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Will Natural Disasters Affect Property Insurance Rates?

Last year (2018) brought many natural disasters, hurricanes in Texas to wildfires in California. These will affect rates, especially for those areas that are at risk of hurricanes, floods, wildfires, or earthquakes.    Also, more and more lawsuits are appearing against the multi-family owner, causing even more rate increases.  It will be important for owners to create safe places for tenants to live, and develop ways to mitigate loss from a natural disaster.  Owners will need to be proactive.  They will need to keep brush trimmed away from the building, update all smoke and carbon monoxide detectors, and insure their tenants are living in safe and sanitary environments.  They will also need to analyze their insurance and really understand what their premium covers, and what exclusions exist.

2019: What Does the Rental Market Look like for Good Ole So. Cal?

Rent seems to be plateauing.  We have seen fairly large increases, without even a flinch from tenants.  It is changing now.  The authors of the 2018 Casden Multifamily Forecast, a rental market study, estimate that LA renters now pay $2,267 per month, on average. They project that number will rise to $2,358 in 2020—an increase of 4 percent. This is 2 percent lower than their projection for 2019.  This still means a large portion of tenants’ incomes go to their rent.

Cities like Glendale and the unincorporated areas of LA County have started to build in protections for its residents.  Glendale just enacted, on February 12, 2019, the amendments to the Just Cause Eviction ordinance to address the growing shortage of and increasing demand for rental housing in the city of Glendale. The amendments take effect on March 14, 2019 and entitle tenants who meet certain requirements the right to a one-year written lease agreement option and relocation benefits. Among the many requirements of the ordinance:

  • Landlords must offer tenants a written one-year lease on an annual basis where rental rates are set in the agreement and may only be increased once a year.
  • Landlords must pay relocation benefits when a tenant vacates a unit in response to a rent increase of more than seven (7) percent in a 12-month period.

LA County just made a similar move, starting on December 20, 2018, for 180 days, the council determined to approve a 3% annual rent increase with a restriction to evict without “cause”.

All is not lost, however; Landlords will just need to become more creative in its marketing efforts, service and cost control.  They might find it beneficial to lower costs for both the building and renters.  It will also be wise to stay on top of the market trends – stay on top of the research.    It will help prepare for a correction immediately if a major shift develops. Preparing and staying ahead will be the focus for rents in 2019 and beyond.

 

 

Interest Rates Are on the Rise: Good or Bad News?

Uncertainty looms ahead as we move further into 2019. But one thing remains clear: Borrowing costs — at least for now — are still going up.

The Federal Reserve brought four rate hikes in 2018.  At the same time, the labor market has been tightening and more layoffs could be coming.  A big blow for a large amount of labor was Amazon’s departure from New York.

Interest rate levels also depend on how trade talks with China play out, but as the year progresses, the economy is expected to slow while fears of an impending recession will grow.

Though policymakers have suggested that the next Fed rate hike may not happen for another several months, borrowers with outstanding balances should be prepared to pay more out of pocket.  This might create a void where young adults and first-time home-buyers used to sit.  It may also mean that as mortgages and the cost of financing increases, investing may become less prevalent.  With much of the future unknown, it might be a better time to rent.