Rental Emergency 2023

California is facing two rental emergencies.

The first is the increase in rental costs. According to Multi-Housing News article dated September 7th, "_rent costs are up 1.5% year-to-year" and "single-family rents rose 0.5 percent year-over-year to $2,104._" We in the Riverside county area are seeing one-bedroom apartments is over $2000 a month.

California has attempted to relieve the rise in rental cost as well as the supply needs by approving Accessory Dwelling Units for typical residential properties but these are being rented for even more. More on these later.

The second emergency is the inflation that could cause layoffs causing even more financial woes for renters. The FED still looks to raise interest rates to slow down the present inflation so rental rates could continue to rise.

What about a recession. Many analysts, like Danielle DiMartino of Quill Intelligence, are warning of a major recession coming over the horizon resulting in job loss. If renters lose their jobs how will this affect them to maintain their rental units? Many who benefited from the moratorium allowing renters to not have to pay rent and not be evicted has ended in August so now back rent is due. According to USA Today article on August 1st, "_roughly 3.6 million people in the U.S. as of July 5 said they face eviction in the next two months, according to the U.S. Census Bureau's Household Pulse Survey_."

Is there an answer? We are finding many clients seeking to build an Accessory Dwelling Unit on their single family resident lot for their family. A low cost rental for mom and dad, for the son and his new wife, for the brother or uncle. Families are consolidating their resources and living conditions. The cost of building a 500 to 1200 square foot ADU is a potential saving response to the emergency but it is not without its challenges. Since covid shortages and increased construction costs in California have risen from $150 per/sf to over $200 per/sf. While construction has continued to grow it is behind the need, but it is also short of experienced contractors and sub-contractors. Contractors are finding it hard to find experienced workers so are unable to start projects. This then adds to the rise in construction costs.

The ADU is still a valid option if started today. We have standard plans that fit well with most residential properties. City permit process can take 2 to 6 weeks on average. This is because most departments are still experiencing post covid blues and are short handed. Low employee return under the high volume of submittals has extended the process. But if you find an available builder who can start once plans are approved, so you could move in within 9 months from when you start.

What re the other options? Selling your home to buy a larger home for the family? You could add on. This is less cost in construction and does add value and space to your home. We have seen an increase in addition projects adding a new bedroom and bath. There are some challenges in these projects but often can be worked out.

This is advisory, rental costs are going up, housing costs have been up and little chance of reducing, but the ADU or room addition is a responsible answer to the coming housing challenges for your family.

Home Market & Interest Rates - Reality check!

Photo by Tom Rumble on Unsplash

This is from a California perspective and it will vary on your location in the country and in your state. Being a realist I want you not to be scared from selling and buying a new home but to be aware and prepared if you do.

Interest rates: The Federal Reserve has raised the interest rates once again and it is expected to be raised another quarter percent twice before the end of the year. According to an August New York Times "U.S. Mortgage Rates Jump to Highest Level Since 2002." It is now over 7% for a thirty year fixed morgage loan (read Article). With the potential two rate increases rise to over 7.5%. Lets say a home owner has a low 2 3/4% interest, do they want to sell buy another home at 7.5%? This is favorable if you have a very large equity in the home you are selling to use as a down on the house you are being.

Small Inventory: You are ok with the interest rate but now its time to find a home. A home owner may seek to sell their home but the market has a limited inventory of houses for sale. This has, for a few years, made it a sellers market but a challenge for the buyers. A home owner places their three bedroom, two bath home on the market and will find themselves with a possible twenty to thirty offers with 50% being good solid offers. Several offers come with a bio of the family that wants to purchase hoping you will be emotionally touched by their stories. Others have already sold their home and the cash is ready in the bank but they are getting desperate as they are living with family or renting. Others offer more than your listing amount in an attempt to insure their purchase. This is a scenario my wife and I experienced selling my father's house in 2021. In speaking to my realtor, recently, this situation is a regular one today.

