Sonoma County housing rental market cools during usual hot summer season
Last summer with the rental market still reeling from the 2017 North Bay wildfires, the three-bedroom home with contemporary amenities in the southeast Santa Rosa Kawana Springs neighborhood easily would have fetched the owner’s asking price of $3,600 a month.
Today, the owner of the handsome, 1,639-square-foot home had to twice reduce the rent he was asking before landing a tenant who would sign a lease for $3,200 a month, said property manager Jenny Rihl of DeDe’s Rentals and Property Management.
“Ultimately, the owner doesn’t decide the value of their home and neither do I,” Rihl said. “It’s what people are willing to pay, and the market that decides. And people are willing to pay $3,200” for that Kawana Springs house.
Summertime usually is the high point for rental prices in Sonoma County, then the market tends to soften as the weather cools in the fall and through the final few months of the year. This summer, though, and over the past 12 months, the housing rental market here has significantly retreated. Property owners have resorted to something virtually unheard of since the 2017 fires - price reductions for apartments and rental houses to lure tenants.
The rent reductions haven’t made Sonoma County suddenly much more affordable, but they are a welcomed new trend in a region upended by the fires, which worsened the local housing affordability crisis. Although there are many apartment developments in the pipeline, particularly in Santa Rosa, there remains a small supply of new rental apartments with modern amenities despite the price deflation.
According to a recent report by the internet residential rental listing service RENTCafé, apartment prices in the nine-county Bay Area, and across the country, are sluggish. In the Bay Area, only three of the 44 cities analyzed saw month-over-month rent increases more than 1% in July.
Of these 44 Bay Area communities, two - Santa Rosa and Rohnert Park - showed year-over-year rent declines. In July, the average monthly apartment rent in Santa Rosa was $1,971, an annual drop of $32. Rohnert Park, with an average monthly rent of $1,967, showed a year-over-year decline of $13.
Ethan Brown, program manager at the Sonoma County Economic Development Board, said housing rent declines should help provide stability and additional disposable income for renters countywide.
Declining rents, he said, are generally a good thing since rental prices have for almost two years outpaced wages and made it more difficult for residents to remain in the region and for local employers to recruit and retain qualified workers.
But Brown said a potential downside is that long-term softness in the housing rental market could hinder investments in local housing projects.
Keith Becker, owner of DeDe’s Rentals, said he has had to make several price cuts this summer for property owners he represents. June, July and August are usually “the top of the market,” he said of housing rentals.
“During the summer kids are out of school, weather is better for moving, there’s no holiday season. … We see this cycle year over year,” Becker said. “If we have vacancies now, we want to get them (rented) before it starts getting cooler.”
Of the 25 rental properties his property management company listed for the first time in July, prices have been reduced on three of them because they were not generating enough interest.
“None of these reductions are huge,” he said. “This is not a fire sale, but the fact is it’s adjusting the dials to find the sweet spot.”
Becker, whose staff tracks price adjustments among other local property management companies, said his competitors are reducing monthly rents, too. The market is leveling off, he said.
“Left to its own devices, the market is increasing 3%, 5%, if that,” he said, calling it a leveling after the fire-induced rent inflation.
Becker said the local rental market is about to get another jolt as more rental properties are listed in Santa Rosa’s Coffey Park neighborhood. Some of these, he said, are likely to fetch monthly rents of about $2,750.
That will likely force owners of similarly priced older homes in other parts of the city to reduce their rents.
“There is likely to be a wholesale reassessment of rent values,” Becker said.
Coffey Park used to be 40% home rentals, he said. Even if only 20% remain rentals after the rebuilding is completed, the asking price of rental homes citywide could be affected, Becker said.
“If we’re renting new houses in Coffey Park for $2,650, then a house that is 1970s- or 1980s-era is hard-pressed to also be worth the same price,” he said. “Unless, the owner is spending a significant amount to put in new countertops, replace light fixtures, to make it desirable for renters in 2019.”
At the Coddingtown Mall Apartments, manager Harry Brown said monthly rental prices have been mostly unchanged. Brown said occupancy is about 98%, but empty units are staying vacant longer.
“It’s getting soft,” Brown said of the rental market. “It’s getting harder for us to fill our units.”
Dale Suwannurak, the owner of the Kawana Springs rental home, said he had a hunch $3,600 was asking too much given the rental market’s downward trend. Suwannurak, who owns a couple of restaurants in Santa Rosa including SEA Noodle Bar, said the house was built in 2016 and has a lot of features that deserve a higher price: hardwood floors, marble countertops and new appliances.
At $3,200, Suwannurak is taking a loss of $200 below his monthly mortgage payment on the house he views as a long-term investment property.
“It’s hard to find tenants,” he said. “It would be nice to get a higher price … but if I have a good tenant and they will be able to keep the house clean and nice, I wouldn’t mind at all taking a little bit of loss.”