I should at least mention the local news reports about the latest Dupre + Scott rental survey. Here’s the meat of the report, courtesy of Aubrey Cohen at the P-I:
The King County vacancy rate hit 3.8 percent this month, down from 3.9 percent in March and 4.2 percent in September 2006, according to Dupre + Scott Apartment Advisors, a Seattle company that tracks the rental market.
“That’s not the lowest rate we’ve ever seen, but vacancies weren’t lower very often in the past 20 years,” report co-author Patty Dupre said in a statement accompanying the report.
The average apartment rent in the county is $1,001, up 6 percent from the spring and 9 percent from last fall.
Elizabeth Rhodes also had an article on the report, but it’s not even worth quoting, as the entire thing is nothing more than the most extreme cherry-picked statistics all strung together.
As I said when last quarter’s report came out, the current trend in rising rents is entirely predictable and to be expected. As home ownership took off, rents have been artificially low. One would expect them to correct up as the ability to commit financial suicide diminishes, thus keeping people renting and sending never-should-have-been home “owners” back into the rental market.
It’s possible that with the current turmoil going on in housing, rents will slightly over-correct, but in general I still expect the 8-9% YOY increases to taper off to a more sustainable 3-5% by this time next year. As I’ve stated before, rent increases are necessarily tied to incomes (i.e. – you can’t use exotic financing to pay your rent), and therefore while they can certainly rise more slowly than incomes, they can’t rapidly rise out of control like home prices have.
It should also be kept in mind that the Dupre + Scott report polls only apartment complexes of 20 units or more, and therefore does not account for the ever-increasing market of rentals created by condo and house “investors” (or “owners” that must move) who are unable to sell in the down market, and instead resort to renting out their unit to cover at least part of the mortgage.
For the first time that I’m aware of in the local media, Mr. Cohen actually addresses this at the end of his article:
[Epic Asset Management VPO Bill] Austin speculated that problems in the mortgage market would force more people back into rentals in coming months, but said that could be balanced by condominiums coming back on the market as rentals, a slowdown in condo conversion and change of some planned new buildings from condos to apartments.
Speaking of condos converting to apartments, it looks like the “repartment” trend that’s sweeping the nation has finally come to the Seattle area:
A reader brought this to my attention. At first I was a little skeptical but have since confirmed that the Max Condo in Greenwood has pulled the plug and is reverting back to apartments.
It seems sales during the first three weeks did not meet expectations. Which is a bit surprising as Greenwood area condos sell very well.
Thanks to Lumpeninvestor for pointing that one out in the comments.