First Rate Property Management Blog

Parking Enforcement - The Good, The Bad, and The Boot

Arica Elordi - Tuesday, November 19, 2019

One of the most important amenities to many tenants is adequate parking at the apartment complex they are renting from. Many value having their parking lot enforced to keep unwanted visitors from parking in their spot. Hiring a vendor for this enforcement can help alleviate these concerns at some of the bigger complexes we manage.

There are various issues that have resulted in enforcing parking at certain complexes. These issues include but are not limited to:


  • Other people park in a resident’s assigned spot, causing a chain reaction of incorrect parking.
  • Insufficient guest parking so guests take up residents parking.
  • They own more vehicles than they are assigned, therefore taking up other residents parking.

Since we’ve started using Deep Six Parking Enforcement, we have had less parking issues that we have to handle, increase rentability of available units through offering this amenity, and keep parking limited to people on the rental agreement; this is especially helpful in downtown Boise during BSU games.

        Obviously, parking enforcement is strict and will sometimes upset tenants but Deep Six has been great about communicating the rules to avoid this from happening. If issues do arise, Deep Six will always take ownership and try to handle the conflict before it comes to FRPM. The residents who currently have parking enforcement feel safer knowing that all they have to do is make a phone call and the parking enforcement company will come directly to the property to assist. One of the greatest aspects of this service is that is completely free for investors and managers!

We have very clear policies detailed within our lease agreement that allows us to issue lease violations and enforce it when necessary. We have also seen decrease in vandalism at our properties and our residents have peace of mind knowing they parking lot is being surveyed. Deep Six Parking Enforcement even complies with city code, records, and documents to ensure they are running smoothly and fairly.





Is the Growth of Technology Contributing to the Diminishing Profits and Return on Relationships in t...

Tony Drost - Friday, November 15, 2019

First Rate Property Management posted a blog back in October including a summary on theState of the Property Management Industryreport that was published by Buildium and the National Association of Residential Managers.  This report was full of useful information, but we found three things to be the greatest take-aways.  They reported stats reflecting the diminishing profits in our industry; relationships are still the heart of property management; and billions of dollars are being invested in technology to support property management industries.


Before we discuss these three interesting traits, let's review where we started.  In the early 90s it was common for residential property managers to start the business as a side hustle to supplement their income and support the cliental in the real estate business.


These were ma and pa businesses that had low overhead and unless you count the fax and copy machine, they had zero technology. As the 90s went on, we purchased one of the very first Windows based property management software systems.  This was great because not only did it provide property management specific accounting, but the real advantage was that it integrated the relationships of the tenants, properties, property owners, and maintenance together.  This integration streamlined many of the processes.


Diminishing profits:

This new technology comes with a hefty price tag. Most of these systems do integrate all of these individual systems.  For example, a tenant can input a maintenance request on an integrated website and once reviewed by the property manager a single click of a button will notify the owner that work is being done, notify the vendor to complete the work once the system verifies the company has a valid worker's compensation and liability policy on hand, and inform the tenant that help is on its way. When the bill is received, very little input is needed and the system will pay the bill and post to the appropriate ledgers.


This might sound too good to pass up, but the pricing is expensive and there are several “add-ons” not included. The user almost always buys the basic package in addition to all of the add-ons. With a sophisticated system that seems to do it all, there is always, of course, technical support. This support is imperative to the success of this costly technology and that too, often comes at an additional price.  All of these systems are now cloud driven and are prescription fee based.  They can cost up to tens of thousands per year.  Perhaps one of the reasons profits are diminishing.


Locally- specifically within our own company- our profits have diminished.  This year, our profits are down by 46%. Rents have increase and so has our gross income. Some of our increased expenses certainly can be contributed to technology costs, but a majority is increased labor costs.  While the minimum wage has not wavered, the cost to employee quality people has grown to almost double the minimum wage in Idaho. We also provide our employees with health care and Simple IRAs, which also have increased, which in total, account for about 38% of our increased expenses.


Lastly, the third area of expense has been around maintenance.  Yes, either the tenant or the property owner is responsible for maintenance costs.  However, when mistakes are made, we often end up paying and this year happened to be a bad year. We can only hope to learn from these mistakes to minimize these expenses moving forward. This can mean more thorough training, reviewing our processes, and providing the appropriate feedback to our staff.


