Podcast 342: Current Rent Rate Trends Across the U.S.

Podcast Host, Andrew Schultz, chats about rent rate trends around the U.S. including what states are seeing a rapid decrease and what states are seeing an exponential increase.

Also in this episode, Andrew discusses how to manage mailboxes in a shared rental. Should you just have your tenant get a P.O. Box?

Last, but not least, what happens when a tenant refuses to let a contractor in because they think the repair reduces the value of their rental? Find out now in our latest podcast.

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Show Transcription:

Andrew Schultz: (00:00)
Hey everybody. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 342. And I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about rent trends across the United States. How to manage mailboxes for tenants in a shared rental antenna to refuse a repair because of a reduced value to the rental. We’ll get to all that right after this.

Voice Over: (00:24)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:29)
Before we jump into today’s episode, don’t forget to check out the Rent Prep for Landlords Facebook group. It’s a great free resource for you to network with housing providers from around the country. And if you have a question or a situation that you’ve never dealt with, chances are someone in the group has been there before and can lend a helping hand. As of this recording, we’re at over 11,800 members, and we need your help and the push to 12,000. Check it out today over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when answering the questions. So we know how you found us. We’ve got a really great in the news article for you this week. Folks coming to us from apartment list.com, the title of the article is the apartment list, national rent report. And before we jump into the actual article, I wanted to preface this by saying that this is a very well-researched article.

Andrew Schultz: (01:13)
They actually write at the top of the article, go into what their methodology is and give you the option of looking at a full report on their methodology. So if you’re a real data nerd and want to dig deeper into this, there’s definitely an opportunity for you to do so. But I did want to preface the article by saying that this is not just some random, you know, random article that’s been thrown up. There’s a lot of data and research that has gone into this. This is a little bit longer of an article, um than what we would typically cover. But I think that the data in here is important enough to warrant covering the entire thing. Let’s jump right in. Again, this is from apartment list.com. This is their national rent report published at the end of November 2020 by Chris [inaudible], Igor pop-off and Rob Warnock.

Andrew Schultz: (01:54)
All that being said, let’s jump right in with the peak summer renting season behind us. We are now entering the time of year when fewer moves normally take place causing a seasonal dip in rent prices. And although this year’s peak season was significantly disrupted due to the COVID 19 pandemic, our national index has stabilized back to a more typical trend over the past few months, rent fell by 0.5% this month, which is consistent with what we’ve seen in the past. That said, when we looked past the national figures, we find tremendous regional variation in rent trends, expensive coastal cities, such as San Francisco, Seattle, and New York City are continuing to see rents falling rapidly while traditional affordable, suburban cities, such as Boise, Idaho have actually become more expensive over the course of the year. The interactive chart below allows you to explore the city-level data and highlights the stark differences between rental markets across the country.

Andrew Schultz: (02:44)
And I would definitely recommend that you hop over to apartment list.com to take a look at this map because it’s actually really interesting to see the data let’s dive deeper into this notion that a national rent trend looks similar to previous years while a number of new and unique local trends are emerging just below surface. November rent decline is line with typical seasonality, but masks regional variation in November, our national rent index fell by 0.5% month over month. Unlike the atypical rent decline, we witnessed during the summer today, continued rent reductions are in line with normal seasonality in the market. In fact, rent has declined 0.5% from October to November in each of the last three years year over year, national rents are down now about 1.3% at the national level, 2020 can be broken into three distinct phases January to March. The pandemic had yet to significantly disrupt everyday life in the United States.

Andrew Schultz: (03:36)
So rents followed a normal trajectory after a typical winter slump, they picked back up as the weather and the market started to warm section two distinct phase. Number two March to June. The pandemic truly disrupted the market. Americans were told to avoid non-essential moves, slowing the market tremendously in previous years, rent Rose 1% per month during this period. But in 2020, they moved in the opposite direction. Since June the market has moved in a fairly predictable fashion during the summer or renters started moving again and prices Rose through August where the market typically peaks since then they have cooled also in line with previous years today, reds, maybe moving along a normal trajectory, but a national level rent index masks, a tremendous amount of regional variation taking place under the surface November has brought a modest, predictable 0.5% reduction in rents. But that half percent is a blend of a few large cities where rents are dropping quickly and many other smaller cities where rents are more stable.

