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Tony's Newsletter - January 2010


Rental Market

Below are some graphs from the SW Idaho Chapter of National Association of Residential Property Managers’ 4th quarter vacancy survey results. Immediately, I noticed that the sample size was much smaller than usual and I was told that fewer property managers participated and reported that they were too busy to complete the survey. It gave me some relief knowing that I was not the only property manager to find December, which historically is a very slow month, to be extremely busy due to vacating tenants.


In 2007, Boise was left with tons of unoccupied homes as the investing and buying frenzy ended. With the sales market weakening, the inventory of single family home rentals increased. The inventory far outweighed the demand. According to the survey, the vacancy rate for single family homes ended in 2009 around 5%. I believe that the low prices of home sales and the government incentives helping first time home buyers (our tenants) swallowed a good portion of the inventory. Additionally, the hundreds of people losing their homes each week have also become renters. If that is the case, we may actually see single family home rentals prices increase in 2010.
According to the NARPM survey (1-12 units) the vacancy rate for multi family continues to climb and the monthly rental prices continue to drop. Why? The economy. When I started doing property management in the early 1990’s I always felt that the business was protected against a recession. "If you can’t afford to buy a home, you’ll have to rent." Well as we all saw this past year, that obviously was not the case in Boise. Boise built to meet the demand of the investor. The investors demand began to slow in the 4th quarter of 2006, and come mid 2007, it was apparent the craze was over. So we were left with a lot of inventory. Then the economy started kicking in. Tenants were losing their jobs or getting their hours reduced, so they moved back in with mom and dad or consolidated households. Then with falling home prices and incentives for the first time home buyers kicked in and those tenants who still had good jobs, took advantage of the times and left the rental market to become a home owner. So we remain with high inventory levels with even a lower demand.

Sales Market:
If you wanted to buy a million dollar home in Eagle, they are going for as low as 35 cents on the dollar. Four plexes values continue to drop and have me convinced that they are the best buys out there. Conventional financing still has attractive interest rates and the properties are cash flowing with the minimum amount down. To me, its time to buy these.

Why on earth would I try to predict the future on real estate that has been so volatile in recent years? We all knew that at some point, the bubble would burst, or maybe we thought it would just slowly deflate. But that is not what bubbles do. Well I am making these predictions because everyone keeps asking me? Is now a good time to buy? Are rents going to recover? Are vacancies going to continue to climb? So, not having a clue on what the government will do next to stimulate our economy, here we go. (it will be interesting to see how I did a year from now)

Single family homes
 - Rental vacancy rates become stable and we see a slight increase in rents
 - Sales prices continue drop until distress sales taper off. Large homes continue to offer the biggest bang for your buck.

Multi-family (2-12 units)
-Rental vacancy rates hang in that 10% range and rents stabilize, although that stable rent amount is probably going to be less than what most desire.

Sales prices continue to drop but level off. I do not believe that we will know that we hit bottom, until months after we have done so. But I think that bottom will be hit this year. These smaller muti-family buildings will continue to be awesome buys.

Tony Drost
Property Management

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