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Saturday, April 15, 2006

Seattle Rents Predicted To Climb

Looks like at least some people are finally cluing in to the fact that jumping on the home ownership bandwagon might not be the best financial proposal out there and they're better off renting.

After several years of flat rents and high vacancies, the local apartment market is tightening, thanks to folks like Seattleite Matt Rivett. He's a 32-year-old aerospace engineer who ran the numbers on renting versus buying earlier this year after his first foray into house hunting.
...
Why buy, he reasoned, when steep house prices and rising interest rates make owning so much costlier than renting. That wasn't true a few years ago, and renters then chose ownership in droves.

Instead Rivett's happily committed to a rental duplex near Ballard that has "a beautiful view, all the amenities, for about half of what a mortgage would have been in a neighborhood further out, in a house I wasn't particularly fond of," he said.

Bucking the siren call of homeownership puts Rivett on the cusp of a trend that apartment expert Mike Scott says is one of the factors causing demand — and hence rents — to rise.
Okay, so rents are finally going to be creeping up in our fair town. Seems to me like they have quite a ways to go to catch up to housing, though. As Mr. Rivett points out, you can rent for quite a bit less than half of what a mortgage on a similar abode costs. Interestingly, the article cites the cause of increasing rental demand primarily as "the improving economy" and claims supply is being reduced due to "the condominium-conversion trend." "High housing prices" are mentioned only as "another factor." Well for this blogger they're the factor.

(Elizabeth Rhodes, Seattle Times, 04.15.2006)

15 comments:

baselle said...

Rents going up, but wages flat or falling, and perhaps real estate cooling off as interest rates rise. It makes watching the bubble pop a bit more interesting. Just make sure you get at least a year lease.

Anonymous said...

Or just move out of Seattle.

Anonymous said...

This sounds like another Seattle booster story. Not at all sure I believe it.

Really, first Lawrence Yun comes out and says RE is going to rise 30-40% in Seatle in the next year or 2. He's an NAR hack. Everywhere in the US RE is suffering a decline but, somehow, Seattle will continue with wild appreciation! All the while the price reductions are coming in fast and furious and most of what does sell is selling below asking.

Then it's "the Seattle economy is booming". Have you, or anyone you know, seen evidence of that? Most people I know are making the same or LESS than they were 3 years ago.

Now it's "rents are rising". Personally, I saw rents rise in Seattle a few years back- or at least try to. What happened when the landlords raised rents? People moved out and apartments sat empty for MONTHS. Everyone moved from the U Dist to Lake City or back home to their parents.

Now, with massive overbuilding, you're going to tell me that rents are going up? And people will actually pay those higher rents?

I'll believe it when I see it.

Personally, I think they are grabbing at straws here in one last vain effort to pump a market that is long gone.

The MLS is impossibly manipulated in Seattle to make it appear that the market is still HOT!!!!HOT!!!!HOT!!!

Face it folks, the good people of Seattle have been targeted as a bunch of chumps who will believe any crap that is thrown their way.

Anonymous said...

I rent, and while rents are going up, I think it has a lot more to do with declining supply than increasing demand (for now).

In Ballard, I've watched three nearby rental properties "convert" to condominiums in the last two years. Meanwhile, my apartment building (and those near me), continue to raise rents, like clockwork. Where are we going to move to avoid the increases?

That said, I think the condominium market is extremely speculative right now, and I wonder what will happen when all of these new condos are being sold into a falling market. Will we see "re-conversions" back to apartments?

Incidentally, I just saw a big, red "RE-PRICED" sign in Fremont, of all places. Could this be the beginning of the end?

S Crow said...

Anon-12:24:

The Lawrence Yun (NAR economist)was again quoted in an article a few days ago at Inman News. If I recall correctly he talked about the 'only area' where there may not be a pronounced market correction DOWN was in mid-America where prices have risen, but not nearly the pace of the coastal major cities.

I just about choked on my sandwich, thinking...wait a minute, you just were quoted in the Seattle Times a few weeks ago saying that Seattle was going to experience a "30-40% increase in median price over the next two-three years." What? Thirty to forty percent over $400K?

And now Lawrence says the mid-America states will be the only areas where there won't be a pronounced drop? What changed in the last several weeks?

My observation in noticing this discrepancy obviously was noticed by others too.

Tim

Anonymous said...

Yup. Saw that too, where he's finally laid off Seattle.

But I knew when he said the 30-40% that he was lying through his teeth.

The same month that he said that, Comcast was doing a little schpiele 5 minute interview with him and some guy in Seattle. You could see very plainly that Mr. Yun was lying as he squeamed and squirmed about how solid the Seattle RE market was.

The interview was classic early "60 Minutes" stuff where they'd corner liars. But that little piece was shown over and over for at least a month last Fall.

In fairness to Mr. Yun, this was also at the time that the NAR itself was loudly proclaiming that NOWHERE in the US would see depreciation, just slowing appreciation.

My, my, how things have changed in just a few short months.

Anonymous said...

Don't worry about rents going up. There are going to be plenty of condos and recently converted apt/condos that will be puked back on to the market as rentals in the coming months.

I would not be at all surprised, if renters are willing to play hardball with landlords, that rents could actually come DOWN.

