Most of us have just put away all our Thanksgiving leftovers, which means we are coming into San Francisco’s slow rental season. Today on the Gordon Property Management blog, we want to talk about pricing your apartment, your single-family home, or your condo in the next three months. From December through February and even into March of 2019, you need to be conscious of the market and the competition.
Rental Market Slowdowns in San Francisco and Nationwide
San Francisco is a great market, and we can always rent properties over the holidays and during the winter, but it’s usually a little slower. Now, we’re seeing that in San Francisco and nationally, the rental market is slowing down in general. At the last NARPM (National Association of Residential Property Managers) convention in San Diego this past October, there were property managers from all across the country talking about the slowdown in the rental market. Prices are coming down.
Property managers who also handle real estate sales reported that the sales market is slowing as well. Home builders nationwide are having to offer trips to Hawaii and other incentives to get consumers to buy homes. The rental market and the sales market aren’t always in sync, but a slowdown in one market certainly affects the other.
Rental Market Economics: Not Necessarily a Long-Term Slowdown
One of the most interesting workshops at the NARPM conference was put on by an economist from Zillow, who talked about the clear slowdown in the rental market. She said it isn’t necessarily long-term. Her graphs included data on San Francisco, and it clearly showed that 2015 was the peak of the rental market. That’s consistent with what we’ve experienced at Gordon Property Management. In 2015, there was a lack of supply, and lots of people were moving into San Francisco and looking for housing. Things changed in 2016, and we’ve had some ups and downs since then, but the overall trajectory has been a slow drop in rental prices.
Pricing Rental Properties Lower to Rent Them Quickly
Some estimates have said there’s been a 10 percent price drop in rents in the San Francisco area, which can vary by location and property type, but the drop has been significant. Recently, I spoke to some property management colleagues in Santa Rosa. There were horrible fires there a year ago and not enough housing was available, but now rental prices in the area are going down.
What does this mean for you? It means that if you have a vacancy in San Francisco over the next few months, you have to be price conscious. You won’t be able to ask what you were asking a year ago, and you definitely won’t earn what you earned two or three years ago.
Correctly Pricing your San Francisco Rental Property
At Gordon Property Management, we use a RentFax report to determine where to price a rental property. It’s very accurate and provides a range of where to properly price a property. It takes into consideration your square footage, the number of bedrooms and bathrooms your property has, and its location. Where a property falls within the RentFax range is determined by its layout, and its amenities. Those homes with a more desirable layout in a great neighborhood will be priced at the higher end of the range than tired properties in the same neighborhood with a less desirable layout.
We believe in the data we get from RentFax. It has been consistently accurate, and we know that pricing a property too high in this market won’t get us anywhere. Whether you’re listing a property for rent with us or on your own, make sure you have reliable information on where your price should land. Check out Zillow or Craigslist and look at what comparable properties are renting for. Remember to look at the number of days on market. If you see a home that’s renting for $5,000, but it’s been on the market for 90 days, that’s not a comparable because no one wants it at that price. Be realistic and look at how your property compares to others.
Consider Property Upgrades in a Slow Market
Now is the time to upgrade because it will put you ahead of other properties. If your property is tired, if your paint or your floors or your appliances are old, or even just a bit tired, your property will remain vacant for longer and/or your rental price will be lower. It’s especially important to improve rent-controlled properties. You will could end up with your next tenant for a long time, and you don’t want a tenant who doesn’t care what the paint looks like. You don’t want a tenant who doesn’t care how the appliances work. That’s not a tenant who will take care of your property.
Many of our San Francisco tenants look for high-end properties. They make a lot of money, and they have high expectations. They won’t move into an apartment that doesn’t look great. All of the recent construction and additional inventory has brought prices down in San Francisco. Those new condos downtown are sleek, modern and have a lot of what today’s tenants want.
In the next three or four months, be careful how you price your property. I can’t tell you what the spring will look like, but right now, we’re facing a rather soft rental market.
If you need help with your San Francisco rental, please contact us at Gordon Property Management. We offer a free RentFax report, and we’d love to talk to you.