Andrew Schultz: (04:32)
If not rising last year, 77 of the nations, 100 largest cities saw rents drop in November. This year, the number was just 64. Fewer cities got cheaper, but those cities got cheaper, faster, does aggregates to a national trend that appears similar to last year, but hide some new trends. Most notably the nation smaller, more affordable markets have absorbed. Most of the summer’s rent rebound while larger, more expensive markets had been settled with unrelenting price drops rent a clients are concentrated in large expensive markets. A sample of the nation’s 50 largest cities highlights the degree to which COVID-19 has disrupted the rental market in expensive cities below. We visualize the relationship between rent levels and rent changes is there is a clear correlation between the two, the city that had the highest rents in March moving right along the x-axis have seen the steepest rent drops since then moving down the Y-axis.

Andrew Schultz: (05:26)
And again, there’s a great chart in this article that you guys can pull up and take a look at that shows this data as the most expensive and most impacted city in the country. San Francisco leads the pack with a rent decline of 24.5%. Since March the median two-bedroom apartment in San Francisco has dropped from 3,147 to 2,377. That’s a pretty substantial drop following San Francisco as a cluster of expensive coastal markets that have also been heavily impacted Seattle and Boston have had the nation’s most November rent drops, 5.6% and 5.2% respectively pushing them past New York, which had previously occupied the number two slot through most of the summer. Today’s Seattle ranks. Second, with a 19.1% rent declined since March Boston ranks, third New York City falls to fourth and San Jose rounds out the top five. All of these cities in the list have lost more than 10% of their rent prices during the pandemic months note that these are some of the most expensive markets in the country, and they all have a high share of their workforce is employed by the sorts of companies that are quick to embrace remote work, no longer needing to be close to the office.

Andrew Schultz: (06:33)
And with many local amenities still closed. Some of these workers may be questioning their choice of location. Furthermore, workers who have been laid off or furloughed in these cities are likely to have little buffer to continue affording sky high reds. Coupled with the seasonal trends mentioned earlier, these factors have led to a softening in demand that has caused some of the sharpest rent dips on record in these cities in affordable mid-sized cities, rent growth accelerates while the pandemic and related economic uncertainty have generally caused a slowdown in rental activity. Some cities have actually seen rent growth accelerate. During these months in Boise, Idaho rents have increased by more than 9% since March, more than double the rent growth had experienced during the same period. Last year, our rental price data is mirrored by evidence that Boise’s for sale market has also been heating up as the priciest cities lose some of their allure interest in more affordable mid-sized cities appears to be picking up potentially driven in part by renters taking advantage of more remote work arrangements.

Andrew Schultz: (07:30)
As many of us continue to spend the majority of our time at home, it is unsurprising that some are now seeking out new locations where they can afford more space. While we may be seeing the early signs of renters making housing choices, independent of where their jobs are located. Many of the cities with Vesta’s rent growth are still within commuting distance of large job centers. For example, Greensboro North Carolina is with a 90-minute commute of Charlotte Chula Vista. California is a nearby suburb of San Diego and Riverside, California, which lands just outside the top 10 with a 5.9% rent growth since March is a commuter city for Los Angeles. And though the drives are longer, it would also be feasible to make the occasional trip from Chesapeake, Virginia, to Washington DC, or from Reno Nevada to the Bay area. This trend may indicate that even workers who are planning for a permanent shift toward remote work still value the option to go into the office when needed.

Andrew Schultz: (08:20)
Another way to visualize this trend is to split our data into two groups, principal studies and suburban cities per the census Bureau principle cities are cities that lie at the core of each metropolitan area. They’re typically the Metro’s largest and they generate the greatest economic output. Suburban cities. On the other hand are the remaining non-principal cities within each Metro. For example, San Francisco is a principal city while Oakland and Berkeley are suburbs. New York City is principal city while Newark and White Plains or suburbs in suburban cities, rents have rebounded quickly and said 0.5% higher today than they did at the start of the year. Meanwhile, rents and principal cities have steadily and are 8.3% lower today than in January in 27 of the nation’s 30 largest Metro areas. Principal cities are experiencing faster rent drops than their surrounding suburbs for a deeper dive on this urban-suburban divide or to explore rent trends within a specific Metro area.

