Last week I was interviewed by Angela King at Q13 about current rental market conditions and it looks like it surfaced this morning- click here for the entire clip!
I am glad the interview came up when it did because our rental market has been severely impacted by the decrease in sales activity and financial crisis. Hundreds upon hundreds of owners in the Seattle area have recently taken their condos and homes off the sales market and placed them into the rental pool in hopes of benefiting from our “stellar” rental market…but only to find out they are about 4-5 months too late.
Every Monday morning, SRG agents get together to discuss market trends/experiences and for the past 3 months, we have all been feeling the pressure of an oversupply, decrease in demand, and the dreaded reduction in rental rates. I personally started to feel this crunch in August when there were a couple properties that just wouldn’t move- properties that would have leased for $2500 months prior (and in mere weeks) were below $2000 and still sitting.
Here are a couple issues that come up during our discussions, please feel free to comment or contact me with questions.
Tightened Pocketbooks: Due to the financial strain and economic state, renters have definitely been paying more attention to their bottomline and planning for the worst. The most common scenario is that people are trying to consolidate and downsize in order to rent a 1 bedroom + den instead of needing a 2 bedroom or a townhouse instead of a home. Renters are more price sensitive than ever and in some cases lower rental rates are the motivating factor rather than quality of building or home finishes- could come down to a difference of $50!
Apartments vs Condos/Homes: We have two rental markets- the private market with individually owned condos and homes, and the apartment rental market.
One of the challenges the private market has in competing with the larger apartment buildings is the ability to offer specials like “1-2 Months FREE” or “waived security deposits.” Private landlords have the flexibility to reduce the rental rates to compensate tenants for such specials but in no way should reduce standard security deposits as they take on more liability when renting their property.
Some advantages the private market has is that the monthly rental amount often includes utilities, parking and additional storage. These items are covered in HOA dues and therefore passed down to the tenant in a lump sum or included in the monthly rental amount. This is easily missed by renters when searching so be sure to clarify what is included!
Note: Over 6600 apartment units are supposed to come on the market in 2009 and even more in 2010- just one of the many items discussed at the IREM Forecast Breakfast last Friday. One of the better Forecast Breakfasts I have attended!
Where Are All the Renters? What we could be experiencing right now is an extreme case of the cyclical blues in combination with all the above. We are approaching the dead of winter and typically Spring and Summer are the most common months for moving- so lets just hope that activity bursts in March! We are seeing signs of this and have been getting a lot of inquiries for Feb/March move-ins…just hoping that the properties available NOW, don’t have to wait that long.
So in short, we are advising all of our clients to be market sensitive and price aggressive. Renters have been starting their searches a lot earlier than in the past (1-3 month prior to their desired move-in) and rental rate negotiations are occurring left and right.
I hate to be a total pessimist so I will depart on this note… although this all may sound grim, relative to other markets, Seattle is still amongst the top in the nation!