Rents go up, pay doesn’t

By Chris Caskey, The Union Democrat November 02, 2012 09:49 am

While income and home prices have fallen, the price of rental housing continued to climb in the Mother Lode through the Great Recession, statistics show.

Rents, according to the statistics from the U.S. Department of Housing and Urban Development, rose steadily in Tuolumne and Calaveras counties year-to-year from 2006 to 2011, with only a small decrease between 2011 and 2012.

The study, compiled by the Center for Economic Development at Chico State University, uses the fair market rent statistic set at the 40th percentile. That means 40 percent of the units are cheaper and 60 percent are more expensive.

Fair market rent in Tuolumne County for a two-bedroom unit was $770 in 2007 and $959 in 2010 — about a 25 percent increase. Over the same period, numbers in the county profile show the median home price fell 38 percent, from $327,750 to $203,300.

Median household income fell during that stretch from $48,144 to $46,296, about 4 percent.

Statewide statistics show the same trends, according to the study. While income and housing prices have fallen, the rental markets continued to inch up through the recent recession until dipping just this last year.

The numbers are all connected, according to experts. As the recession and housing bust led to foreclosures, more former homeowners entered the rental market.

While their foreclosed houses became vacant, they didn’t necessarily become available to renters.

A survey of American property managers released this summer by credit information company TransUnion found that rental prices are largely increasing or staying the same without putting a damper on demand.

Local property managers are saying the soft housing market is contributing to the rental prices.

“It’s just an ebb and flow, supply and demand sort of thing,” said Frontier Property Management co-owner Tom Griggs

Griggs pointed to the foreclosure issue as a reason for the trend. 

Those foreclosed homes are often “shelved” for a bit, as banks do not rent them out and the former owners look to the rentals, he said.

“Some of our best renters are foreclosures,” said Griggs, whose company manages properties in multiple Mother Lode counties.

Griggs noted that rental prices tend to be more stable in general than housing prices, especially lately. He said the local market historically does tend to strengthen during good economic times. But even now, with between 15 and 30 units available at any given time, they are able to fill as many as 10 a week.

“It’s pretty stable in terms of supply and demand,” Griggs said.

The rental market has even led to some local business expansion.

Kimberly Darr, of real estate company Century 21 in Twain Harte, said they’ve only been in property management for less than a year and are seeing a strong rental market.

People who go from owning to renting due to short sales or foreclosures are used to and able to pay for a certain level of home quality. Because those customers have continued looking to rentals in recent years, they’ve brought increased demand with them.

“All of my research has said the rental market was only going to get stronger,” Darr said.

And she’s even seen it open up new opportunities for investors. Because of that demand, people are looking at some of those foreclosure homes to purchase low and own as rentals.

“We’re certainly dealing with more investors” interested in those homes, she said.