Publication Date: Friday, October 10, 2008
Buy, lease or rent?
Competition is stiff for homes on the rental market
If homeowners aren't putting their houses on the market, what are they doing with them?
Some appear to be renting them out, notes Leon Leong, a Realtor with Cashin Company, Palo Alto, who has been keeping close tabs on home rents since early 2004.
"It really varies with the economic cycle. Talking with people who've read my newsletter, it kind of peaked in 2000, and dropped 35 to 40 percent by 2004. That was about the bottom, and it's been driving up again, as the local economy recovers," Leong said.
Leong produces a newsletter where he graphs changes in rental prices each month.
In his July newsletter, Leong counted 118 single-family homes and condominiums offered, with the median rent for a two-bedroom home at $2,700, with two-thirds above $2,450. A three-bedroom home went for $3,600 and a four-bedroom for $6,500.
By his September newsletter, Leong found 132 homes available, with prices up almost across the board: $3,000 for a two-bedroom house, $3,800 for a three-bedroom, $5,690 for a four-bedroom. (That compares to rents for a two-bedroom, two-bath apartment at the end of June 2008 at $2,658 or a three-bedroom, two-bath unit for $3,757, according to RealFacts, a Novato-based research firm that collects data on rentals and occupancy.)
Leong concluded that inventory is higher at the end of summer, particularly at the higher rental price points.
"Quite a few investors bought rental units in the new condo developments in South Palo Alto," he noted, adding that he counted 20 units in Arbor Real advertised for rent this year.
"Some homes that were for sale were overpriced and didn't sell; the owners took them off the market and put them up for rent waiting for the market to appreciate more," he added.
Looking back to 2003-04, Leong points to "quite a few people who decided to buy versus rent, which created more vacancies as well."
He's even encountered people who've decided to rent because their child didn't get into a neighborhood school. "Rather than drive across town, they'd tend to rent closer to the school where they could enroll their child," he said, adding that he's seen that phenomenon with elementary or high-school students, rather than middle-schoolers.
Rental trends tend to be seasonal as well, he said, with higher demand (rental prices) in summer. "We're going towards when demand is less, as we approach Thanksgiving and the holidays," he said.
According to data collected during the 2000 United States Census, 57.2 percent of the 26,048 housing units in Palo Alto are owner-occupied. That leaves nearly 11,000 rental units in town.
"Housing prices are still pretty expensive, so that favors people continuing to rent. It's anyone's guess how this economy will end up locally," he said.
Associate Editor Carol Blitzer can be e-mailed at email@example.com.