A few months ago, I wrote about the future 'shadow' rental market in my column for Builder & Developer magazine and the impact it would have on the traditional apartment market -- namely higher vacancies and a squeeze on rental rates that would see a return of lease incentives.
I recently lived through this 'shadow' market with a small income property I have in Long Beach, CA, which has been in my family since 1980. Located within two miles of both CSULB (30,000 students) and the beach, the occasional vacancy would never take more than a couple of weeks to fill. But when a couple of failed conversion projects hit the market, they suddenly unloaded scores of recently upgraded apartment units -- including granite countertops and new appliances -- onto the marketplace. Suddenly that two-week vacancy turned into over two months, and to fill it I had to forget about any price hike from the previous lease.
Similar stories are now hitting other markets throughout the country -- generally where the housing market was the frothiest. From an MSNBC story:
Renters may be the biggest winners in the current housing slump, especially in places like Florida, Las Vegas and Southern California, that have thousands of vacant for-sale and foreclosed homes and condos on the market.
Apartment vacancies are edging up in many areas of the country as frustrated sellers instead try to rent out their homes and condos in once red-hot housing markets. And that is making it harder for landlords to raise rents. In the toughest markets, apartment owners are even offering lease incentives to snag renters.
This "shadow market" of investor-owned homes and condos accounts for almost half of the rental stock, and attracts displaced homeowners more often than your typical apartment renter...
After staying relatively flat last year, apartment vacancies bumped up in the first quarter from the end of last year, the research showed. The vacancy rate is expected to rise by a half-percent this year to 6.1 percent as the market absorbs about 3.3 million more rental home and condo units...
The national trend, however, belies what's happening in the country's most beleaguered housing markets. Areas that experienced explosive condo development and conversions of apartments into condos for sale are finding those units unloaded onto the rental market because developers can't sell them.Sharp increases in vacancy rates plague most Florida markets where condo development was rampant. In Jacksonville, for example, rental vacancies spiked to more than 10 percent in the first quarter, up from 5.8 percent in the prior year. Orlando and Ft. Lauderdale had the next biggest gains in vacancies..
In San Diego, single-family homes being placed on the rental market are hurting luxury apartment communities, said Rick Snyder, president of the California Apartment Association.
The new supply is preventing some landlords from increasing rents, and other are even being forced to offer freebies like one free month with a one-year lease or upgraded unit fixtures...
But there could be some unseen risks behind these bargain shadow rentals. Renters who got homes or condos on the cheap may find a sheriff knocking at the door with an eviction notice if their landlord fails to pay the mortgage...
Meanwhile, renters in some of the costliest cities aren't getting any relief, to their dismay. Rents in pricey San Francisco surged 11.5 percent last year, while New York rents shot up 9 percent and rents in San Jose, Calif., climbed 8.7 percent, Marcus & Millichap said.
No comments:
Post a Comment