The Rent Won’t Be Too Damn High For Long

Are you a Seattle-area renter who feels like rents have been going up too quickly the last couple of years? There’s a great article by Eric Pryne this morning in the Seattle Times that you should read: Ballard’s apartment boom comes with risks

Seattle’s apartment boom extends far beyond Ballard. Nearly 8,400 units are under construction in the city now — the largest number in at least 20 years, according to Dupre + Scott.

Developers are building them because demand has risen, led by a demographic surge of young adults who prefer in-city living, at a time when there’s little new supply.

Few projects were built during the recession. The last new complex in Ballard opened more than two years ago.

Wait how did he get here.But analysts such as Cain and Dupre + Scott’s Mike Scott forecast that, in a year or so, all the new construction will start to tip the balance between demand and supply.

Vacancies will rise, they say. Rents will stabilize, perhaps drop. Landlords will start offering tenants concessions like free rent again.

And the turnaround could be most dramatic in neighborhoods like Ballard where developers have been most active.

“That submarket is getting an awful lot of product in a very short time,” says Scott. “It’s bound to have an impact.”

“It … could be a disaster,” Cain, whose clients are mostly landlords, wrote of Ballard nearly a year ago.

“Except, of course, for the tenants.”

It’s definitely worth reading the whole thing. It definitely sounds like the apartment rental market is going to get a lot more competitive (in renters’ favor) soon.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    Keith says:

    Oh no! The risk of stabilizing rent? Everyone run for the hills.

  2. 2
    wreckingbull says:

    Had to do a double-take on that photo of my old neighborhood. I thought they accidentally pulled an AP stock photo of Beirut.

  3. 3
    Eastsider says:

    I believe one reason for the apartment build-up is due to very generous incentives from the city.

  4. 4

    […] That’s the opposite sloganeering spin of Seattle Bubble, where the headline is “The Rent Won’t Be Too Damn High For Long.” […]

  5. 5
    David Losh says:

    What’s interesting is that these apartment buildings are selling as fast as they are being built. The return to an investment group, from what I’ve read is 6%. The back end, which I guess would include the resale of the building is quoted at a 16% return.

    It seems to me that a well run apartment building, or complex is a pretty safe investment.

    The second thing for Seattle is that we have thousands of high paid contractors. It makes sense that they would rent rather than buy, or until they feel secure enough to buy.

  6. 6
    Dave0 says:

    Yep. Developers have forgotten what happened 5 years ago and are a bit too excited about multifamily projects. I just did some research on the Downtown Bellevue market for an appraisal I’m working on and found that apartment vacancies have already started to rise (from 3.2% in late 2010 to 4.7% now). Meanwhile, the number of apartments being built is so high that the inventory of rental units is going to increase by 50% by 2015. I’m afraid some developers are going to lose a lot of money in a few years.


  7. 7

    RE: Dave0 @ 6RE: Eastsider @ 3 – Part of it is simply that we don’t have a centrally planned economy. That’s why it tends to go in boom/bust cycles. When something is a good idea too many people do it, leading to excesses.

    Not that a centrally planned economy would be better, or even prevent this type of excess in all situations. China may be going through this now.

  8. 8
    wreckingbull says:

    RE: Kary L. Krismer @ 7 – I’d venture to say that we indeed are living in a planned economy, and that (poorly) planned economy is exactly what is causing our whip-saw cycles. Part of the reason “it is a good idea” is due to short-sighted incentives, whether in central banking or local planning departments.

  9. 9

    RE: wreckingbull @ 8 – The low interest rates are almost certainly a factor, but I meant a bit more precise planning, not just incentives to do things. Actually dictating what gets built where.

  10. 10
    softwarengineer says:

    My Daughter Has a Y Generation Friend From Kansas

    Yeah, he makes the typical Y generation $10-12/hr [no medical benefits] wages….but can fly down to Seattle, pay for all my daughter’s dinners out at Seattle menu prices and stay at a local hotel too. It must be nice for him paying like $300/mo rent in the midwest….

    Much of our young single locals are too cheap or broke to afford dating anymore, even with the women paying half…..$2000/mo rent, sounds like rents only the top 1-5% can only afford and most of them already own a home….how do Seattle’s Y generation squeak by?

    Food Stamps?

  11. 11
    redmondjp says:

    RE: Kary L. Krismer @ 7 We may not have explicit central economic planning, but it has been going on for decades, via organizations such as the Bilderbergers (google their attendee lists and you’ll see what I mean).

