Rent Drops fourth month in a row
I am seeing reports of rents dropping everywhere! Usually when trends like this happen it doesn’t really affect California however, both San Jose and San Diego have been the first counties to see drops in rent last year in the fall. More recently, I have seen Riverside now added to these lists.
How does rent effect the housing market?
Most homes are owned by LLC’s or buy individuals that own multiple homes and use those homes as rental income. When rent prices drop rentals become less profitable. If you invest $600,000 cash (average home price in LA County) in a high yield savings account averaging 4% return could be up about $2,000 per month. That is a little less than rental return, but you now have no maintenance costs or headaches from problem renters.
Even though wages have seen some growth, they are still so low many cannot afford the steep prices, which is also why we are seeing a rise in multi-generational living. Bottom line, we have been living in an unsustainable market for far too long and what goes up eventually comes down that’s nature bro.