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September 28, 2010

Apartment market might be stabilizing

It's been a pretty good couple of years to be a tenant. Annual rent increases, about 5 percent in the Baltimore metro area right before the recession hit, fell to practically nothing by some measures (and into negative territory by others) as job losses and doubling up caused vacancies to mount.

But a summer survey by Rent.com suggests that the balance of power has stopped shifting toward renters. Just over 40 percent of rental property owners say their vacancy rates are dropping, the site says.

Thirty-six percent are offering a free month of rent or more as an incentive, but that's down significantly from the 65 percent doing the same last year. Sixty-three percent with properties in the Northeast and 50 percent in the Southeast thought rents would rise in the next 12 months.

Red Capital Group, a multifamily financier, said in a separate report that demand for apartments in the Baltimore metro area -- which was falling in the first quarter -- rose in the second.

For all the landlord optimism, they're seeing a trend that normally bodes ill:

Tenants' financial situations -- as measured by their credit scores -- continues to worsen, Rent.com said. Just over half of survey respondents said prospective renters' creditworthiness declined this year, which is really something considering that it comes on top of widespread deterioration last year.

I wonder how many of those applicants are former homeowners whose credit scores were dented by short sales, foreclosures or strategic default.

These have been unusual times for the apartment market, like everything else in this economy.

When home sales are falling, you might expect good times for landlords because people have to live somewhere. But high unemployment has chipped away at the number of people who can afford to live on their own, and it's made the employed more anxious about their situations -- redefining what "live somewhere" means to folks. Pairing up with roommates. Staying home with parents. You name it.

That means job growth is the key to turnaround. Employers in Maryland were adding jobs this spring, but some of those gains disappeared in the summer.

Renters and landlords: What trends are you seeing out there?

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (8)
Categories: Renting
        

Comments

I'll be renting until fall next year at least.

As a renter since August 2009, I saw my rent go up drastically in this most recent renewal. I reside in Columbia off Columbia Road at an Avalon community and when my lease came up for renewal and I saw prices went up quite a bit, I made an inquiry with the leasing office. They claimed "market conditions were improving" and that all lessees in the community would see an increase in their rent at their next renewal. Needless to say, it's quite surprising. Oh, the best part was that if a 12-month lease was signed, it came with the largest increase in rent. Instead I chose the 8-month lease, it had the lowest increase in rent.

I find these stats strange. There are tons of rental properties - half of the harbor strip is vacant, the new towers around Camden Yard too, the new neighborhood above Little Italy too. I am sure rent.com uses the most recent scientific methods, but are there the sources out of the field with some data?

Mickey, the Rent.com survey was nationwide, so mileage may vary at a local level. The Red Capital Group report suggests that demand is stabilizing in the metro area, but again, that varies from neighborhood to neighborhood.

Are you noticing MORE vacancies? The thing about "stabilizing" is that it doesn't mean "back to normal" -- just "not getting any worse."

Yes, I am noticing a lot MORE vacancies in and around the city.

Maybe the landlords just want to recoup the rising costs, but I don't buy the stats.

That's interesting, Mickey -- thanks for sharing. I'll keep an eye out for more city-specific numbers.

Jamie, as a property manager my community is stable if not slightly better than last year as far as occupancy is concerned. Renewal increase range from $10 to $40 depending on apt type. That being said we have had to become more accomidating with rent payments. Offering programs to residents that were normally on time and due to the economy have become late payers. We have also seen bad debt rise as many who we have tried to work with realize they just can't and skip out.
In regards to Rent.com it may just be that they are using the communities that are on their website and not all communities.

I am searching for an apartment in Baltimore and have found slim pickins. I prefer an apartment within a renovated, older house but see very few. I am not an apt. complex dweller and want to know should I be searching in a different way to find this type of apartment home?

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie
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