Location: Santa Cruz-Watsonville, CA | Metro: San Francisco, CA HUD Metro FMR Area
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,870 |
| 1 Bedroom | $3,190 |
| 2 Bedrooms | $3,930 |
| 3 Bedrooms | $5,140 |
| 4 Bedrooms | $5,780 |
| 5 Bedrooms | $6,705 |
| 6 Bedrooms | $7,510 |
| 7 Bedrooms | $8,111 |
| 8 Bedrooms | $8,517 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $3,930 | $969,450 | 0.41% | F |
| 3BR | $5,140 | $1,353,385 | 0.38% | F |
U.S. Census Bureau data (2024)
A skeptical investor considering Pescadero, CA (ZIP 94060), might raise several objections regarding the feasibility of investing in rental properties here. Let's address these concerns using available data.
Objection 1: Will FMR $3600 (zip FY 2024) cover the mortgage on a $1,204,458 home?
The Fair Market Rent (FMR) for ZIP 94060 is set at $3600 for fiscal year 2024. This figure represents the median rent for a two-bedroom apartment. To determine if this will cover the mortgage on a home valued at $1,204,458, we need to consider typical mortgage rates and terms. Assuming a 30-year fixed-rate mortgage at an average rate of 5%, the monthly payment on such a home would be approximately $6,300. Clearly, the FMR does not cover the mortgage payment, indicating that renting out a home at this price point may not be financially viable solely based on the FMR.
Objection 2: Is there enough renter demand at 30.4%?
Renter occupancy stands at 30.4% in ZIP 94060. This percentage suggests that roughly three out of ten households are renters. While this may seem low compared to urban areas, it is important to note that Pescadero is a small coastal town with a different demographic profile. The demand for rental properties is still present but limited, and investors should focus on properties that cater to this niche market. Additionally, the town's proximity to Silicon Valley can attract seasonal or part-time residents seeking a quieter lifestyle.
Objection 3: Will vouchers keep pace with $850 market rents?
The average market rent for a one-bedroom apartment in ZIP 94060 is around $850. However, voucher amounts are typically lower and do not always match market rents. According to recent HUD guidelines, the Housing Choice Voucher program aims to cover 30% of the area median income, which may not fully align with the $850 market rent. Landlords accepting vouchers must ensure they understand the potential gap between voucher payments and market rents. It is advisable to check the latest HUD voucher amounts specific to the area to make an informed decision.
In summary, while the FMR of $3600 is insufficient to cover the mortgage on a $1,204,458 home, there is a modest level of renter demand at 30.4%. Furthermore, voucher amounts may not keep up with market rents of $850. Investors must carefully evaluate their financial goals and the specific characteristics of Pescadero's rental market before making investment decisions.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). Demographics from U.S. Census (2024).
About FMR: Fair Market Rent (FMR) is used to determine payment standards for the Section 8 Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, and rent ceilings for HOME Investment Partnerships.