Friday, October 13, 2006

Rental Market Heating Up WSJ Article

Bidding War May Be Moving to Rental Front

The country's apartment sector is seeing more bidding wars as tenants jockey for available rental units in increasingly tight markets.

Nationwide, rent for a 1,000-square-foot apartment has risen 3.7 percent in the last year to $1,389 a month, says Property & Portfolio Research Inc.

One of the main reasons for climbing rents is the reduced inventory of units, created in part by developers that built condos or converted rental stock into for-sale units during the home sale boom.

In the second quarter of this year, rental vacancy rates fell to 5.3 percent from 6.2 percent in the year-earlier period. This has produced what is known as a "landlord's market," with companies like AvalonBay Communities Inc. raising their asking prices and cutting concessions for incentives like a free month's rent.

Source: Wall Street Journal, Christine Haughney (10/11/06)


Crashcadia said...

Rental Market heating up.

Lets put it in perspective.

We have rampant conversion of apartments to condo’s but many of these are heading back to apartments as the housing boom turns to the biggest bust in history.

I think that many of the newly built condo’s will find themselves converting to apartments as well. We sure have a glut of them. They are even building million dollar condo’s in Auburn and Puyallup. I don’t think any millionaire is going to choose to live next to the train tracks in Puyallup or Auburn. Perhaps you could sell one to a wanna be millionaire who has debt in the form of an I/O loan to the tune of a million dollars. That should work for a few months before reality sets back in.

Next, we have flippers not wanting to rent out their flips so that they can fall into a different tax structure when they sell their speculative houses. This is also falling apart as they realize that house prices are falling year over year and that they are underwater on their loans.

Also we have your no doc and low doc ignorant buyers buying at the peak. Nationa wide, foreclosures are up 70% from last year. These people are heading back to apartments. But don’t worry; they will soon be able to rent the same houses they lost in foreclosure, as they will be sitting empty. Or they could just rent from those upside down flippers who will be begging people to rent from them so that they themselves can hold off foreclosure.

I wouldn’t touch any form of investment property unless you like to catch falling knives.
That goes for commercial real estate as well.

Wait for prices to get cut in half and then purchase them only if the rental income will cover the loan, maintenance, insurance, and taxes. Lets get back to what makes sense.

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