    As far as housing goes, we are witnessing the implementation of (global central planning) UN Agenda 21 right before our eyes – look at what has happened to downtown (fill in your city here) over the past 15 years. Downtown Redmond is no longer recognizable and that is our housing future. The City of Redmond has even hired a planner to figure out how much carbon dioxide that I am exhaling every day (no joke – but I’m sure they are doing other important things as well).

    And who is pictured at the top of this entry? He looks like a certain controversial Eastside pastor.

  12. 12
    wreckingbull says:

    By redmondjp @ 11:

    And who is pictured at the top of this entry? He looks like a certain controversial Eastside pastor.

  13. 13
    chrisM says:

    RE: wreckingbull @ 12 – Funny, I’d seen him on YouTube, but never read the wikipedia entry until you posted it. I find myself agreeing with most of his positions!

  14. 14
    chrisM says:

    RE: Kary L. Krismer @ 9 – Kary, I’m kind of surprised you’d state there was a lack of planning. It is probably a cultural thing, down in Arizona & New Mexico there was basically no planning at all.

    Here in Washington (I’m in Clark county) I see a *ton* of planning. Of course, not all planning is good – we have a newish Vancouver housing development literally adjacent to a dairy lot!!! Run Google Maps on 4507 NE 162ND AVE, VANCOUVER, 98682 or check out the county record at:

    300+ acres of dairy smack dab next to 2004 houses. Idiocy.

    Centrally planned rental stupidity in a Portland suburb:

    “Three years after it was built, Washington Street Station is no longer vacant. A Pacific University dental student moved into the 20-unit complex along the MAX line Friday.”

    I have to monitor the urban growth boundary and protest city incursion. I see planning as nothing more than the county/city taking their cut from developers. Maybe this is why Clark was one of the fastest growing counties in the nation a few years ago?

  15. 15

    RE: chrisM @ 14 – I’m not talking about zoning and such. I’m talking about the decision to build these apartments. You don’t have one entity making the decision, but instead have many making the decision, not necessarily knowing about the others in a timely basis.

    As far as the city is concerned, they probably want as many apartments as the infrastructure will handle, because that will lead to lower housing costs. And they probably want that 100% of the time, even during times there’s already a glut of housing.

  16. 16
    D.G. says:

    RE: softwarengineer @ 10
    My own perspective from Generation Y- it’s not necessarily easy getting established in Seattle, but your assessment is overly bleak. Work hard, do a good job, and you won’t have any problems- Seattle has jobs. Can’t afford $2000/mo rent? No problem- live on the eastside where you can easily rent for $600/mo. Or find room mates.

    I personally think the recession/ housing bubble has been a tremendous opportunity for those of us in GenY with a little money and some risk tolerance. Prices across the board have been so depressed (think cars, stocks, furniture, homes) that I see great deals to be had. I bought an SUV during the height of the gas crisis, sold it a couple years later for a PROFIT. I went all-in on my 401k plan when the market was nearly 40% lower than where it is today. Given low interest rates and lower home prices, I found it very easy to buy a home this year given I didn’t have one to sell. GenY is young enough that we will most likely see a recovery during our working lives- we need to plan for that. The issue is our generation can’t react to what’s in the news- we need to focus on what’s next.

    It seems like the rental market is just playing to the “recession lifestyle” as much as the housing market was playing to the pre-recession credit boom. As I evaluated my living situation, I didn’t see renting in Seattle making any financial sense the last couple of years. I was paying close to $2k renting an 800sqft apartment in Northgate, I’m now paying 25% less on my mortgage, taxes, and insurance for a mostly renovated 2500 sqft home in Ravenna and I don’t need to worry about $200 rent increases every year.

    This apartment bubble has been blindingly obvious for about 2 years now… you could call this as soon as the 10% rent increases started.

  17. 17
    HappyRenter says:

    By Kary L. Krismer @ 9:

    RE: wreckingbull @ 8 – The low interest rates are almost certainly a factor, but I meant a bit more precise planning, not just incentives to do things. Actually dictating what gets built where.

    It’s interesting how somebody can get so many “thumbs down” just for hinting that we could benefit from some more (and better) planning. Maybe, we need a culture of more preservation? Wasn’t Ballard supposed to be a historic district? Can somebody please point me to where I can find history in Ballard?

  18. 18

    RE: HappyRenter @ 17 – It’s apparently also people without brains, because they cannot write about why they disagree. Just a bunch of knee jerk reactionaries.

    That was also the case on my comments about MERS in recent open threads. Knowing little, they think everything about MERS is bad and evil. Or posts 4 and 7 in the Case-Shiller thread, where posting facts about property taxes got at least three rather unintelligent uneducated members of our community to vote thumbs down.

  19. 19
    Yob says:

    Hey so have rents subsided to pre-spike levels yet?

    Because this was over 3 years ago.

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