I Find Myself Envying People Who Didn't Pay Attention to the Markets Last Month

Year To Date Activity

Properties Sold (single and multifamily): 17

Sales Volume: $27,355,000

Homes/Units Managed: 254

Properties Leased: 24

Gross Collected Rent: $3,373,554

Brokerage Listings

Property Management Rental Listings

I find myself envying people who didn't pay attention to the markets last month.

It's been quite the rollercoaster. But we will get into that later on.

I wanted to kick off with a summary of a new California state assembly bill, AB 1157 that was just proposed .

It's dumb. Very dumb, in fact.

Like room temperature IQ level dumb.

What does it do? Two things primarily. First, it expands rent control to now include single family homes and condos. Second, it further limits rent increases to 2% + CPI for owners of rent controlled properties. (Currently it is at 5%+ CPI, except for in cities with stricter rent control laws.)

*The rent control laws do not only limit how much you can raise the rent but also have very specific rules about reclaiming possession to the home.

Why do I think this is a dumb proposal? The obvious answer is I own rental property, so this is bad for my checkbook. But the real reason is: this proposal is bad for tenants as well. Why?

There are only two ways to decrease rental rates:

1. Massive economic crisis (think GFC) - that is bad for everyone, renters included

2. Build more housing

Expanding rent control disincentivizes building leading to further supply constraints.

In a lot of respects, this proposal would really benefit our property management business - no one will want to self manage a rent controlled single family home, but that is neither here nor there.

What can we do about this? Contact your local legislator. I've included all of the Orange County legislators contact info below.

🏛️ California State Senate

Senator District Email Address

Bob Archuleta SD-30 [email protected]

Kelly Seyarto SD-32 [email protected]

Tom Umberg SD-34 [email protected]

Steven Choi SD-37 [email protected]

Catherine Blakespear SD-38 [email protected]

🏛️ California State Assembly

Assemblymember District Email Address

Phillip Chen AD-59 [email protected]

Blanca Pacheco AD-64 [email protected]

Sharon Quirk-Silva AD-67 Contact Form

Avelino Valencia AD-68 Contact Form

Tri Ta AD-70 [email protected]

Kate Sanchez AD-71 [email protected]

Diane Dixon AD-72 [email protected]

Cottie Petrie-Norris AD-73 Contact Form

Laurie Davies AD-74 [email protected]

Not sure who to contact? You can look up your district here.

Here's a list of other proposals with varying degrees of stupidity - please feel free to mention these items in your email as well.

SB 262: Allows local governments to adopt rent control to qualify for state housing funding.

AB 1248: Prohibits landlords from charging separate fees for security deposits,, pet rent, parking, rent control compliance, or water submetering.

AB 381 and AB 681: Caps late fees at 2% of monthly rent, bans extra charges like admin, pet rent, and parking fees, and sets deadlines for application processing.

SB 436: Gives tenants the right to pay overdue rent and avoid eviction before final judgment.

AB 863: Requires lease termination notices and legal complaints to be provided in the tenant’s primary language.

AB 628: Mandates that rental units must include a stove and refrigerator less than 10 years old.

AB 246: Protects tenants from eviction if they can't pay rent due to delayed Social Security benefit payments.

SB 522: Lets Los Angeles impose rent control on homes rebuilt after fires, eliminating the usual 15-year new construction exemption.

SB 610: Requires landlords to offer former tenants the right to return to fire-rebuilt homes at their previous rental rates.

This is in addition to all the new, and mostly misguided regulations that have already been inacted this year:

AB 2747 – Tenant credit reporting requirement

AB 2801 – Security deposit photo documentation

AB 12 – Security deposit capped at one month’s rent

SB 567 – Just cause eviction expansion

SB 1051 – Domestic violence-related lock change requirement

SB 611 – Ban on junk fees for notices and check payments

AB 2493 – Application screening fee regulations

SB 721 / AB 2579 – Mandatory balcony and exterior inspection requirements

We had to hire an additional team member on our management to help us stay compliant with all the new regulations.

California leads the nation in solving problems that do not exist.

Note to management clients: we have never raised prices, and our goal is to never have to. Our hope is that we can grow our business to help offset the additional staffing requirements, so if you have anyone who could benefit from our services, we would love an introduction. If you have not given us a review on yelp/google, it would go a long way in help with the growth we need to offset our new overhead.

Single-Family Transactional Market: Compass, the nation's largest brokerage, has waged war on Zillow in what seems to be one of the dumbest strategic moves I've seen. Then again, Compass is a Softbank company, so dumb moves are sort of their thing. (Note: I'm not saying Compass agents are dumb - some of my favorite non-Marterra agents are Compass agents.)

Here are my thoughts on how it will impact the single-family transactional market 👇

Quick update: I may get into it next month. Compass just filed (2 days ago) a lawsuit against the Northwest MLS. The lawsuit is an entire conversation in itself.

Single-Family Rental Market: Indecision is the name of the game right now. Inquiries across the board are down. People seem only to be moving if they have to move. I'm assuming (or maybe hoping) it is tied to uncertainty. As a result, the leasing market is moving very slowly right now.

As the old saying goes, this too shall pass (see the commercial real estate update below).

Mortgage Rates/Market: They are still very high. No one knows when they will improve, but help is coming.

Last month, we closed our first loan with our new loan program!

-we closed the loan in a shortened time frame

-the client received a market rate interest rate, and a ~$6,500 credit towards closing costs

-we have several more we expect to close in May

If it seems too good to be true, it's not. If you don't believe me or think it's as my ten year old would say, "SUS", give me a call. It is so incredibly simple, I'm unwilling to write about it, because everyone else is going to steal my idea.

