California extends eviction moratorium through June 30

[Dan H.]

We have one tenant that we provided reduced rent (reduced to $2k from $2.6k) when impacted by Covid that applied for rental relief many months ago that we have not received a response (and mostly have given up on).  The tenant paid most of their rent each month (they paid the agreed upon reduced rent) and the reduce rent rate ended late last year.  This eviction moratorium does not negatively impact me in any way (we are not considering evicting anyone at this time) other than my belief that it is not fair to Landlords that have not been collecting their rent. 

California extends eviction moratorium through June 30 for anyone that has filed for rent relief.  This is the 4th extension of the eviction moratorium.  Some Landlords have not received rent, but cannot evict their tenants.

If the state wants to ensure tenants can stay in their home, they should come up with the money to pay the rents.  It is unreasonable to expect Landlords to continue to not collect rent and have no viable recourse.  The delinquent tenants, if the state does not provide the rent relief, are unlikely to pay their delinquent rent. 

In my primary market rents went up over 20% in 2021.   there are multiple reasons for the large rent increase, but one reason is the increase risk Landlords face due to eviction moratoriums.  These policies will increase rent rates for a few years.  The way free markets work is that increased risk must be compensated for by increased revenue.  

As an aside, the eviction moratorium extension was the first California bill signed into law by a female.  The governor was on vacation so the Lt Governor signed the bill.  I find it remarkable that a progressive state like CA has never before had a bill signed to law by a female.  It is about time, but I wish she had signed a different bill into law.  

[Dan H.]

Quote from @Nathan Gesner:

Quote from @Dan H.:

I think property values in San Diego have tripled in the last 14 years, but property values will drop the hardest in that market when things go bad. In 2008, San Diego probably lost 40 - 50% value and took about four years to catch up. Appreciation is like flipping; you have to time the market to take advantage of it. If the world turns and you're not ready, you can lose a lot.

The California numbers look sexy because they are big. If you buy something for $400,000 and ten years later it's worth $1.2 million, that's no different than me buying something for $100,000 and ten years later it's worth $300,000. We get the same return, but I benefit in other ways like lower taxes, paying tenants, and just laws.

 True if the appreciation percentages were the same.  The California primary housing markets have a higher appreciation rate than virtually all other markets.  You can reference NeighborhoodScout to see the major California coastal cities are each 10/10 for this century.  Or you can simply look at the housing prices to determine virtually all other markets have not had the same rate of appreciation.

Four of my existing properties (we sold one recently) were purchased before the Great Recession and one shortly before the Great Recession. They all have appreciated over $2k/month over their hold.  The property that was purchased shortly before the GR has appreciated over $4k/month over its hold.  This property was negative ~20% from my purchase price (which was not quite the top of the market), but I was not over extended so was not forced to sell at the depreciated price.  As you point out it took only a few years (less than 5 years in virtually all areas of San Diego) to recover. Now it has appreciated ~$1m over purchase price.  

I do recognize that past performance does not guarantee similar future performance, but San Diego has many decades (at least 5) of outstanding appreciation and the fundamentals are very similar (geographically constrained, great climate, diverse jobs, housing shortage, etc,).  I also realize that the last decade has had extreme RE appreciation that cannot continue at that pace.  Some of this is recovery from the GR, but some of it is due to other items that are not going to be addressed quickly (such as a housing shortage were many people want to live). 

Historically coastal California RE has produced incredible ROI. Time will tell if that is to continue, but I suspect it will over the long term (I make no predictions for the short term).

Good luck