Renter’s New Leverage
In the same way a rising tide lifts all boats, a sinking one brings down those around it. With housing prices continuing to fall, renters suddenly have more leverage:
Early in the housing crisis, former homeowners were starting to rent again, supporting demand for rentals. Now, with more newly constructed condos being converted into rental units, landlords are struggling to keep buildings occupied. Apartment rents nationwide fell 0.4% in the fourth quarter from the third quarter — the first drop since 2003, according to Reis Inc., a New York City-based real-estate research company. Apartment vacancies rose to 6.6% in the quarter from 5.7% a year earlier.
In some major cities, the declines have been far steeper. In Manhattan, rents fell on almost all kinds of apartments in 2008. Rents of studio apartments fell 7.4%, and rents of one-bedrooms and two-bedrooms in buildings without a doorman fell 5.5% and 5.6%, respectively, according to a report released Tuesday by the Real Estate Group of New York, a Manhattan-based brokerage firm. In Miami, 60% of rents decreased in the fourth quarter, and 45% of rents in Los Angeles declined. Rents did buck the trend in a few cities. During 2008, rents increased 2.3% in Pittsburgh and 4.2% in Houston.
The increase in the vacancy rate, especially in major metropolitan areas like NYC, is significant. When I moved into my current apartment, I did so sight unseen - the apartment would have rented to someone else if we had waited till I could get off work that afternoon only a few hours later. To have the breathing room of a higher vacancy rate, and to actually be able to negotiate the monthly rent, is a welcome change.
The increase in vacancy rate is directly attributable to the flood of new inventory - since there is no movement in the housing markets, many homeowners are becoming accidental landlords. Finding a renter is a great way to make mortgage payments, hold onto the property, and await calmer times in the real estate market. This is difficult, though, when everyone is following the same course of action simultaneously; you then have a concurrently weak housing market and rental market.
The advantage here goes to those who have positioned themselves well for such a situation - those who are not tied down by a mortgage and have the flexibility to move to a new apartment. If this is you, there are some great deals to be had in this market.
