Trends: SFD vs. Rental Property

[GoBears]

My good friend is a realtor, and he recently showed me a print-out of a report from this cool website that he has access to called RE Info Link.

I was curious to see sales data on how the averages and median prices changed over the past 6 months. To no surprise, both were down a fair amount...

This report can be run for SFDs and Townhomes/Condos, but not for multi dwellings such as a 4-plex. I was hoping to see data on this as well.... I am under the impression that income-generating properties tend to be more stable during such "downturns" and I'm wondering if that is generally true.

If there is source on this topic, or something that I can reference, please do share?

Someone is telling me that a 4-plex (San Mateo, CA) appraised with an effective date of July 1, 2006 would now appraise for about 50-100k less. This same person is stating that a SFD (Mountain View, CA) appears to have not gone down at all during this same span of time. This is despite both city's market's showing declines, and actually Moutain View a bit more...

I appreciate your input, thanks!

 

[Mike Boyd]

When rents go up the value of a 2-4 should go up. When rents decline, 2-4s should also decline. Right now in MY market area, rents are increasing, according to the RE section of the Sunday paper.

 

[GoBears]

Mike, thank you for this information. Is there a place to see rents for an area, now and even back a few months? In this case we are talking the San Mateo area...

 

[Bob Ipock]

For the most part....investors buy 2-4 unit properties. They buy at investor prices....wholesale if you will.

When you want o SELL a 2-4 unit property the largest % of potential buyers will be investors...looking for a bargain.

If you are looking to buy real estate.....single family stuff is easier to rent, own and sell.

 

[GoBears]

If the average or median sales price for single family homes has declined in an area by let's say 5% over the past 6 months, while rents have gone up about the same, would it be correct to say that 2-4 unit properties took less of a hit to their value, or even saw an increase?

It seems that the market for SFD homes, and that of the multi units don't move in unison, or mirror each other...

 

[Bob Ipock]

When mortage interest rates are under 7%......thelargets pool of renters will be those unable to purcahse. Unable to purchase at under 7% is a scary thing.

I would question rental rates going up when the s/f market has huge inventories, slow sales, record foreclosures etc.

It could be true somewhere....not where I live. I have owned boght and sold rental properties for over 30 years, residential, commercial and multi-family.

 

[GoBears]

Good points Bob, thank you.

When doing an appraisal on a 4-plex, is it customary or expected that the appraiser should ask for the rental income generated?

From the stats I've seen, this would seem like an important characteristic, but he did not seek this information...

 

[The Warrior Monk]

When doing an appraisal on a 4-plex, is it customary or expected that the appraiser should ask for the rental income generated?

I certainly would. It's part of the data collection process. It's possible that it may not be necessary for the valuation of the property, but at a minimum it should be examined. I wouldn't want to find out after-the-fact that all the units had five-year leases at below market rents.

I wouldn't expect prices for single-family and multifamily dwellings (especially a fourplex) exactly in tandem. The majority of single-family dwellings are purchased for owner occupancy (obviously there are pocket areas with a high percentage of SFR's), and the majority of fourplexes are
purchased by investors. They are two separate sets of buyers with entirely separate interests.

 

[GoBears]

Thanks David for addressing that question I had. When the appraiser was approached as to why he did not ask about the rental income, he said that he never does for such few units (in this case 4)...

While the trend for housing prices has been stagnant, to down, rents have been up, and quite a bit...

I appreciate the the reply!

 

[Smokey Bear]

RE Infolink doesn't let you search very specifically for your data. So you can narrow it down to neighborhood in some cities, but in other cities the data will only be for the whole city. Some areas are more desirable than others, so the larger the are chosen, the less reliable the data.

Also, current listings show a lot of info, days on market, median list price etc., as do expired/withdrawns. All of it has to be considered together to come up with a meaningful market analysis. For instance, Alameda Island is holding fairly stable right now, but there aren't enough sales in any one area (Fernside, Gold Coast) to come up with meaningful statistical results for those neighborhoods. The high end neighborhoods here are a little slower than the rest, but showing that is a different story.