June 14, 2017

The Declines Could Signal Saturation Of The Market

A report from AZ Big Media in Arizona. “Phoenix renters caught a slight break in May, as average rents decreased slightly from the high reached in April, according to Axiometrics. Some moderation in the market can be expected given the recent drop in job growth. Meanwhile, levels of new supply are high, with 7,076 new units identified for 2017 delivery. ‘Phoenix’s current rent growth rate might not have been impressive a year ago, but the overall moderation of the apartment market places it among the strongest performing metros in the nation,’ said Jay Denton, vice president of analytics for Axiometrics. ‘However, occupancy is trending downward, which may limit the ability for strong rent increases later in the year.’”

From Boston Agent Magazine in Massachusetts. “Boston might be the third most expensive housing market in the country, but average rent prices in the area have actually begun to trend downward. According to a recent RENTCafé report, Boston has now been closely following a nationwide trend. It turns out apartment construction rates have actually been booming all over the country. And Boston is no exception. According to Yardi Matrix senior analyst Doug Ressler, this growth doesn’t appear to be slowing down anytime soon. It also means good news for those who hope to rent in some of the country’s historically pricey markets.”

“‘Renters have much reason to be optimistic,’ Ressler said in the report. ‘After a long period of incessant rent increases, rents are finally slowing down — even in some of the country’s higher-rent cities, like San Francisco and New York. Even if demand for apartment living is still robust, rent growth will continue to taper off in the coming months, mainly prompted by the record number of new apartments entering the country’s tightest markets.’”

The Longview News Journal in Texas. “Longview apartment rents continued to drop in May, according to a new monthly survey from Apartment List. The declines could signal saturation of the market, said Karen Holt, housing navigator with Community Healthcore in Longview. Rents apparently are dropping in the Longview area because newer and higher-end properties are making it tougher for older properties to attract tenants, Holt said.”

“‘So they are seeing a decline in occupancy,’ she said. ‘Therefore, they have to adjust their rent.’”

“Holt said renters should not have to pay more than 30 percent of their income toward housing. The area median household income is between $56,000 and $57,000 a year. Using $650 as a hypothetical monthly rent, Holt said a tenant would have to earn $12.52 an hour to avoid paying more than 30 percent of his or her income. ‘Wages are going to have to go up or the properties are going to have to lower the rent a little bit,’ she said.”

The Jewish Voice New York. “Luxury apartments are dropping in price. Robby Browne of the Corcoran Group found this out the hard way when he had to drop the price of the two-bedroom condo at 15 Central Park West which he owned that he was typically able to rent out for $18,500 a month. According to him, whenever a lease was about to expire, tenants and agents would be clamoring to rent the apartment, and he never had a problem finding someone new to move in. Now, with the current real estate market, he not only had to refurbish the apartment, but he had to drop the rent down to $16,250 a month.”

“As he put it, ‘I thought, ‘Be sensible, Robby, the rental market is down. Put it on at a price that will work. I don’t like missing a month.’”

“After a huge increase in rented condos that led many investors to become landlords, there’s now a huge quantity of extremely high priced condo units available on the open market. Tenants are finding themselves able to get sweet deals in terms of rent thanks to downturns in the real estate market, where landlords are finding themselves having to drop rents to find tenants. Since 2015, the high-end rental market decreased 10%-15% according to Robby Browne.”

“According to Dorothy Somekh, who works with Halstead Property, the real estate market will remain ’soft’ until apartments currently without renters are finally rented out. She states, ‘The people who are going to rent [to tenants] are the ones that are going to make adjustments quickly.’ Jordan Sachs with Bold New York. He stays, ‘Our clients on the rental market are getting 20 percent off on some of these apartments. You’re dealing directly with an owner, not a professional landlord. All he wants is cash flow, and every day the apartment sits vacant is affecting his return on investment.’”

“One can find a plethora of expensive condos and other rentals in places like Tribecca and Chelsea in Manhattan which have long been attractive to real estate developers. But with the closure of many new developments just in the last year, these same rentals are now on the open market. As Jordan Sachs put it, ‘We’re seeing a flood of apartments $40,000 and higher.’”