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Humboldt Vacancy & Rental Rates – Q1 2020

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For existing property owners and investors with a current portfolio of properties, the Humboldt County housing market is trending positively. For those looking to invest in property, because of surprisingly low-interest rates, competition may be stiff. There is a decrease in the vacancy rate – an all-time low of 2.6% in Humboldt, and a slight increase in rental rates which, if historical patterns repeat, generally leads to increases in new home construction, ultimately benefiting Renters.

 

Rental property investors looking to buy high cash flow rental homes will face challenging market conditions. Foreclosure levels dropped to a 14 year low in 2019 and will likely remain so, making bargain properties more difficult to find. Affordability in the single-family home market is expected to decrease slightly as home price growth grows to a forecasted increase of 0.8% and existing home sales drop by 1.8%. Link to Source

 

Mortgage rates will decrease. This decrease is in response to geopolitical uncertainty and a slowdown in the global economy. This means a potential increase in competition for affordable properties. This decrease could potentially entice new home buyers and also make it more affordable to finance new rental property purchases. “Interest rates will, on average, remain lower for longer given the somewhat cloudy economic outlook. These lower rates will in turn support both purchase and refinance origination volume in 2020,” said Mike Fratantoni, MBA’s Chief Economist and Senior Vice President for Research and Industry Technology. After multiple years of home-price growth above wage gains, several markets in 2019 saw a slight slowdown in price appreciation. Fratantoni expects to see further deceleration in the next few years, as additional housing supply comes on the market. (Mortgage Banker’s Association 2019)  Source: mba.org 2020 Forecast

 

Rent growth is a modest 2.5%. Our national rent index increased by 0.1 percent from November to December, and has now remained essentially flat since last June. In fact, nearly all of the rent growth over the past year occurred during the three month stretch from last March to June, during which rents increased by 1.3 percent. Although this was the fastest growth over any three month period since the summer of 2017, this spike was short-lived, and rents have otherwise remained stable over the past twelve months. (Apartment List 2020)Source: Apartmentlist.com Rentonomics

 

Rent growth tends to be slower in the fall and winter months due to seasonality in the market. This year though, rent growth began to slow before the summer was through. That early end to the summer rent spike marked the beginning of a prolonged period of stagnant rent growth. That said, rents have not fallen in a meaningful way, as they sometimes do during the off-season. Currently, rent growth is trailing the overall rate of inflation, which stands at 2.1 percent as of the latest data release. Rent growth lags even further behind the growth in average hourly earnings, which have increased by 3.1 percent over the past twelve months. The fact that rent growth is still trailing income growth is a welcome bit of relief as millions of our nation’s renters continue to struggle with housing affordability. (Apartment List 2020)

 

Vacancies will be easy to fill. The current rental market is dominated by millennials and others who have decided to delay buying property. Faced with economic factors like dire warnings from economists about trouble ahead, an increasing number of would-be buyers are putting off real estate purchases. There is the possibility of a surge of homebuyers as Millenials and Gen Xers may gain confidence in the economy despite the mention of a potential recession and try to take advantage of current mortgage rates. However, these mortgage rates are also good for investors which could bring a bit more competition to the market, pricing out first time home buyers.

These final two predictions are good news for investors looking to enter the market, or those looking to purchase additional rental properties. Although obtaining bargain rental properties will be difficult, the outlook for strong rental demand and raising rents make single-family rentals an attractive long-term investment. This could ultimately benefit renters too, as more investment flows into the construction of housing, there will be more non-owner occupied homes increasing the supply of homes available to renters, which would be a real benefit in our area which has an increasingly high demand for rental housing, and simply not 

enough to house everyone in need.

Vacancy rates in Humboldt and nationally are in decline.  According to the US census Bureau reports national vacancy rates in the third quarter 2019 were 6.8% for rental housing which is a decrease from 2018’s 7.1%. According to our data, Humboldt’s vacancy rates are at an all-time low of 2.6% – a decrease from rates this time of year in 2018 at 3.6%. We are pleased to see that our market rates are not dramatically increasing, adversely affecting the residents in our community; the medial market rents are $1005 (US Census 2019). It is especially exciting to see a decrease in vacancy rates, a typically stagnant data point. This is fantastic news, as this means landlords are getting people housed quicker and it is a positive trend for investors considering purchasing rental properties in this area. Source: Census.gov Housing Press Release

 

Low inventory levels will create a more competitive market. 

A February 2018 housing assessment from the state Department of Housing and Community Development found that Eureka had only met 13.9% of its housing needs between 2007 and 2014, building 122 of 880 housing units needed. Over the next eight years, the city needs to build 952 housing units, or 119 per year. “Over the past 10 years, the city of Eureka has created an average of 12 to 16 housing units per year,” Eureka’s former director of development services, Rob Holmlund.

