Back when I was renting, I remember going to apartment showings that invariably ended in a race to see who could whip out their checkbook first, to write out the security deposit on the spot. Now that I’m on the other side of the exchange, I’ve been longing for those days to return (instead of an endless parade of showings, and people who respond to you several weeks later, with full confidence that the apartment is still available).
According to this article, that kind of market may be returning, for a number of factors:
“The good economy has resulted in significant job growth, as U.S. businesses have produced about 4 million new jobs over the past two years, and many are looking to rent. With the high prices and mortgage rates, many are opting to wait for the housing bubble to bottom out and home prices to tumble before buying a home, adding to the demand for rental units. Furthermore, there has been a significant growth in the renter pool as the baby boomers’s children graduate from college and strike out on their own. Finally, the effects of Hurricane Katrina have been felt greatly on many markets, as people have been forced to relocate to the surrounding areas. In fact, the Associated Press reports that the vacancy rates in Houston, TX have fell from 10.8% to 6.3% since the hurricane.”
Also, the current condo craze is also cited as a major factor:
“Well, for starters, during the past five years, many apartment buildings were converted into condominiums, particularly in Florida and Southern California. In fact, Ft. Lauderdale, FL has the highest occupancy rate in the country, 99%. Furthermore, the construction of new buildings is limited by high construction and land costs and, especially in traditionally tight markets like New York City, building permits are especially hard to come by. Therefore, there has not been sufficient construction of new apartment buildings to make up for the conversion craze of past years.”
What does this mean? An opportunity to start raising rents, less of a need to offer concessions, and hopefully vacancies that are filled more quickly (and with less work):
“With the increased demand for apartments and the limited supply of available units, rent has soared across the nation, as vacancy rates have fallen. Thus, rather than competing for tenants like in years past, landlords are no longer forced to jump through hoops to entice renters to their properties. Instead, people are practically knocking down their door and many landlords have waiting lists for people waiting for apartments to become available. I am on about ten of them myself here in D.C., where I am looking for a reasonably priced apartment, preferably in Dupont Circle, Georgetown, or Adams Morgan.”
The New York Times agrees, and says that rents are up by 4% nationwide, the largest increase in 6 years.
While I’m still not sure how the condo craze is going to shake out, and how much effect that will have on rents, vacancy rates, and small landlords like me, it looks like the outlook for the near future is good — a reward for sticking it out the past few years while things were tough.