than that.”

Jeff Winaker, an Alamo resident and client who has an astute understanding of the situation, sums up the relationship between rentals and sales.

“The point at which the after-tax cost of ownership is less than the equivalent rent is where prices stabilize," he said. "For home values to go appreciably lower, rental rates would have to decrease too. Given the crazy rental market, I don't see rents softening.”

Mike Miller, Bank of Commerce mortgage lender, suggested that the “shadow inventory” in foreclosures may result in more rental properties in the inventory. However, as the former owners of the foreclosures look for a rental to call home, they may balance things out. Mike checked out the statistics (using what we know from the MLS) and said, “It looks like rental prices are up and sales prices are down, based on May to May data. There were about the same number of leases but there were about 29 percent more sales in 2011 than in 2010 for May.”

Miller offered the following median price information for Danville:

May 2010 – Lease = $2,595 (.262 percent of sales price)

May 2011 – Lease = $3,012.50 (.329 percent of sales price)

May 2010 – Sold = $989,869.22

May 2011 – Sold = $914,543.62

Rates, he pointed out, are historically low so buyers who are considering a purchase to avoid the high rents will benefit by obtaining a loan with low rates.

Inventory data is based on information from the Contra Costa Association of REALTOR’S® MLS. The data is deemed reliable but is not guaranteed accurate by the MLS.