Rents to Drop in Seattle in 2008?

[george]

Rents are creeping up just a bit this year. Will rents to continue to edge up, or will they drop as the Seattle housing market levels off in 2007-2008?

Here's the sobering news for real estate investors who were counting on double-digit price increases and think a recovering rental market is going to bail them out:

"The glut of U.S. properties for sale is about to hit the rental market.

A record number of homeowners who can't sell condominiums and houses are competing for tenants with the country's biggest apartment owners, led by Chicago-based Equity Residential, said Jack McCabe, the founder of Deerfield Beach, Fla.-based McCabe Research & Consulting.

Vacant rental apartments rose to 6.1 percent in the U.S. during the first quarter, the most in almost two years, even as the average monthly rent reached a record $991, said Sam Chandan, chief economist of New York-based real-estate research company Reis."

http://seattletimes.nwsource.com/html/r ... ts06.html'

[meshugy]

Hi George....it's important to not conflate the local market with the national one. Seattle vacancy rates are plummeting and rents are skyrocketing and are predicted to do so for many years:

It's a different picture in the Seattle area, where the strong economy and demand for housing have dropped apartment vacancy rates to their lowest in six years. The vacancy rate is 3.9 percent in King County and 4.0 percent in Snohomish County, according to figures recently released by Dupre+Scott Apartment Advisors in Seattle. The average rent for King County is at $946 a month, and for Snohomish at $854.

[deejayoh]

yes George. don't conflate them.

there is the nation, and then there is Seattle. And Seattle means just Seattle, or King County, or the Seattle MSA, and sometimes a single block in Ballard. It depends on which statistics work best, and which side of bed I get up on in the morning.

Just like home sales, which are down for King County, and up for Seattle. See, there Seattle is different, but King County is part of the country. But for rents, King County is different, and Seattle is part of that.

Do you see?

Please check your facts before posting.

[george]

[deejayoh]

Actually, when you look at the data - fluctuations in rent have just about nothing to do with fluctuations in home prices.

I looked at 20 years of data for the 4-county Puget Sound Region comparing the change in rent vs. the change in housing prices. The correlation between the two is 28%. In other words, very slight.

So Shug can keep posting about rents, and others can keep arguing about the data (which I agree is probably crap) - but fundamentally, the premise of the argument is FLAWED. The reality is that history shows that rents in Seattle pretty much move independently of home prices. Tried 'em one year staggered, two years staggered, rents ahead of housing. Zip, zilch, nada. Results barely out of the range of random.

I used to be of a mind that they were inversely correlated - but stand corrected. The facts indicate this whole topic is pretty much a tempest in a teapot.

Rent Housing
1986 6.6% 3.6%
1987 7.2% 7.2%
1988 5.9% 6.9%
1989 7.4% 19.5%
1990 8.2% 22.7%
1991 5.8% 1.1%
1992 3.7% 1.4%
1993 3.4% 6.3%
1994 2.0% 4.3%
1995 2.0% 3.2%
1996 2.8% 2.4%
1997 6.0% 5.6%
1998 7.3% 9.2%
1999 5.5% 9.5%
2000 5.4% 6.1%
2001 5.8% 2.1%
2002 0.6% 6.4%
2003 -0.7% 4.3%
2004 -1.2% 10.1%
2005 2.0% 15.4%
2006 4.3% 11.0%
Correlation: 28.1%

[meshugy]

[sniglet]

[deejayoh]

[Lionel]

[george]

[deejayoh]