Relationships:

We know that the global growth of technology has threatened our ability to interact as humans. We also know that trust, credibility, and connection are all aspects of human relationships that impact our business precipitously. These three characteristics are all things that lack in technology. While technology and automation make our processes streamlined, are they really worth the money spent if we are losing our ability to build personal relationships with our clients and tenants?

In our recent focus on customer relations, we have found that a simple human touch can result in a better experience for the tenant, leading to higher tenant retention, resulting in less turnover expenses for our owners. The question remains; is this diminishing profit among property managers related to the diminishing ability to relate and interact with owners in a credible way? The cost of technology rises, companies are seeking ways to minimize human interaction, yet human interaction is what our clients and tenants are seeking.

Perhaps the solution is to find an automated software that balances efficiencies and stimulates human interaction. Is this something PM companies will more likely pay for?


Technology today:

Technological solutions continued to be developed in an effort to support the property management industry. It was slow to start, but has since grown exponentially, adjacent to the growth of global technology in all industries. This growth stimulated the billions of dollars being poured into it.  In most cases, this new technology came about as a single product. Here is a quick list of the more popular tech solutions:    Websites, Marketing, Marketing Syndication, Communication Management, Leasing, Automated Forms with Mail Merge, Online Maintenance, Inspections, Advanced and  Customizable Reporting and Accounting statements, Online Payments, ACH, Work Flow Management, Key Performance Indicators and other Business Metrics, Tenant Screening, Corporate Accounting, Online Tenant Applications, Portals for Owners and Tenants, Showing Coordination, Electronic Signatures, Mobile Applications, Cloud Based systems, VOIP, Contact Management Software, Texting, Ratio Utility Billing System, Virtual Tours, Floor Plan Generation, 3-D Modelling, Virtual Staging, Check Scanning, and Word Processing, and Automated Client Notifications.


As these programs began to roll out, each of these tech solutions were discreet or standalone.  So the PM would pay for each service and none of the systems collaborated for efficiency. Integration was needed to provide a centralized data location. The demand for an all-inclusive property management solution was born.



Written By:

Tony Drost - Chairman & Julie Tollifson - Leasing Manager  First Rate Property Mgmt. 

tony@frpmrentals.com; julie@frpmrentals.com

City Council Discussion - Capping Rental Application Fees

Julie Tollifson - Wednesday, October 30, 2019

As an owner, tenant, or landlord, it is important to be informed on the latest proposed cap on rental application fees and how it will affect you. Councilwoman, Lisa Sanchez, has proposed an ordinance to cap rental application fees at $30. On October 29th, 2019 the people of the city were allotted 3 minutes per individual to discuss their concerns and position. Here is what you need to know:

There are five points included in the proposed ordinance. 


1) Requires that the criteria on which an application will be judged must be disclosed in advance, along with the amount of the fee.

This is a common best practice among most Property Management companies and especially among those among the SW Idaho Chapter of the National Association for Residential Property Management. First Rate Property Management and many professional property managers support this section of the ordinance.

2) States those applications can only be taken and screened for units that will be available within a reasonable amount of time.


I believe this part of the ordinance was envisioned to keep prospective tenants from feeling pressured to move into an apartment as quickly as possible. In the property management industry, limiting the time those properties can be available, will result in an added pressure to tenants to find an available rental quickly, have their money quickly, and move in quickly. By limiting the amount of days that a property management company can advertise an upcoming available unit, the result would actually be the opposite of the intent. 

Once leases are signed, the next thing to do should always be to deactivate advertising. This is not only to minimize the cost for owners but to keep prospective tenants from unknowingly and inadvertently paying an application fee on an apartment that is actually no longer available. FRPM practices this ever time a tenant gets approved. I suggest other property managers or landlords follow suit.


3) Sets the amount that can be charged for a unit shall not exceed the actual cost of the screen process or $30, whichever is lower and a receipt detailing how the fee was used must be given. The applicant will also be given copies of any reports that were generated.

