As the seasons change, typically the Placer County and Nevada County Residential Rental markets change too. Summer is usually our busiest time of the year as property managers and landlords. It is great weather to move in, kids are out of school, and leases typically end in the summer months so an opportunity awaits for folks eager to go onto their next adventure.
However, this summer was different. People did not move. An astonishing 98% of our leases were renewed this summer. People are not buying homes like they were six months ago. People are staying put for the time being.
Why? Because people are waiting to see how critical issues will play out. An uncertain economy with inflation on goods & services, higher interests rates than what we were used to in 2021, world crisis such as the Russia/Ukraine war, and rapid political changes have all greatly influenced people’s decision to stay put. When there is heightened emotions and people feel uncertain they do not make big changes. Knowing they have a home to rest their head at night brings a sense of comfort.
How does this stagnant rental market affect rental prices? They are slowly decreasing but they are still higher than they were pre-pandemic. As we all know, the market determines price. When we had a big influx of city folks moving here during the pandemic that significantly increased residential rental prices. The rental market also works with supply and demand. So, although people are not moving at the fast pace like they were in 2021, the low supply of available rentals is keeping the market prices from dropping significantly.
There is, what I like to call, a “sweet spot” in the rental market which is the price that determines how quickly a rental property will rent. Pre-pandemic that price for Nevada County was $1800. Anything at or below this price would rent quickly (within 1-2 weeks). Anything above that price would take a bit more time (2-4 weeks). Today, that sweet spot is more around $2200 for Nevada County. For Placer County it was $2200 and is now $2600. We are not seeing properties “fly off the shelf” at or below $2200 and $2600 but they do generate more interest simply because we have a greater pool of people in our communities that can afford those prices.
Investment property owners have not yet recognized this change in the market. Because of this, the majority still believe the can generate an “above market” price for their property. When we educate them on the market conditions and present a realistic price point they cringe. They often times do not take our advice and are adamant about listing high (above market) to start. However, when the property sits and generates very little activity over a 1-2 week period they begin to understand that the high price is no longer accepted in today’s market. We reduce it, then the property rents.
What does this mean for residents looking to rent in Placer County and Nevada County? Understand that the market always determines the price. It can be frustrating to tenants to see such high prices posted on social media outlets and property manager’s websites. Some even go as far as to negatively comment on social media. But, it is a good reminder to know that what fellow tenants are willing to pay for a rental property in Placer County and Nevada County is ultimately what determines price, not the property owner, landlord, or property manager, as some tenants believe.
Today, we are still living in a very healthy real estate economy in Placer County and Nevada County. Leases being renewed means people are enjoying living here and are spending their money here. Low inventory doesn’t always mean higher prices. In today’s market it simply means people are not moving. We have adjusted slightly down from pandemic times which allows more people in our community the opportunity to afford living here.
Remember that the real estate market is cyclical and the natural ups and downs are a sign of a healthy economy. Through time, real estate appreciates and has proven to be a good investment. The key is to understand how to take advantage of any real estate market in order to be successful.
Amelia Barrett is the President and Broker of Barrett Property Management, Inc. and Barrett & Associates. She can be reached via email at amelia@barrettpm.com or by calling 530.470.3272.