Be smart, save that rent money towards a downpayment on a home, if not Seattle, then somewhere else- after the market crashes.

Our game of inflationary prices just to put a roof over your head is turning. It wasn't always like this, a roof used to be affordable for both buyers and renters alike.

It will be that way again.

seattlerenter3 said...

Once again, the Seattle Times has taken a kernal of truth and wrapped it in horse dung.

Yes, renting is definitely the better bargain in comparison to buying right now. However, I think most people here would take issue with the idea that rents are rising even slightly.

I live in a converted house-triplex. There are three apartments here and at the end of this month, two will be vacant. I can look out the window and see "For Rent" signs all over the place. And if I needed to move, I could find another rental across the street or a few houses down. It seems that "For Rent" signs are all over the place!

I could not imagine what my landlord goes through, knowing that he's not making anywhere close to what he needs for the mortgage but also knowing that competition for renters with good credit and some sense of longevity (the last place I stayed in for 2 years) is fierce in this town. And even with all of the condo conversions, there is still more rental supply than demand out there.

Maybe it's just my personal experience; I could be wrong. But even a cursory glance at Craigslist or the Stranger shows a ton of rentals of all types out there. Even with the "good job market" and expensive house prices, it's only a matter of time before this situation gets ugly.

T.S. said...

I can't speak for apartment rentals, but we rent a house in the Ravenna/Maple Leaf area and have been watching comparable "for rent" announcements very closely. Rents are not going up here. If anything, we could get a better deal if we wanted to move.

Here's an example: Down the street, a large 3-story Tudor was just rented. 4 bedrooms, 2 bath, fireplace, dining room, 2,000+ square feet, garage, yard, deck.

The asking price was $1,700. I've seen the house and it looks really nice -- would sell for over $500K, possibly $600K. Is it the same in other parts of the city? That's just a crazy inversion of mortgage vs. rental.

previous seattle renter said...

Well here's a story of renters getting deals in Seattle:

A couple years back, when the U Dist. was covered with "for rent" signs after a huge run-up in rental prices that forced everyone to move out, I and a friend of mine were both offered "deals" to STAY.

My friend, when he gave notice to management was offered a $125.00 REDUCTION per month in the rent he'd been paying for the previous 2 years.

I was offered a $225 (!!!) per month reduction in my rent if I would stay.

With all of the over-building and fipped and "investment" properties, it is hard to imagine that rents have anywhere but down to go in Seattle.

Especially if you live in a place with vacancies, tell them you're leaving and see what happens.

Eleua said...

Let's say rent is $1500/mo, and your lease is up in a few months. Your landlord needs to raise the rent to cut into the $2500/mo he is subsidising you (it costs him $4K/mo to carry the property). He now wants $1667/mo and you walk.

He could have kept you at $1500/mo or $18K/yr, but now he has to list the property at $200/mo, and have it cleaned and prepped for the next tenant (probably $2500). The house will likely go vacant for 3 months, and that is if your lease was up in the spring. If your lease expires in Sept/Oct, count on 5 months or more on the market.

He is out 3 months of $1500 rent, $2500 in preparation costs, and $200 in advertising. Factor in another $150 to carry the property in management fees. That is $8K out of his pocket, plus his negative cash flow. It would take him 4 years to make that up with the new rent, providing he finds tenants that are creditworthy and won't trash the place. Most people like that are buyers rather than renters.

Absent a massive influx to the area, rents will not likely go up. The more desparate they are, the quicker they will cut each others' throats.

Anonymous said...

seattlerenter3 is correct. There are "For Rent" signs everywhere I look, and my own building is nowhere near full - I've heard the owners talking about renting some rooms by the DAY. The papers have been screeching for months that rents have to go up, in order to please their masters in the real estate advertising business. Don't let them worry you. Rents are going nowhere.

Anonymous said...

Condo conversions are being turned back into rentals in FLA. as we speak.

There's a link to the article on todays "thehousingbubbleblog".

nwcoastguy said...

The converting of apartments into condo's definately hurts renters. I was in South Florida prior to coming out here and rental associations were more or less saying they were raising your rent %5 a year in the coming years.

This was a year ago. I could only afford a dangerous living situation there due to the high costs in S. Florida. The cost of living vs. wages there was ridiculous. My how things change.

Still, I think prices have been careening higher and higher here. I was apt. hunting in Georgetown and the the prices are ridiculous there as well for living in what amounts to a bombed out neighborhood. Columbia city and Beacon are slightly better but still nothing special for the price.

I'm afraid there are enough "hip" zones around here that people will pay for the experience at sometimes ridiculous prices. I think one thing that's very different here from S. Florida is the number of people splitting places or sharing space. It would get you killed in S. Florida if you did too often but here it's different. Still, when one considers that a lot of the listings here for "1 bedroom" apt. really turn out to be "1 bedroom" in a house full of strangers, I think the market's really high for what you get.

Anonymous said...

Yes, apt. rents are very high in Seattle for what you "get". They first zoomed up around '96 when RE started rising fast and new owners had to cover their costs.

Then they went up from there til renters began leaving. It just got too expensive to rent in Seattle.

Then they dipped down a bit.

We'll see what happens next.