 

The lower-than-expected number of new builds in 2019 has economists predicting this under-producing trend to continue into 2020. At the same time, professional investors have taken notice of the stability of the single-family rental home market, creating an influx of new rental property owners. These conditions and more will create limited inventory conditions in 2020 and make for a more competitive real estate market. The Census Bureau and HUD provided a look at the data on new home construction, and the report shows that housing completions for single family residences increased and multifamily units decreased nationally in 2019. For Humboldt, there is work being done to streamline the process for adding Accessory Dwelling Units and transitional supportive housing in our area.

Accessory Dwelling Units could be leading the way for new construction in Humboldt. The Planning and Building Department collaborated with the Humboldt Association of Realtors to make construction plans for 3 different accessory dwelling unit (ADU) designs available to the public. An ADU is a small house or housing unit that is secondary or “accessory” to a primary unit. Some examples of ADU’s are better known as backyard cottages, basement apartments, carriage houses, attached in-law suites, garden suites, granny cottages, mother-in-law flats, secondary units, or even tiny houses that include a foundation and garage apartments. Planning and Building reviewed the plans in October of 2018, and provided updates & information on their website (CLICK HERE). The City of Arcata, the City of Eureka and Humboldt County governments are all committed to making the ADU permitting process as easy as possible by providing education and outreach opportunities for property owners.

 

 

Conclusions

 

What does this mean for Investors? A low vacancy rate is a reliable indicator of a competitive rental market. This is generally beneficial to Investors who are looking to lease their property with minimal vacancy loss.  This decreased vacancy loss may spur demand for the development of more housing. With Eureka & Arcata City’s efforts to streamline new development, investors may take advantage of this support and build much needed new housing in Humboldt.

 

What does this mean for renters? Although increased rental rates are not a direct immediate benefit to Renters, the long term impact on the development of new housing is positive.  A decrease in vacancy rates and increase in rent could increase confidence in investing in properties as rentals, and ideally new construction, which, over time, adds to the stock available housing. If there is a substantial increase in investment, and thus a larger supply of properties available, demand and thus prices would continue their market cycle. Regardless of market conditions, Real Property Management Humboldt will continue proudly serving Property Owners and Residents with their rental needs. 

 

Our Mission at RPM is to improve lives and our community by continuously elevating property management standards. By conducting research and preparing real estate market predictions, Real Property Management is investing in the education and success of both Property Owners & Residents of our community. We hope to not only provide the data but answer any questions you may have about rental housing in our area, please don’t hesitate to reach out with any questions or suggestions.  Visit Report.RPM101.com for future releases.

 

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About Real Property Management Humboldt

At Real Property Management Humboldt in Eureka CA, we proudly stand behind our reputation as a locally preferred property management company.  With over 35 years in business & decades of experience, we are the trusted leader in property management.

Your Real Property Management team consists of highly-trained experts in every aspect of property management -we have multiple licensed REALTORS that know how to handle the difficult challenges of property management. We value our ability to be responsive to the needs of both owners and tenants. With backups to backups and thoroughly developed systems in place, we keep things simple, timely, personal & accurate. For the best property management from anywhere between Trinidad and Rio Dell, Real Property Management Humboldt provides the details, management, and insight on your properties that you need to be a successful investor. For more information regarding Real Property Management Humboldt or the services we provide, visit RealHumboldt.com

About US Census Bureau

The Census Bureau’s mission is to serve as the leading source of quality data about the nation’s people and economy. We honor privacy, protect confidentiality, share our expertise globally, and conduct our work openly. We are guided on this mission by scientific objectivity, our strong and capable workforce, our devotion to research-based innovation, and our abiding commitment to our customers. The Census Bureau operates under Title 13 and Title 26 of the U.S. Code. Our goal is to provide the best mix of timeliness, relevancy, quality, and cost for the data we collect and services we provide.

Their reports are here: 

https://www.census.gov/housing/hvs/files/currenthvspress.pdf

https://www.census.gov/construction/nrc/pdf/newresconst.pdf

About HUD or the US Department of Housing and Urban Development

Hud works to ensure & with issues pertaining to Affordable housing · Community development · Design technology · Economic development · Fairhousing/fair lending · FHA outlook reports · Homelessness · Homeownership · Housing finance ·Housing for special needs · HUD research (HUD User) · Manufactured housing · Market characteristics · Periodicals from HUD. The Office of Policy Development and Research (PD&R) is the principal advisor to the Secretary on overall Departmental policy, program evaluations, demonstrations, and research, and is responsible for providing economic information and analyses of housing and community development statistics and other data.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.