4) Stipulates that current tenant are not allowed to be charged on application fee to move to another unit under the same property owner

In order to find quality tenants, our screening criterion needs to be met. This is consistent across the board with every person that comes in to our office to apply. The Fair Housing Act requires that all property managers hold applicants to exact same standard throughout their businesses. The hard costs to acquire accurate information regarding credit, criminal, rental history, and income can range anywhere between $30 - 100. This range is determined by an abundance of factors including but not limited to state of the search, name changes of the applicant, and rental verifications. Hard costs do not include the cost of labor used to acquire the information, communicate with the tenant, and any other administrative processes that might be needed. 

According to Sanchez’s story, one of the things that inspired her to want to advocate for such an ordinance was when a friend of hers & long time tenant wanted to switch units and the property management company required her to re-apply. This was extremely disheartening for Sanchez to hear and she thought she’d take action to protect tenants in similar situations.

What Sanchez may have been unaware of when proposing this ordinance is the thinking behind the property management position. As a tenant in a multi-family dwelling, it is important to know that you are safe in your home and trust that your neighbors are not a threat to you or your family. The property management company, likely wanted to ensure that Sanchez’s friend had maintained reasonable financial responsibility and a clean criminal record since the time she first applied. 

We know how difficult it can be for low income families to find a place to rent, and we work hard to accommodate as many people as possible. Here at FRPM, when existing tenants are moving out and want to apply with another one of our available listings, we require them to pay and apply to ensure the safety of our owners and other tenants, but once they are approved we credit their application fees back to their account. This is a great benefit to the tenant, owner, and their neighbors. Whether it is the tenant, the owner, or the employee, we try to find a happy medium for everyone. Many property management companies, like FRPM, allow tenants to apply once and have their application be transferrable between any of their available properties. In the summertime FRPM can have as many as 100 properties available to choose from. This helps to alleviate some of the concern tenants have about their application fees. 

5) First violation is an infraction with a $100 fine. Second or subsequent violations are misdemeanors

During the public hearing, it seemed everyone agreed that this consequence was a bit too aggressive. 

                                                  

Julie Tollifson, Leasing Team Leader

First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about this blog.

SW Idaho NARPM 3rd Quarter Vacancy Report

Melissa Sharone - Tuesday, October 29, 2019

                The 3rd quarter Narpm vacancy survey is out and it shows that vacancy dropped quite a bit from the 2nd quarter but that is to be expected. It is the time of year when things slow down for the rental industry. The vacancy for Ada County is at 1.53% and Canyon County is at 1.99%. First Rate’s vacancy is currently at .88% and will continue to decrease as the winter gets closer. Rents are still holding strong but any vacancies now, especially single family homes, will likely need a slightly lower rent or a move in special to get filled as the activity decreases. First Rate’s strategy for single family homes that are vacant now is to sign a shorter term lease and then look to get them back to market rent come spring or early summer.   We anticipate the 4th quarter to be pretty quiet and then things will start to pick up after the first of the year towards the end of the 1st quarter of 2020. 

Read full report here: http://pm101700.pmws11.com/files/112.pdf 



Melissa Sharone

President, FRPM 

Melissa@frpmrentals.com

2019 State of the Property Management Industry Report

Tony Drost - Thursday, October 24, 2019

Mid October, a group of us from FRPM attended the National Association of Residential Property Managers (NARPM) Convention held in Phoenix.  One of the sessions I attended was the 2019 State of the Property Management Industry Report.  This report was a collaborative effort with NARPM and Buildium.  Buildium is a web-based property management solution.


The report examines how property manager's goals, challenges, and priorities have evolved and reveals their outlook for the year to come.  It lays a foundation for what the property manager's role and the property management industry will look like in the future.  The fusion of relationship-centered, technology-powered customer service with the on-the-ground industry expertise that technology can never replace.  The survey participants included property managers, association and community managers, tenants, and owners and investors from cities across the nation.  Below are some highlights from this 77 page report.  Over the next few blog posts, I will elaborate further on a few of these topics.


