A number of readers pointed out an article in yesterday’s Seattle Times about “multifamily housing” (apartments) that’s full of the usual pep-talk and rah-rah-speak claiming that prices have nowhere to go but up, up, up, and isn’t that just wonderful!
With apartment vacancy rates declining and job growth increasing, real-estate investors are snapping up properties in anticipation of a three-year boom in the multifamily market around Seattle.
Local investors are beefing up holdings, and out-of-state investors are buying large buildings, even as developers take more apartments off the rental market and convert them to condominiums.
Dupre + Scott Apartment Advisors, a research firm in Seattle, reports apartment vacancies were 4.6 percent as of April, down from 6.5 percent a year ago. This is the first time the rate has fallen below 5 percent since 2001, the firm said.
Starting next spring, rates are predicted to dip below 4 percent and stay there through the end of 2008. Dupre + Scott expects rents will rise about 5.2 percent a year.
Condo conversions play into the dipping vacancy rate, Bosl said.
He cited Dupre + Scott data that indicate that in 2005, more apartments were converted to condos and taken off the rental market than new apartments were built and added to the market.
“Seattle is a favorite of the investment community now,” said Peter Larsen, a principal with Paragon Real Estate Advisors in Seattle, a firm that sells buildings with 10 to 100 units and typically priced from $1 million to $12 million. “People’s expectation of rising rents is outpacing their fear of rising interest rates.”
Larsen said mid-sized buildings his firm represents are selling faster, with some properties moving in only 30 days.
Of course, one thing this article doesn’t mention is how many condo conversion apartments have come back on the market as rentals as the “investors” try to turn a buck… That’s the kind of real investigative reporting I can only dream about in Seattle.
However, even if the claims made in this article are 100% true, I would still be convinced that renting is by far the better deal right now. You can get a pretty darn nice apartment for $1,250 per month—far less than even most interest-only mortgages on condos around here. Even if rents go up 5%, you’re only looking at an increase of $62.50 per month, barely pushing you over the $1,300 mark, and still a far cry from the cost of a mortgage.
So maybe mildly rents really is a win-win situation for everyone. Renters still pay far less than they would owning, and apartment owners turn a greater profit.
(Jane Hodges, Seattle Times, 07.08.2006)