After an impressive run of year-over-year appreciation and multi -year increases in rents, the outlook for the rental housing market in Southern California for 2023 is for lower rents, higher vacancies, and longer marketing time for new tenants, compared to the market peak of late summer 2022.
While rents are still substantially higher than pre-COVID levels in 2020, rents are now trending down from the peak and likely to continue lower in 2023. We have already seen rents drop 3% or more from the peak and this trend is likely to continue in 2023.
Economic uncertainty, potential job layoffs, and loss of discretionary spending power due to inflation in other household expenses, such as gas, food, utilities, transportation, etc. means tenants have less ability to pay higher rents in 2023 and are becoming more price-conscious when choosing a rental home this year.
“The balance of power in the rental market has really shifted very rapidly to renters. We’ve seen that rent growth has really slowed down. We’ve now got four straight months where month-over-month new leases have actually come down. The market has really changed materially.”
-Jay Parsons, chief economist for real estate technology firm RealPage
Be a Market Leader – Not a Market Follower
The best strategy to get ahead of a softening rental market is to be a market leader, not a market follower. Price your vacancies competitively and be the first to offer a more attractive rental rate in your market. Higher vacancies and more choices mean tenants can be more selective in choosing a rental home and the most competitively priced options will attract new tenants first. An overpriced unit with above market rent will take longer to rent and costs money in lost rent every week it sits vacant. A little lower rent in the beginning can bring you more income over the long run.
In the last several months of 2022, online real estate firms Zillow, Redfin and Apartment List all recorded significant drops in rental asking prices.
Refresh / Renew / Renovate
Make sure your rental properties are in the best possible condition, clean, fresh and in good repair. A few selective improvements such as, fresh paint, new carpet, updated faucets, light fixtures, even simple items like drawer pulls and cabinet hardware are relatively inexpensive investments that will help maximize the rental value of your property and reduce the vacancy time.
The most effective time to renovate and refresh your rental is in a slow market. A vacant unit is costly! – Get it rented sooner with a cost-effective renovation. It is important to remember that well-qualified tenants have options too, and a fresh, attractive, and appealing rental that is competitively priced will always be the first choice for the highly qualified tenants you are looking to attract to your property.
To learn more about cost effective property management and maintenance services contact us at:
(818) 884-5155
or email us at
service@lrsrm.com