So you have sold your house and are now on the hunt for a new one with a swarm of competition. You are living with family as you hunt, or maybe the RV trailer you own. Your choices are few because you are looking to upgrade to a larger home in a nicer area. So is everyone else.

Tract Home Purchase: But maybe you are looking for a new tract home to buy. This is possibly less stressful but even that market is small. Back in 2000 there was a recession and many home builders were caught with standing inventory or empty developed lots and no buyers. Sine then tract home builders builder smaller phases of less that 25 house instead of the 100 house phases they once did. Once those 12 to 25 house are sold they start another small phase. This then is also a challenge, however, it is simpler as it allows you to remain in your house while construction of your new house begins, allowing you to prepare for the selling of your old home and preparing for the future move when your new home is completed. However, the construction of a tract home, depending on the status of the house development project when you first contract with the builder, could be six months to a year.

Building a House: Building your dream house may be another direction you desire to take. You can go with a standard set of plans an architect or design firm may have or have the firm design you a fully custom house. A custom is more money for the plans and can become more expensive to build depending on the design. In either case you have a long process ahead. Let's approach this as if you do not own a lot to build on. Doing property searching may be as exasperating as purchasing a home. They are also few but the amount of purchasers are less as well.

Once you have your property there is time to design and draw the construction drawings, then plan submittal and permitting of the plans, if grading of the property is required then that triggers the needs for a civil engineer and surveying, soils testing is also required by a different engineering firm and maybe includes the need for a septic design depending on the location of the property. Time then from starting the design process to having a permit in your hands for a fully custom home could take as long as 1 -3 years. Banks loaning construction money typically will not sign contracts until plans are through this process. Also, banks like to see the property owned completely, though I have herd of some banks loaning money for the land purchase. So as you can see this is a much longer process and with the changing interest rates and economy can add further anxiety to your new home endeavor.

In closing. These are the major challenges in today's world of home buying and building. If you have quick questions or want to take further steps toward building your home you are welcome to contact me.

Bob Ybarra

California Fires: Steps to take when your home destroyed by the fire?

A friend posted this very valuable list of advice to those who lost their homes in the California wildfires. The loss of your home is a tragic one and is followed by a lot of confusion, uncertainty and fear. But having some knowledge and understanding of steps to take to rebuild is invaluable to assist you and build hope.

“I thought it could be helpful for those who have losses and don't know where to start. We are safe and trusting Jesus to be our comfort, hope and strength. Hope this helps some of you.”

Start with the small list:

1. Get a PO Box

2. Longer term rental search - include insurance on it so they pay directly for rental. Find a nice place that you like, don't settle.  You should be able to get a "Like Property" so insurance should cover a nice place for you to live while you work through all this.  You might be living here for 2 years, so choose wisely.

3. Find a place to buy some sturdy boots and gloves.  Get some shovels. 

4. Start working on the personal property list (this is not fun at all, be prepared to cry we sure did).  Write down the moment you remember – keep list on phone or pad of paper with you at all times.

5.  Save receipts.  Loss of use insurance will cover incidentals too – hairbrush, phone chargers, etc.

6.  As you buy things, tell the store owner your situation.  Most stores will give you some level of discount as their way of helping you.

7.  Let people do things for you.  Do you have a friend that you can send to the store to buy you some basic clothes or comfort foods?  Let them do it – they want to help and you don’t need to spend time doing these errands.   (The ‘fun’ of shopping is gone…it quickly becomes a chore because you don’t want a new shirt, you want the one that you always liked to wear but now it’s gone and you are sad/mad.)

The Big List:

1.    Register at the shelters, with Red Cross and any other agency there, california FEMA, etc.

a.    Most of the aid coming in will use these lists as a point of contact and will help to ensure that you don't get left out of anything.  

b.    This will be especially important should FEMA be activated, which in my opinion is very likely with the amount of devastation experienced.

