i bought a duplex (!)

Fallout from the foreclosure situation: rents are falling fast

It’s been all over the news lately: rents are declining. The foreclosure crisis is creating more and more vacancies; many people who would otherwise sell their homes are forced into becoming landlords (renting out their properties in lieu of selling at a loss), and overconstruction in the condo market has caused more supply than demand. Some articles claim that falling rents are the sign of something even worse: deflation. I’m no economist, but I know enough to understand that deflation is a very, very bad thing.

However, on the bright side, articles like this one in Business Week claim that the hardest hit properties are luxury high-rises, especially in places like Manhattan, which is a ground zero of sorts for all that’s wrong with the economy right now. The article reports that landlords have lowered rents as much as 20% to lure tenants into their properties. I’m hoping that more modest accommodations are largely untouched. From a quick search on Craig’s list, rents don’t look significantly lower than last time I looked. I do, however, notice a lot more ads for “house for rent” than usual.

According to a related report, also on Business Week, my metro is in the list of 25 large metros where rents declined most in the end of 2008. It’s lower on the list, but still made the list. According to the entry on my metro area:

Rent drop: -2.1%
Q4 2008 rent change: -2.5%
Q4 2007 rent change: -0.5%

The unemployment rate climbed to 5.6% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate jumped to 5.5% in the fourth quarter last year from 4.4% in the same period in 2007. Landlords on average are giving 2.7 weeks of rent concessions.

Rent concessions. Yikes. My tenants are in a lease until the end of June, so hopefully they’ll just stay put. Interestingly, when my previous tenants moved out, I was able to easily find tenants who were willing to pay $50 more per month. Perhaps I was undercharging my previous tenants. However, I’ve always been of the mindset that I’d rather keep good tenants staying put than try to get $25/month more. Turnovers are a lot of work, and can be costly as well, with screening fees and turnover-related maintenance.

Or, maybe this whole economy thing will be fixed by the end of June and rents will start going up again. Here’s hoping

Related Articles:

• Cosigners, a signed lease, and a successful turnover
• The would-be, could-be landlord.
• The cost of the housing market "correction"
• Home sellers are the ones giving incentives now...
• Subprime-mortgage crisis government aid...a handout? or a safety?
• Duplex - a better investment than a condo or single family home?
• The McMansion is (finally) falling out of fashion?
• So, the rental market is getting a bit better. But (predictably), condos are getting in the way.
• No longer a speculator's market
• Flipping Condos - Are all of the speculators in trouble?
• Rents Rising?

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Entry Filed under: The Rental Market
Technorati Tags: falling rents rents declining rents lowering rent rent declining overconstruction deflation foreclosure rent concession landlord tenant rental housing market rental property apartment duplex