I made my monthly price survey today, looking at comparable properties which might compete with mine.

I found a drop in average price of 5.7% .

Also, a substantial drop in number of comparable units available on the market.

Hard to tell what's going on here as we are entering the Winter Rental season - so 99% of the rentals listed (which is still only 28 total on CL!) are off-season furnished rentals. Tenants will need to vacate in March or April for the summer season.

Average properties in our area, lower end, went from an asking price between $880,000 to $970,000 to an asking and preying price of $760,000 to $920,000.

This is for a 3+2 with 1400+ sq.' home on a 7000+ lot.

Not the larger stuff.

All because things were over inflated and interest rate were too low. Now that loans start at 5.5% and can even go as high as 6.5%,

prices have to come down.

Moshe,

Good to keep track.

Local rents are going up. Indiana was up 14% over last year.

Last year I rented a nice home for $1250. Just re-rented it for $1465 without pet fees.

Sec8 is increasing.

Brad,

You say that "Local rents are going up. Indiana was up 14% over last year. "

But my figures are, as of October 1 vs September 1 (2022), and specific to units that are comparable to mine( 2 br, 2 ba, pool, landscaped grounds, rec room, 850 to 950 sq ft, within 1 mile of my property, same schools, parking, etc.

We can see more over the next few montha.

Sisco,

"Tight supply and falling prices are an unlikely combination. What do you make of it?"

Is it such an unlikely combination?

What about the possibility of poor economy? Tight supply, falling prices and poor economy? What do YOU make of THAT?

I make of it, that falling prices are falling prices, be it groceries, gas or rents. To find orthogonal basis vectors, try tight supply, inflation and interest rates. Maybe there is unexplained variance left over for low consumer confidence.

Rents are still up in our area, probably due to tight supply. An acquaintance from my church was so happy to tell me that she found a 1 br apartment, galley kitchen, for "only" $1125, in a Philly suburb. It took her months to find something that she really can't quite afford (she makes around 3000/mo).

Yikes.

One data point could be an anomaly statistically, three contiguous data points in the same direction are statistically significant. This problem is compounded where the sample size is small as you describe in the comparable units. I ran into this earlier in the year when there were virtually no comparable units to establish a market rental basis for a vacant unit. I set the rate based on the small sample set and then realized it was too low when I was inundated with applicants.

I hope that they are only short-term variances.

Interesting research. You could reach out to Bruce Norris and ask him his thoughts. He published multiple 100 page plus studies about the SoCal real estate market place, but his research is mostly on affordability and its impact on the SALES market place.

RE: Norris

What has his research shown?

Moshe, perhaps many houses are occupied by non paying residents who cannot be evicted and a poor economy has reduced the supply of qualified applicants.

Stagflation. Tight inventory keeps prices stable. Inflated but still lower wages keep vacancies longer.

People get used to paying higher prices over time. No one expects to buy a gallon of gas for 25 cents or a dozen eggs for 10 cents any more. Prices went up, stayed up, and folks are used to it now.

Prices in my local market have leveled off. I'm not longer bumping units 10-15% at turnover. Fine by me. The unit I rented for $550 two years ago goes on the market for $700 and rents within 5 days. Works for me. Plenty of willing and able payers.

Yes, Robert, but do you see any effect of the US Fed interference in the monetary supply on rental prices?

On what evidence?

Bruce will provide between 100-150 charts that will allow you to determine the direction of the real estate market in about 7 counties in the SoCal region.

His research is based on the basis of affordability for the specific county. The reason for the variations? Each market place has its own price point based on the wages and migration even within the SoCal area.

He doesn't do this for just one real estate cycle, he goes back, multiple cycles to show you how the affordability number doesn't shift much at all from cycle to cycle. Even when something crazy like when the aero space industry largely pulled out of SoCal and went to Az, the magic affordability number in San Diego was 18%. As soon as 18% of the population can afford to purchase given the current market conditions.........(and those conditions constantly shift), the momentum is in place for the cycle to shift

So what does his work have to do with the effect of FED interest rate increases on a possible recession in rental market?

Where there was some correlation to affordability, the real driver was the areas local wages. His research was county specific, so he did say San Bernardino and Imperial Counties where the wages were low locally and then Orange and San Diego.

His research is available at TheNorrisGroup in the series "I survived Real Estate 2022. He has published this every year since 2008

he did say San Bernardino and Imperial Counties where the wages were low locally and then Orange and San Diego.

Did you say, Orange and San Diego counties number 3 and 4 in low wages locally? And that that determines rental rates?

Here in the big city, there are low-wage workers, medium-wage workers and high-priced workers, plus businessmen whose income ranges all over the place. As the song goes regarding all the gold in California, [that] California's a brand new game.

While rents are certainly different in different counties [in CA], both Orange County and San Diego counties have both high concentrations of illegal immigrants, and large concentrations of professionals and very wealthy people. I challenge if average wage in the county is a good determinant of rental rates.

If the question at hand is, has the Federal Reserve board's attempts to attack inflation by drastically raising interest rates had any visible affect on rents. Thats the question I'm watching.

I was comparing lower income locations with lower price points as compared to other locations with higher price points.

He can show a pattern where people migrate and make the longer commutes and when they retreat back.

Where Bruce's research is on market sales prices, your question is specific to market rents. I am not sure - especially in the SoCal world. Here, most local banks consider ANY Non-Owner Occupied place as a commercial loan and offer 10, 15 or 20 year loans fixed for 3, 5 or 7 years. Since real estate doesn't appreciate as fast here - basically the inflation rate continually, they want these places paid off faster. I am alright with as they still cash flow.