Andrew Schultz: (09:12)
You can definitely head over to apartment list and they have a suburban rent breakout available for you to take a look at, in conclusion, since the start of the COVID-19 pandemic, we have seen shelter in place ordinances, put a halt to a normal moving activity combined with staggering job losses. As huge segments of the economy were put on pause. Although some laid off and furloughed workers have been brought back, the unemployment rate remained staggeringly high and the economic recovery is likely slow and gradual. The heightened financial hardship has led to an increase in downgrade moves. As many Americans are forced to look for more affordable housing options. At the same time, there is evidence that a growing embrace that remote work will outlast a pandemic, which could significantly alter the housing choices of workers in these flexible arrangements amid this backdrop. We’re seeing a sharp drop off in demand for expensive rental units in cities like San Francisco and New York, while more affordable mid-size cities, such as Boise are continuing to.

Andrew Schultz: (10:07)
I won’t spend a ton of time commenting on this article because I think the article really does do a good job of standing on its own two legs. The research is data-driven. The research appears to be accurate as near as I can tell, um, based on what I’m seeing here in the article, as well as what I’m experiencing in the market. And I would say that the article is accurate based on that because we are seeing, and I think I’ve mentioned this before in a couple of other episodes, we are seeing a move from larger metros into smaller metros, even here in New York. I know it personally here with our company, we’ve actually had one of our clients decide now that they’re able to work remotely and don’t have to stay in the Manhattan region that they’re not going to stay in Manhattan any longer.

Andrew Schultz: (10:46)
They’ve made the move into the smaller metros. You know, in this instance, they moved to Buffalo because this is where they had some at rental property decided to live in one of their vacant apartments and take over the management and manage their property from here. And I think that it makes a lot of sense if you’re in a situation where you can remotely work, why on earth would you earn and spend a New York City dollars when you can earn a New York city dollars and spend in Buffalo dollars? Because there is a drastic difference in the cost of living between Buffalo, New York and New York City. It’s just a fact of life. So I think that you’ll see a lot of this happening over the next probably year or so, as things continue to straighten around with the pandemic and things of that nature. Um, it is interesting. I’d actually covered an article in Oscar property manager. My other show that we run on our Facebook page, and one of the things that was talked about in that article, it was actually published by, uh, CVRE, Coldwell banker, Richard Ellis. They had talked about, uh, they think that there’s going to be a return of about 80% of the traffic back into offices. They don’t think that remote work is going to be a forever thing, or at least not in the capacity that we’re seeing it now. I’m not so sure.

Andrew Schultz: (11:54)
I agree with that. I think that remote work is here to stay in a very large way. Um, even if it’s in a little bit different capacity where you don’t have to go into the office every day, but you have to go in maybe one or two days a week or one or two days a month. And I think that that’s more of what you’re going to see is fewer and fewer in-person meetings and more and more push to the remote meetings. And I think that it does help both people and companies in terms of reduced expenses. And I think that that’ll be one of the biggest driving factors, not just the fact that they don’t have to physically be in the office anymore.

Voice Over: (12:26)
Water cooler wisdom, expert advice from real estate pros.

Andrew Schultz: (12:34)
This week’s water cooler wisdom comes to us from the Rent Prep for Landlords Facebook group. Don’t forget to check that out. If you haven’t already, this is a question about a mailbox for tenants in a shared home. We rent our basement and it’s a totally separate unit from our upstairs home, of course, but their mail comes through our mail slot, or it gets dropped on our front porch. We have a little mailbox installed on the wall of the stairs, going down to their apartment and we sort the mail and put theirs in there each day. We’ve never had an issue, but I fear that it’s a weak point. What happens if they desperately need their mail while we’re on vacation, or what happens when they claim that we didn’t get a package to them last week, an Amazon mailer envelope arrived for them. That was completely slashed open.

Andrew Schultz: (13:13)
I could see the contents and I texted our tenant to told her that it had arrived in that condition. Uh, but I wouldn’t blame her for being suspicious. What others do in this situation. Any thoughts? So my first thought on this is, is this truly a legal second unit in your home? And the reason I say that is because I think that might be part of the problem here. I get the impression that this might be some sort of an in-law unit or something like that that’s been built out in the basement and that it may not be an actual true duplex per the tax records, whether or not that will create an issue for you. I have no idea. I’m not going to jump into all that, but I think that there is a method that you can use to get in separate address squared away for the second unit.

