Apartment market takes turn for better (for owners) in 2010
There's a lot of hand-wringing over the less-than-roaring economic recovery, the housing-market mess and the foreclosure crisis. But here's a group that's not complaining: apartment owners.
Employment is growing again, but not strongly enough to encourage people to relocate if they're already renting, which has kept turnover low. Home sales are way below where they were even a decade ago -- a plus for the guys offering an alternative to buying. And foreclosures are pushing people back into the rental pool.
I've got a story about the results here. Bottom line: Average "effective rents" are up more than 6 percent in the Baltimore metro area, according to one research firm, while rents in the upper end of the market rose 7 percent. That's being driven both by rising monthly rents and falling concessions, i.e. "first month free!" (Fewer concessions, in fact, are nearly half the story.)
The figures focus on apartment complexes, but rented-out homes make up a significant part of the rental market. That's trickier to measure. But it appears those rentals aren't seeing the same sorts of gains (if any gains at all) because there's so much supply in the form of homes up for rent by owners who can't sell.
I'm sure that varies a great deal depending on the neighborhood.
Speaking of neighborhoods, here's a photo gallery that biz editor Liz Hacken put together using RentJungle.com data on monthly rents in Baltimore communities. If you work your way through the gallery, you'll see which neighborhoods RentJungle says are the priciest. Most at the very top are pretty obvious, but one of the top five surprised me.
Do you think $1,357 a month is representative of Highlandtown? (That's slightly higher than the site's average for the Inner Harbor.)
I didn't draw on RentJungle data for the story, in case you're wondering, but I did a post about its averages in the fall of 2010. The site, which compiles rent ads from a variety of sources, was showing a lower rent increase year-over-year than research firms that track the industry.
Part of it may be differences in geography, and part of it could be the types of rentals tracked. But it looks like the concessions effect is a real driver. Apartment complexes were offering valuable givebacks in 2009, which effectively reduced the cost of their face rent, but those concessions have faded as the market improved.