2.    Call Homeowners/Rental insurance to trigger "Loss of Use" This typically will allow you to be in a "Like" property for x number of years and sometimes has a dollar limit attached and sometimes not, this is dependent on your policy.

a.    This coverage should also give you some immediate access to funds for essentials, clothes, toothbrushes, food, etc.

b.    This will also get the ball rolling for the insurance claim on your home and rebuilding/personal property Dollars.

3.    Get a PO Box and forward all mail to the Box.  Use this PO Box as the mailing address on all forms you begin to fill out.

4.    Start Searching for a Long term rental. Coordinate with your insurance company so that payments can be made directly from them using your “Loss of Use” money.

a.    Plan on renting 1-2 years, but do not necessarily sign a lease for a full two years as circumstances can change.

5.    Itemized List of belongings - (This is very hard but very necessary for your claim) I would organize by room and list everything that was there with a replacement cost. (you will cry a lot doing this and that is ok)

a.    Replacement Cost should be what it would cost to replace not on sale from pottery barn, it should not be the price you paid for it with that 50% off coupon.

b.    Make sure you list everything, even if it is above and beyond your policy limit.  This is very important because everything above and beyond the policy limit is considered a Loss and can be claimed as such on your taxes - See #9

6.    Call all of your utilities and either freeze or cancel service. Electric, Gas, TV, Land Line phone

a.    Newspaper delivery, either cancel or update to PO Box.

7.    Call the rest of your insurance points as needed. Car insurance

a.    Any specialty insurance for unique items

8.    Permits - An unfortunate necessity. Debris Removal - as things wind down it will be necessary to remove the debris, this requires a permit usually. (This should be covered by your insurance, we had to force the issue but ask repeatedly.)

a.    Erosion Control - If you are on any kind of hill or have sloped property you will need to put some sort of erosion control measures in place, again this will need some sort of permit.  

b.    Temporary Power Pole/Trailer on site Permit - Getting this earlier on can prove helpful in both the rebuilding process.

(My comments: The county and/or city will possibly respond to the cleanup and demolition of debris from your property. This hasty be done with care as there are many toxic and environmentally dangerous contents in the debris. Refer to local website as they will be posting information or personally go to your local Building and Safety office.)

9.    Taxes. You will be able to claim the monetary loss of the value of all your items minus what you receive from your insurance company.  I’m unfamiliar with the exact laws, but I believe that we were able to carry our losses back 2-5 years and received most of the money that we had paid in taxes back in a nice large check.

10.  Network with others.  You will learn so much from others as you go through the rebuilding process.  We all have our strengths so share yours and use others.  The amount of time that you will spend on the rebuild, insurance, recovery process is staggering so you need to use all your resources.

I will be posting more advice soon.

The Water Fence - Residential solution to water collection

The Water Fence is the idea of 15 year old Steven McDowell.   The 6 foot high water storage fence is capable of collecting 240 gallons of water in each tank section from the rain run-off of your roof.  

According EPA.gov, "the average American family uses 320 gallons of water per day, about 30 percent of which is devoted to outdoor uses," (http://www.epa.gov/WaterSense/pubs/outdoor.html).  That would be an outdoor use averaging 96 gallons a day.  A 240 gallon unit could supply water for 2.5 days depending on the use and size and type of landscaping.  Doesn't sound like much but when you add 32 of these together (the length of fencing on a standard residential lot of 60'x100') you have reduced your water usage by approximately 80 days, nearly a quarter of a year.  Take in consideration rainy and cool months where less or no water is needed in the garden you have a generous supply to supplement your outdoor irrigation.  Add drip a system or high efficiency sprinkler heads and you have succeeded to increase the usage.  You could maybe even sell it to your neighbors and help offset the cost. 

There are a variety of decorative treatments for the sides and it seems that the typical white vinyl look  would be most in demand thought they do not have any photo's on their sight.  Most Home Owner Associations approve the white or tan vinyl fencing over other types.  

I am waiting on the some cost information from the company and will add that to this post. For more information go to  http://www.waterfence.com.  Also, do the young man a favor and repost this post or any of the companies other videos.  

Bob