Andrew Schultz: (13:55)
So the first thing you’re going to want to do is go talk to your local post office, talk to the postmaster there and ask them what the process is or see if that’s something that they can handle locally from that post office. Sometimes they can. Uh, and sometimes it’s as simple as the postmaster talks to the, you know, the carrier for that route and says, okay, there’s two actual units at this address in a and a be an upper and a lower whatever the case may be. They’re going to put two mailboxes up, make sure that you’re delivering mail to two separate units there. And sometimes that’s all you need more than likely what’s going to happen is they’re going to refer you to the address management system office. And that is the office within the post office that handles all new address designations and change of address designations and things of that nature.

Andrew Schultz: (14:40)
So if you’re adding a second unit onto an address, they would probably need to make an update in their system to show that that’s no longer a single family, but all actually a multifamily that has more than one official mailing address. And again, they’ll, they’ll tell you what your designators are going to be, whether it’s, you know, front and rear upper lower a and B um, you know, whole address and half address, whatever the case may be. They’ll tell you exactly what it is that you need to do to get your addresses squared away so that your tenants can actually have their own separate mailbox. Two other tips that I have for you is definitely make sure that you have separate mailboxes, one for your unit and one for the second unit. And the other thing that I would mention is make sure that you have the names of the recipients clearly labeled inside the mailbox.

Andrew Schultz: (15:25)
So that if there’s any question as to, who’s actually supposed to be receiving mail in what mailbox, it’s very easy for the postal carrier to sort that out. I know that we actually have a lot of issues, especially around college turnover time. When you have students moving out of apartments and new students moving into apartments, the post office tends to get very, very confused on where people have gone and where people have moved because college kids aren’t necessarily the greatest at doing a change of address form. So it gets to the point where if a name’s not on a mailbox, sometimes the postal carrier just won’t deliver the piece of mail there because they’re not sure if the person actually resides at that address or not so good, bad, or indifferent, make sure that you’re putting your names on mailboxes as well. You know, maybe a first initial and a last name or something like that for privacy sake. But that would probably be the recommendation that I would have there in order for you to get these mailboxes split apart. So you just don’t have to deal with this issue going into the future

Voice Over: (16:22)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (16:31)
Our landlord forum this week comes to us via the landlording subreddit. This is a question with regards to how to handle tenant caused damages. Uh, the tenant broke the ceiling fan and said that he would be withholding rent. If it didn’t get fixed within a month saying that the lights went bad and then he broke the light kit and possibly the fan as well. The contractor went in to replace the ceiling fan with a flush mount light, and the tenant refused to allow him to do so. And emailed me saying that the light is cheesy and that he be getting a reduced value for his rent. If the fan was replaced with just a light, I live 5,000 miles away from the property, and I’m unable to view or handle this issue in person. What would you do? So the first question I would have here is do you have any sort of a damages clause in your lease that allows you to back bill a tenant for damages?

Andrew Schultz: (17:18)
Because in my opinion, the tenant has caused damage to the unit as a result of their actions in disassembling this light or breaking this light fixture or whatever the case may be. There’s a big difference between a tenant notifying you that, Hey, there’s a problem with this light fixture it’s not working and a completely different situation when the tenant destroys the light fixture because the light fixtures not working and they never actually called in or, um, made any sort of a notification that there was a repair that was necessary. So it doesn’t sound to me like this was ever actually reported to you by the tenant prior to this becoming an issue where now you’re arguing over the light fixture that has to be replaced. And honestly, it sounds to me like this is probably tenant caused damage. That’s going to wind up being back billed to the tenant.

Andrew Schultz: (18:00)
So that would be my first question. My first two questions, I guess, are number one. Do you have any sort of a clause in your lease that allows you to back bill things to your tenant? If not, make sure you add one before you sign your next lease. And number two was the issue ever reported to you and as this something that’s been going on for a long period of time where the tenant has, you know, an actual right to be annoyed, um, or is this a situation where you’re just finding out about it and the tenants already taken it upon themselves to, uh, let’s say, let’s say make a repair or attempt to make a repair to the existing light fixture, which is now broken. So all of that being said, you’re in a situation now where you have a tenant screaming that they’re not going to pay rent until the light fixture is replaced.

