What would you say is causing that decrease? I mean there are you know it’s an election year things get crazy when you have you know very polarizing topics come up we’ve had some historic inflation happening you know San Diego is just marked as the most expensive city to live in and uh it just makes it really hard for people to be able to afford living here you know housing is one of those largest expenses for people right? right and you’ll actually see you know people making choices based on that economic indicator as opposed to just you know the lifestyle choices I’m seeing more people make those choices economically as opposed to uh “hey I want to go live at the beach and you know go surfing every morning” you know people are starting to change their mind about that has that.

Has that been difficult for your clients? yeah I mean we obviously have a very vast portfolio of different types of properties that we’re managing and certain types like I should say really low-end Apartments Class C Class D type properties where it’s not super desirable maybe there aren’t so many amenities, those prices are being depressed really hard right now and and pulling the market down at the bottom but at the same time I’m seeing you know some of those houses that are really luxury nice you know you I’d actually probably say condos and town homes that are built more lifestyle like you know having that gym having that pool having the spa having the mixed use shopping that kind of stuff people are being drawn towards those communities and are willing to pay a little bit more or even get roommates to be able to afford paying a little bit more so as to have that lifestyle in in addition to cutting their cost on their rent.

Speaking of different uh property types. What neighborhoods in San Diego have the highest demand for rental properties right now? In my experience and and I don’t know if I have great data backing this up right now other than my experience and how we’ve been managing our properties I’m seeing properties on The Fringe you know during Covid everybody was moving out to The Fringe you work from home you know cheaper lifestyle right get getting away from the cities I’m actually seeing those rentals kind of sit for longer you know those parts in the outskirts like out you know east side of elone Lakeside Santi Ramona Escondido these places that are a little on the on the Inland side are slowing down a lot and we’re seeing those those prices falling more in those areas as people gravitate more towards those Center convenient areas because you know it’s so expensive right now they’re thinking well if I have to spend so much in rent I need to I need to recoup my expenses somewhere else so they try to make sure that they’re close and you know limiting those commute times

You talked about communities On The Fringe taking a little bit longer to rent uh San Diego is a whole could you speak to our vacancy times right now? yeah vacancy times are skyrocketing right I was just looking on Zillow today and average times are over 45 days from move out to move in these people you know these units are sitting vacant so long and those vacancy rates are really killing the return on investment for for property owners we we are really trying to price things aggressively so as to stand out in the competition to reduce that vacancy number right for every $100 you know you’re trying to increase your rent that’s $1,200 for the year but if you have a $3,000 rental and it sits for an extra 4 weeks you just lost you know $2,800 when you’re trying to just make it $1,200 more so you’re really at negative 600 in that $1,600 Less on your return on investment as if you were going to go be competitive up front you have to really know what’s on the market that day and be able to judge what you have coming in for interest on those leads you know on the applications that you’re getting and on the quality of person that you’re actually attracting to your units.

Yeah so seems like there’s a kind of a battle between the Market’s already dropping and then longer vacancy times it’s probably making it really difficult for for owners right now yeah well and you have owners that talk to somebody and their neighbor last year rented their house out for four grand and now they think they’re going to get 4 grand but that market is showing that you know it’s down $200 $250 for that housing type in that neighborhood right? if you’re not getting the interest there’s no reason to mark yourself against that you really have to mark yourself against current market conditions and make decisions based on where you are at currently not what Jim and Susie did down the down the street

Any tips for for property managers any tips on how to have those kind of difficult conversations with clients? I think elevating it and elevating the experience for the property owner by saying you know here’s why I am the expert right I’m going to look at that year-over-year return I can look at saying “hey we’re going to keep keep up with our rent increases if the market is continuing to go up if it corrects we’re going to be able to take advantage of those opportunities by keeping our finger on the pulse of the market as opposed to just setting the rent and forgetting it and not even thinking about it in a year and then you know a property manager forgets to do the rent increase and now all of a sudden you’re 16 18 months down the road and you never got the return on your investment that you were hoping for so having an expert property manager that has that process is exactly what you’re going to look for

What are your predictions for rental price trends moving forward say next 1 3 5 years? oh hard to say like like I said it’s a election year and we’ve had some really historic inflation rate changes over the past few years um so it’s been really hard to keep up and and know exactly what’s going to happen and frankly if I knew exactly what would happen I probably wouldn’t be a property management company owner I would probably be off making millions and millions of dollars doing something else however, what I expect to see is I I expect us to be plateauing here for a while with this cool down prices are coming back to a level where people can afford to live and and work back towards you know that good foundation of an economy right so as we as we see the this cool down happen in Plateau for a little while obviously right now it’s October 2024 right we’re going to have our winter months which are classically slower all the way through February so I anticipate currently in the next 6 months to see you know us come out of that Plateau at the end of the at the end of February and then next year in the summer hopefully we see things that are accelerating our Market the demand is back because right now people are trying to to not move that’s shown by how many vacancies are on the market and how long things are taking to rent it’s not because people don’t need somewhere to live because we all hear about a housing crisis all the time it’s just people can’t afford to live there so we have to watch that market find find its even Keel

I know interest rate drops are on everyone’s Minds right now uh when we see these drops happen uh how does that affect rental price? uh and then do we see more renters uh purchasing homes? Yeah well I mean on the real estate market side of things you see people get stuck in in a mortgage or stuck in a house even though they might want to move or transition right and we’ve seen historically low transactions happening on the real estate market right by that not changing you’re not seeing these rentals get created or taken away or opportunities for first time home buyers right as these interest rates change I think you’ll see those transactions go up as as rates drop but you’ll also have people who are able to refinance their house and be able to take some money out maybe they do want to buy a second property or maybe they want to build that Adu and now with interest rates falling that money is more affordable and accessible for them and it will make a return for that investor and provide housing for the renter the other side of things is that you can also see some properties are already underwater and landlords are not making money off of their rental on a cash flow basis month over month and as finances on the on the property as they have opportunities to refinance or get better rates or you know make those transitions it should allow those investors to stabilize as well

All right Tommy well thanks for joining us uh for this San Diego market update hoping to hear more in the future. Yeah absolutely happy to share my insights. [Music]