What the Property Managers are seeing:

1.  Urgency around finding operational efficiencies so that property managers can refocus their time.

2.  The importance of the "human factor" with the pivoting market.

3.  How the industry has refocused around "empathy-driven, service-oriented, tech-enabled" property management.

            4.  And most of all, how things are changing.


The industry is changing:

The Property Manager is in the middle and surrounded by two layers.  The first layer consists of the daily property management tasks, such as:  Screening tenants, marketing vacancies, maintenance of properties, generate financial reports, manage contractors, evict tenants, develop new business, inspect properties, manage clients, provide tenant insurance, write and execute leases, collect rent, and lease enforcement.


At the macro level, which is the 2nd layer, property manager are dealing with:  increase in cost of housing, legislative and regulation changes on the local, state, and national level, institutional investors, industry consolidation, shifting renter demographics by generation and geography, and technology versus the human element where tenants want the technology but miss the human element.


Macro Trends:

1.  Cost of Housing:

Housing prices remain at an all-time high

Costs related to managing housing are steadily increasing

Cap rates continue to compress

Owners are selling.  I assume this pertains to single family rentals.  The report shows that property managers are reporting a 7.2 point drop in growth and revenues are expected to drop 4 points in next 2 years.


2.  Legislation and Regulation:

            Upzoning and bans on single-family zoning

            Rent caps and rent stabilization

            Changing laws that impact the lead-to-lease cycle


In the words of a property manager in Colorado Spring, CO.  " Increased labor costs have made maintaining properties exponentially more expensive. It’s more and more difficult to market the concept of real estate investment and becoming a landlord to investors and property owners.


Increasingly restricted laws and ordinances will dissuade many rental property investors from trying to manage their own properties. Well-educated, technically trained, and highly ethical property managers will be in greater demand.”(Kansas City, MO)


3.  Industry Consolidation:

Institutional investors are becoming ‘national landlords’.  Their top 3 concerns are:

1.  43% Maintenance

2.  32% Filling Vacant Units

3.  31%  Finding a good property manager

 Investors are consolidating into larger conglomerates

 Developers are building “single family, built to rent” communities


4.  Tenant Demographics:  Large US metros are losing tenants due to domestic migration

Millennials and Gen Z are renting longer

40% of renters are 45 or older

Baby boomers are the fastest-growing renter segment


5. The Proptech Wave.  Investments in the space to provide technology to the industry are projected to be $26 billion dollars this year.


Tenant tech preferences in order of preference:

          Paying rent online.

          Communicating with manager via text/email

          Finding rentals online

          Online resident portals

          Filing a maintenance request online

          Signing documents online

          Smart home technology


Property managers use of tech in order of priority:

Accounting

Payments

Communications

Property Management Software

Listings

Document sharing

Website

Maintenance

Resident Portals

Client portals

Reporting

Social media

Inspections

Analytics

Smart home tech


Property Manager's future:

There will be a 10% increase in demand for professional property managers

  Since 2018, more people are renting versus owning

  Property managers play a critical, more consultative role as regulations complicate ownership.

  Relationships are still the heart of the property management, despite proptech hype

  Creating high-touch, personalized experiences are critical

The number of PMs entering the field is diminishing.  In 2017, 21% of the property management segment consisted of PMs with than 2 years' experience, compared to the 10.3% reported in 2019.


Tony Drost, 

Chairman, First Rate Property Mgmt. 

tony@frpmrentals.com

Treasure Valley Vacancy Trends - What FRPM Does to Combat Fall Market Decline

Julie Tollifson - Thursday, September 5, 2019

              Currently we have a vacancy rate of 2.48%. This is ever so slightly above last year’s vacancy rate of 2.47% at this time. This vacancy number depends on the time of the month. Of all of our vacant units 61% are already re-rented, we are just waiting on our vendors to complete the turnover. By September 13th, 2019, we expect vacancy rate to decrease to 1.12%

               We have noticed a drastic decline in the interest in all of our properties. This descent in interest is to be expected as property management is seasonal and is busiest throughout the summer. The five year running average of vacancy is 3.03%. In the past 5 years we have successfully increased our total number of units managed by about 33% while simultaneously maintaining a vacancy rate below the national average on a regular basis. 

