The rental market in Silicon Valley is finally softening after 5 straight years of dramatic growth. In the past 45 days, rents have declined as much as 15% in some markets. This correction may represent the stabilization of the market, which could not have sustained double digit annual growth indefinitely.
Scott Safadi believes that rent growth along the Bay Area Peninsula should slow down in the coming 12 months, however, he does not expect a reduction due to strong job growth in the Western Bay Area. Typical applicants today have more than ample income to support the current rents. Those working lower paying jobs are being forced to the South Bay and East Bay in search of lower rents.
There are few things I’d rather see than interest rates staying nice and low. I wonder if employment is the primary metric at this point, since inflation doesn’t seem to be a major issue. If employment is the metric, it could be a while before we’re seeing anything near full employment in middle America. Does that mean we’ve got low rates for years to come?
If there is one reason not to accept an applicant for your rental house or apartment, it is that they have had a landlord/tenant conflict in the past, namely an eviction, judgement, or unpaid balance to a previous landlord. There is a small subset who are willing to go all the way down the path to eviction – that’s not the subset you want to rent to.
Scott Safadi couldn’t be more excited to see all of this rain and snow coming to Northern California. Think of all the great things that it brings:
1. Snowpack and rain to work towards alleviation of the drought.
2. Snowpack to ski and snowboard on!
3. Lower water bills since we wont need to irrigate our lawns and gardens.
Bring on the rain!
Scott Safadi would like to draw people’s attention to the seasonal fluctuations that exist in the rental market. Between the months of October and February, prospective renters can expect to find more inventory, better deals, and often, even promotions, which are unheard of during the peak summer months.
Scott Safadi judges the strength of then market in two ways. The first is by rental growth, which primarily occurs over the course of the peak season, as landlords are lucky to even maintain their peak September rents through the course of the winter months. The second way that Scott Safadi judges the strength of the rental market is by the extremity of the slowdown during the winter months. There are always people looking for apartments in the summer months, regardless of the market conditions, however, the margins are on what happens during the slow season.
Scott Safadi believes that a robust winter rental market is a sign of a stable and vibrant rental market. Scott Safadi would rather see a strong winter market than double digit growth over the summer months, as one is an indicator of a potential boom bust situation, while the other represents stability and consistency, something that all landlords should want.
In closing, Scott Safadi believes that sometimes it is better to monitor exactly how bad the bad times are rather than just focusing on how good the good times are. In the context of an economy that has shown itself quite susceptible to huge booms and even bigger busts, it’s good to measure the baseline, which in our world is the winter rental season.
So far, the 2014 slow season has shown itself to be reasonably robust, a very good sign.
Scott Safadi has managed apartments throughout the California Bay Area for over a decade. He exclusively manages properties with 16 or more units.
Scott Safadi has noticed that the Ivy League and other pricey institutions have come under increased scrutiny as a poor investment. The argument is that the more costly institutions do not increase your odds of producing more wealth over the course of ones life. Instead, graduates are simply left with a higher debt load and an education that could be impractical in the professional world, considering the liberal arts focus of most Ivy League institutions.
Scott Safadi believes that this argument misses the point. College is not all about return on your investment. It is not a means to an end. Instead, College is valuable in and of itself. The end is one of personal growth, surrounded by the best and brightest. There is much to be said about being average amongst a sea of superstars, as opposed to being the smartest kid in every classroom. It is a humbling experience and one that promotes hard work.
Scott Safadi believes that if one demands that college be a means to an end, one should consider that you will be part of a large network of highly educated peers for the rest of your life. This can prove beneficially socially and in your career. Nevertheless, Scott Safadi believes that college should be seen as a special experience and one should attend the most challenging institution that will take them.