Andrew Schultz: (18:39)
Typically in a situation like this, I would probably lean towards the same way that this landlord is leaning and put in a normal flush-mount light as opposed to a fan because obviously, this tenant is causing damage to the unit. And the fan is obviously just one more thing for them to break. However, in this particular instance with this tenant being as difficult as he is and screaming about a reduced value for a fan versus I’m sorry, for a flush Mount light versus a fan, honestly, I would probably just throw the ceiling fan in there and just move on with my life. The difference in cost between a flush Mount light for maybe 20 bucks at home Depot and a low-end ceiling fan for maybe a hundred to 150 bucks at home Depot, sometimes it’s worth just throwing the cash at the issue to make the problem go away.

Andrew Schultz: (19:25)
And honestly, I think that that’s exactly what’s going to wind up happening here. The tenant is going to get their way they’re going to wind up with the ceiling fan replaced. Despite the fact that the better move is to put a flush Mount ceiling light in there, as opposed to a ceiling fan in a situation like this, where you’ve got a tenant screaming about such a minute amount of money. Honestly, I would just spend the money and move on with my life so that I didn’t have to continue to worry about it. Especially given the fact that you’re 5,000 miles away and you certainly have better things to be worrying about, especially this time of year. All of that being said, you can bet your broken ceiling fan, that I’m going to be back billing this to the tenant. I mean, it’s pretty clear to me that the tenant caused more damage to this light fixture.

Andrew Schultz: (20:02)
It’s very possible that this is something that could have been fixed before the tenant decided to take it upon themselves to break it, disassemble it, whatever the case is, I would be back billing this to the tenant. They took what could have been a very routine maintenance type issue and turned it into a repair. So at the end of the day, I would probably be back billing this to the tenant and not for nothing. Since this is a tenant caused damage issue, you could actually approach the tenant and say, okay, you’re paying for this repair because you were the one who caused the damage. Now you have the option of the flush Mount light, or you have the option of the ceiling fan and give them the prices for the two and let them make the decision because ultimately if it’s going to be back billed to them anyway, maybe they’ll decide to change their tune a little bit.

Andrew Schultz: (20:43)
Maybe that reduced value is not so important to them if they have to pay for it out of pocket. So maybe that’s the tactic to use in this instance, approach the tenant on the front end and say, look, this is a tenant caused issue. You’re going to be responsible for this caused. Um, what do you want the bigger cost or do you want the little cost? How important is this reduced value to you really at the end of the day and leave the tenant, you know, leave them all on the tenants’ court, let them make the decision as to what route they want to go, but make sure that you are the one coordinating and handling the work? Don’t let the tenant continue to damage your unit, send in a licensed and insured contractor, get the work done properly, and move on with your day.

Andrew Schultz: (21:21)
Well, everyone that pretty much wraps up the year from the Rent Prep for Landlords podcast. Thank you all so much for your continued support. During 2020, it’s really meant the world to everyone over at Ren prep, as well as myself. We hope that you’ve been able to draw some knowledge from the podcast and we’re super excited for what’s coming up in 2021, including the launch of the Rent Prep interview series. We’re going to be interviewing industry professionals from around the country and even looking internationally to see what’s happening outside of the United States. We hope that you all continue to have a safe and healthy holiday season and new year. And we look forward to speaking to you again in 2021. If you’re looking to get in contact with me, I can be reached over at what’s drew up to.com from there, you’ll find links to everything going on with me over at owned Buffalo, as well as other projects we’re currently working on.

Andrew Schultz: (22:09)
There’s also a contact form over there where you could send me a message directly. If you’re looking for top tier tenant screening services, head on over to rentprep.com, there are multiple products to choose from including a tenant paid option. And if you’re over 50 doors, don’t forget to ask about the enterprise-level pricing. I’ve been an enterprise user of Rent Prep for years now, and it’s definitely changed the way that we screen our tenants. Check that out today, over at redprep.com. Again, thank you all so much for listening. We’ll be back next Thursday with an all new episode that you won’t want to miss until then. I’m Andrew Schultz with ownedbuffalo.com for rentprep.com and from all of us to all of you, have a safe and happy new year.