               While we do have majority of our vacant units rented, we are still seeing a drastic decline in interest on the remaining 39% vacant units that have yet to get rented. In order to combat this distress in the market we have amplified our advertising to further grab the attention of the reader. We have begun implementing virtual tours so prospective tenants and FRPM showing agents can save the time of having to view the property and can go right into the application portion of the process.

               When the market declines we look at several different factors that might be affecting the vacancy rate. Our website software allows us to delve into, not only the clicks on the website, but the clicks on each specific property. We compare the statistics to that of previous months to identify if our opportunity is attracting interest or rather retaining the interest. We have an underwhelming number of “clicks” on our properties in comparison to just 3 weeks ago. 

               We work diligently to improve our search engine optimization to increase traffic onto our website to get these units rented.  Through encouraging positive online feedback, posting relevant & informational blogs, and updating the content regularly we are competing daily for increased search engine optimization to combat the expected increased vacancy in the month of September.

               Based on last year’s numbers, we expect our vacancy rate to not only remain below national average but we expect to see a consistent decline in available units before the end of the calendar year. 


                                                  

Julie Tollifson, Leasing Team Leader

First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about this blog.

Property Management Perspective: Boise considering capping rental application fees at $30

Julie Tollifson - Thursday, August 29, 2019

Property Management Perspective: Boise considering capping rental application fees at $30

Boise City councilwoman, Lisa Sanchez, is working to put a cap on rental application fees. While I believe her intentions are of pure heart, I feel that her suggested resolution does not solve the root of the problem.

          Sanchez is concerned that Property Management Companies are utilizing the Application Fee mark-up to increase their profitability at prospective tenants’ expense. She is proposing that we cap application fees at $30 in order to keep property management companies from doing this. The proposed consequence for a first time violation of this ordinance is a $100 fine, followed by a misdemeanor. 

          From a property management perspective, I would like to clarify. Most property management companies have a hard cost thru their screening agencies of $25 - $35, in addition to this hard cost; there are personnel expenses. While we are a business, and are aiming to make money, we are not taking advantage of our tenants. 

          In the article, author Gretchen Parsons, discusses how an existing tenant was required to pay another application fee just to qualify to move to a different unit in the same complex. While I can understand the tenant’s frustration to have to pay an additional application, I’d like to provide some insight on the other perspectives involved. 

          In the case that the tenant has lived there for a year, there is a chance that he/she could have been convicted of a felony, become unemployed, or had a significant decline in income/credit history. It is a Property Manager’s obligation to the owner & other neighboring tenants to ensure we are placing vetted tenants who qualify under our screening criteria. As a Fair Housing Provider, we are required to ensure all tenants are screened under the exact same criteria. 

          First Rate Property Management (FRPM) requires tenants to re-qualify under our screening criteria regardless of if they are an existing tenant or not. The application fee will apply for everyone that will be going through the qualifying process. Again, we have the some hard cost and personnel costs. If someone applies who is already an existing tenant and they are approved, they get their application fee back in the form of a credit on their account at the incoming property. It is a cost to tenants up front, but at the end of the day, our investors want to maintain properly vetted tenants and are willing to absorb the cost of those application fees in order to do so.

          Sanchez’ proposed ordinance is expected to crack down on property managers collecting application fees for units that aren’t available. While it is inconvenient & frustrating when someone applies and gets a call saying that the property has been rented, it is not a dead end road. FRPM works hard to accommodate as many people as possible. Whether it is the tenant, the owner, or the employee, we try to find a happy medium for everyone. Many property management companies allow tenants to apply once and have their application be transferrable between any of their available properties. In the summertime FRPM can have as many as 100 properties available to choose from. This helps to alleviate some of the concern tenants have about their application fees. 

          While I admire and appreciate Sanchez’ efforts to create a more accommodating application process for tenants across the valley, I simply ask for both perspectives to be thoroughly researched and represented in order to find a functioning solution to the application fee concern that she has expressed in this article. I hope to be able to find a compromise to be able to accommodate all parties involved. 


                                                  

Julie Tollifson, Leasing Team Leader

First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about this blog.

                                                            

Property Management: Organized Chaos

Julie Tollifson - Wednesday, August 28, 2019

               Among the exponential growth in population in Boise, ID includes increased rental rates to assist clients in capitalizing on their investments. Unfortunately, Boise natives’ wages are falling behind these rental rates they are forced to relocate, move in with friends, or seek out housing assistance.