This month, we started extending the program to buyers of our listing (much like homebuilder preferred lender programs).

Commercial Real Estate (CRE): Mortgage Rates/Market: New supply is the only thing that has proven to be able to slow rental growth.

We saw a historic level of new apartment construction completed in 2024, and now the surge of new supply is behind us.

Multifamily completions hovered around 150,000 units per quarter through the final three quarters of 2024, but dropped sharply to 113,000 units in Q1 2025. While still relatively high, the decline is significant.

With new construction starts collapsing over the past two years, well before tariffs entered the spotlight, the construction pipeline is thinning rapidly. Completions are expected to stay moderately elevated through 202 but could fall dramatically in 2026, potentially dipping below 300,000 units for the year.

In unrelated news, I will probably start looking for apartment deals in the markets with the most apartment construction (Phoenix, Austin, etc.) as their rents have softened significantly due to new supply. These are boom and bust markets—currently, they are busting.

What comes next is relatively predictable.

Macro Observations: As we step into Q2 2025, the U.S. macroeconomic picture is beginning to show meaningful signs of stress. First-quarter GDP contracted by -0.3%, the first decline in economic output since early 2022. This weakness was partly driven by a surge in imports ahead of new tariffs, which widened the trade deficit and dragged on growth. Businesses stocked up anticipating cost increases, but consumers now face tighter financial conditions and rising prices.

Inflationary pressure remains sticky. The PCE price index—a key measure watched by the Fed—rose to 3.6% in Q1, up from 2.4% in Q4. Meanwhile, CPI inflation held at 2.4% year-over-year. Job growth has cooled, with just 62,000 private-sector jobs added in April—the weakest since July 2024—though the unemployment rate is steady at 4.2%. Weakness on the employment front indicates more bad news ahead, and I think we are starting to see this reflected in the stock market and the 10-year treasury yield, which has retreated from its recent highs.

Key U.S. Economic Indicators – April 2025

The good news is that the administration and the Federal Reserve have indicated, at least in their own ways, that some relief is on the way.

The administration has begun discussing new tax cuts, notwithstanding potential impacts on the deficit. Tax cuts are generally good for the business environment (at least in the short term). Here are a few of the major highlights.

Extension of TCJA Provisions: The administration seeks to make permanent the individual and estate tax cuts introduced in the 2017 TCJA, which are currently scheduled to expire in 2025.

Corporate Tax Rate Reduction: A proposal to lower the corporate tax rate from the current 21% to as low as 15%, aiming to stimulate business investment and economic growth.

Tax Exemptions for Specific Incomes: Plans to eliminate federal income taxes on tips and Social Security benefits, and to make auto loan interest on American-made vehicles tax-deductible.

New York Post

No Federal Income Tax for Middle-Income Earners: A proposal to exempt individuals earning less than $150,000 annually from paying federal income taxes.

As of April 30, 2025, the Federal Reserve has maintained its benchmark interest rate at 4.25%–4.50% and has signaled a cautious approach toward future rate cuts. While the Fed's projections from March indicate an expectation of two quarter-point rate reductions later this year, the timing of these cuts remains uncertain due to several economic factors. I'm keeping my fingers crossed for the Fed to cut 25 basis points in June.

What's The Good Word: I was talking to the guy who supplies our plumbing and door hardware last week, and he told me that their prices are going up 8% today (May 1st) and if the tariffs stick, they will try to pass on a 25% increase.

I know I spent a fair amount of time last month discussing how tariffs are necessarily inflationary, so what do I think about that now? Did you see the inflation numbers this month?

Here is the thing: I have to buy plumbing and door hardware, but most of you don't, and if you were thinking about replacing hardware, you probably won't unless you have to.

Christine (my wife) recently replaced our garage door (that functioned perfectly) because she liked the aesthetics of 👇better.

If this garage door was 25% more expensive, we would still have our old garage.

This is an example of price elasticity of demand, or the measurement of the change in the demand for a product due to a change in its price. I have zero demand for my new garage door at a price that is 25% higher than what I paid.

Price increases, like the hypothetical garage example above, demonstrate that while the price may increase, the total number of units sold (for discretionary goods) will also likely decrease, potentially leading to a decrease in overall consumer spending.

That's not great for the economy, especially since 70% of our nation's GDP comes from consumer spending.

Remember the potential 25% price increase proposed by our supplier? Well, he told me Home Depot said no. They will have empty shelves before they pass on a 25% price increase.

Albertsons is taking a similar stance with groceries. Who knows where this ends up?

We have also seen the tariff rules change constantly; when it's all said and done, whatever tariff policy we end up with will not be as inflationary as most alarmists would have you think.

Full disclosure: This might be a cope. I long for the days of lower interest rates.

Project Updates: We have several active projects; here is a quick update on a few of them.

Nantucket, Tustin: COMING SOON! We hope to have this property (and 36th in Newport) in the next 2-3 weeks.

Once these deals close, I'll quickly summarize how they went and the lessons learned. In the mean time, here's a sneak peak.

Lucero Tustin: Big shout out to Michelle Wahler for pushing for this one. She identified a diamond in the rough. We closed on Monday on this deal for about $200k less than a neighbor is in escrow at for a model match property on the same street.

Thanks again for reading, and I would like to thank our agents and property managers who provide valuable insights from their day-to-day in the field. Without them, this email wouldn't be very useful or interesting.

If there is anything you need: vendors, lenders, or others, please let me know. We have an extensive network of the best and brightest in the industry.

I geek off this stuff; if you want to grab a coffee or chat about anything related to real estate, the market, or investing, please do not hesitate to reach out.

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