               The summer of 2019 for First Rate Property Management was the busiest I’ve seen. We had anticipated 60 tenants moving out in the month of July, however, by June 28th, 2019 we had received over that amount of 30 Day Notices and counting! By the 2nd of July, we had received a total of 104 Notice to Vacates for the end of July. At this same time our maintenance department was combating all of the June 30th, 2019 move outs. We had about 73. In the midst of chaos we had to prepare for more chaos.

               Our management team sat down to brainstorm potential bottlenecks and roadblocks to identify and anticipate solutions proactively. We threw around some good and bad ideas. Ultimately we came up with a solution that bettered our processes, tenant relations, client relations, and employee morale.

               Our biggest concern was how our staff was going to endure over 100 turnovers on the same day without excessive overtime and diminishing enthusiasm. In the property management industry it is common to have a lot of employee turnover in our maintenance departments. Often overcome with negativity, and tenant and/or owner pushback, maintenance puts up with quite a bit. First Rate wanted to find a way to keep our employees happy by keeping owners as well as incoming or outgoing tenants happy. Our solution was to offer an “Early Bird Special”. If outgoing tenants turned in their keys 1-5 days early, they would receive a $25 gift card and/or credit, 6-10 days; a $50 credit, 11-15 days; a $75 credit. This cost FRPM a total of $600 between all 104 turnoversThis amount is a small price to pay to preserve the spirits of the team, client satisfaction, and tenant relations.

               Along with the internal benefits, there were many external benefits in this service as well. If a tenant turns in their keys 7 days early, the average turnover time is 5 business days, and the incoming tenant moves in on the 6th day, the owner does not have any vacancy expense. For example, a tenant turning in keys on the morning of Wednesday, July 24th, 2019, we complete all the turnover work by Thursday the 29th, 2019, the incoming tenant can essentially move in on Friday July 30th, 2019.

               The average daily cost of vacancy for an owner is $30 per day. Because our preferred vendors aren’t able to address all 100 units in the same 5 days, if all tenants were to turn in keys on the same day, this could have very likely extended vacancies out over two weeks. This “Early Bird Special” saved many of our clients up to $420 in vacancy per unit. Some of our bigger clients, who had multiple vacancies coming up would have been looking at even a much bigger expense.

               First Rate Property Management was able to increase their Google Review Rating 4 tenths of a point in only 8 months. Many of these reviews came in during our busiest months, when historically, our staff tends to be spread thin and unable to provide the best customer service due to the sheer volume of calls, emails, and walk-ins. The “Early Bird Special” allowed our leasing department to offer early move-ins to already approved applicants to ensure their satisfaction with the move-in process.

               Additionally, during this busy week we all got back to our elementary school roots and participated in an eccentric and comedic spirit week. This lightened the mood and kept spirits high as we attempted to simultaneously move people out and move people in. Instead of remembering the chaos of an exceedingly demanding week, our team remembers the amusing & creative outfits, hats, socks, and t-shirts everyone was wearing and the fun everyone was having.

               Overall the team at all levels worked together to create a plan that was executed almost seamlessly. Property Management is inevitably unpredictable but throughout this process we were able to accomplish almost all of our 2019 goals developed in our Strategic Planning. We were able to reach a Google rating of 4.0, prepare for growth, improve and streamline interdepartmental communication, and reduce effective days vacant.  While this example might be specific to FRPM, it can be applied to any business and any obstacle to achieve the goals within the company.

               There are many obstacles in that our industry must face. Some are predictable and some are unpredictable. Among these challenges it is crucial to think outside the box to create a plan. Once your plan is in place, the follow through is of the upmost importance. Once you’ve gotten through the fire, you and your team will be even more prepared for the next big complication resulting in the growth and prosperity of your company.

                                                  

Julie Tollifson, Leasing Team Leader

First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about this blog.

                                                            

Mid-Year Housing Summit Summary

Melissa Sharone - Tuesday, July 23, 2019

Earlier this month, Tony attended the Boise Regional Realtor’s Ada County Housing Summit. Within this blog, we wanted to focus on the mid year housing market report. Some of the other speakers spoke on topics such as, revitalizing community neighborhoods, affordable housing, and community involvement. 


Click here Mid-Year-Housing Summit to view the market report. Below are some highlights.



 Historical Monthly Inventory vs. Median Sales Price for Ada County

The report shows that during the boom, such as in 2005-2007, inventory levels still remained far higher than median home prices and prices were driven mostly by speculative buying.  Inventory and median sales price fell together through Jan 2012.  Today, there is a huge disparity driven mostly by migration to Idaho with families wanting to buy homes.  The low inventory and high demand has shot median home prices.

 

Historical Annual 30-Year Fixed Mortgage Rates for the U.S., 1971-2018

Today’s low rates has increased purchase power compared to the previous market peak in 2007, as lower rates are allowing people to pay higher prices. The low rates since 2011 may play a part in our low existing inventory levels.


Share of Total Home Sales that were New Construction Compared to the Overall Average Sales Price in Ada County, 2016–2019 YTD

As new construction sales made up an increasingly larger share of total home sales, the overall sales price grew year-over-year. This is due to new home prices being, on average 32.2% more than existing homes, because of higher land, labor, and materials costs. So as more new, higher-priced homes sold, it brought up the overall median sales price for the county.


Share of Existing Home Sales by Price Range in Ada County, 2004-2019 YTD

The share of existing homes in Ada County priced below $199,999 was at 53.7% during the previous market expansion. That share increased to 65.5% through the Great Recession and then settled at 59.9% through August 2014. But as lower-priced existing inventory has been held back from the market, the share of total existing home sales priced under $200,000 has dropped to just 26.3%, causing the median sales price for the segment to rise over time. This, combined with more new construction sales selling at a premium, has pushed the overall median sales price for Ada County to new record highs — reaching $354,405 in Jun 2019. 


Primary Factors Limiting Existing Housing Supply

More seniors are staying in their existing homes instead of selling.  Investors are keeping single-family properties as rentals.  Many homeowners are staying put because of the existing low rate mortgage.  Despite equity, homeowners “locked in” due to limited inventory and rising prices compared to local wages.


Changes in the Existing Median Sales Price at the Previous Peak (2007), through the Recession Low (2011), Local Recovery (2014), and Current Expansion Activity for existing single-family homes in Ada County

Many who purchased in 2006 and 2007 were unable to sell in later years, as prices fell 40-60% through 2011. More than a decade later, they are finally seeing their equity return, but are hesitant to list due to the lack of available inventory to move to. Those who purchased in 2011 may have significant equity to roll into another home, but today’s prices are up 130-190% since then, making a new existing home potentially out of reach for many, although lower mortgage rates are helping some.


Factors Driving Demand for Housing

Rising rents make buying a home more attractive for those who are able.  People moving to the Boise area to retire.  Demand from servicemen and women stationed at Mountain Home AFB.  Millennials are “aging into” homeownership.  In-migration from higher-priced metros due to our comparative affordability.


Minimum Incomes Required to Afford Average Rent or Purchase Median Priced Home in Ada County, June 2019

The minimum income required for a rental assumes income is 40 times higher than the average monthly rent, which was $1,050 in June 2019, up 2.2% from last year is about. $42,000.  To purchase the median price home of $354,405 as of June 2019, the minimum income required is $58,000 per year and assumes a 30-year fixed mortgage of 3.8% including PITI, with a down payment of 20%, and spending no more than 28% of monthly gross income on a payment.


Melissa Sharone

President, First Rate Property Mgmt. 

Melissa@frpmrentals.com

NARPM 2nd Quarter Vacancy Survey

Melissa Sharone - Friday, July 19, 2019

The SW Idaho Chapter of Narpm just released its 2nd quarter vacancy survey.  The results are pretty typical for this time of year.  The vacancy overall went up a little but that is because this is the time of year where the rental activity is the highest.  Good news is that the rental rates continue to rise at a steady pace.  The trends prove that this market is still very strong. 

Read full report here: SW Idaho Narpm Q2 Vacancy Report


Melissa Sharone

President, First Rate Property Mgmt. 

melissa@frpmrentals.com


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