Dupre + Scott’s 2014 Rental Market Forecast

With January already halfway gone (have you gotten used to writing 2014 on your checks yet?), we thought we’d check in with Dupre + Scott to see how their rental market forecast for the coming year was shaping up. This data is courtesy of last month’s Apartment Advisor. Let’s see what 2014 (and the next few years after that) might have in store in five key areas affecting the market.

Employment

Over 52,000 jobs were added in the Puget Sound region in 2013; Conway Pedersen predicts that another 52,000 will be added over the next year. Much of that growth (about 37,000 jobs) will be concentrated in King County, but all counties in the region could see a 2 to 3% increase in job rates. Looking further down the line, Conway Pedersen is predicting that the region will see about 194,200 jobs added over the next five years; that’s an improvement over last year’s prediction.

Apartment Demand

So just how does employment relate to demand? 2013 saw about 7.8 jobs for every occupied apartment. Based on that rate in conjunction with current demographic trends, Dupre + Scott is predicting that about five new jobs will correspond to the demand for one unit over the next few years, resulting in about 40,000 new renters within the next five years.

Gen Y and the Boomers

Let’s talk about the renters. The influx of Gen Y adults into the rental market, the effects of which have bolstered the market over the past year, should continue steadily through 2014. Most people ages 20-34 still prefer to rent their home; and currently there are about 570,000 of these young people living in the region. That’s a lot more than during the last development boom! Then there are the retiring Boomers. Over the next five years, just about 45,000 people in our region will turn 65. These waves of retirement frees up jobs for young workers, who in turn are able to afford to live on their own–and they prefer apartments. And not all of these Gen Y kids will have grown up in the region; plenty of professionals will move to the area as well. Conway Pedersen predicts that net migration will total 100,000 people over the next five years.

Development and Supply

According to Dupre + Scott’s Apartment Development Report, at least 38,000 new units will open over the next five years, with an average of 7,600 units per year. Of course, this number is dependent upon other predictions, such as job growth forecasts, and could drop if demand is lower than expected. Some investors are worried that supply will outstrip demand, with so many units planned; Dupre + Scott points out that in the end, it all comes down to where the surge in renters is coming from, and just how deep that surge is. With so many Gen Yers forming new households currently, it looks like things should go smoothly in the years ahead.

Vacancy and Rent

According to Dupre + Scott, both market and gross vacancy should hold steady in 2014. That would keep them at about 4.0% and 4.7% respectively. Vacancy should hold steady despite the increase in units because of the job growth and preference for renting we’ve seen over the past few years. Market vacancy is expected to rise, however, over the next few years; it should reach just over 6% by 2016. That would still put it below its high rate of 7% back around 2002. So how will this affect rent? Dupre + Scott tell us that rent usually starts to decline once vacancies hit about 7%, so we’ve got some time before rents start to drop. In 2014, rents should increase 5%, followed by 3% in 2015.

Trend Report | Single-Family Rentals, Home Security, & Seattle’s Fastest-Growing Companies

Live like an owner: more renters seeking single-family homes

There may be fewer families buying homes these days; but that doesn’t mean families don’t want to live in single-family homes. According to a new article from The Shared Wall, “neighborhoods that once featured all single-family homes that were exclusively purchased are now boasting a mix of homeowners and renters.” Some characteristics of these renters who “live like owners” include living in one house for quite a long time, getting to know their neighbors, and keeping up with light landscaping around their properties.  Read more.

What do renters want? Mobile, yes; texting, no.

We recently sat in on an interesting webinar from Appfolio. They presented research on the top technology trends renters are looking for today from their landlords and units. Among the findings, of course, were renters’ ties to their smartphones: Over one-third of apartment residents use their phones to make maintenance requests, and more residents are paying rent on their mobile devices than writing checks these days. But tenants’ connections to their phones do not translate into wanting texts from their landlords; a full one-third of the people surveyed said they preferred not to receive rental-related texts at all. Read more.

Affordable and upscale housing: A workable mix?

Can upscale and affordable housing be mixed effectively? The Council on Tall Buildings and Urban Habitat has just released a new video studying the concept. Architects across the country chimed in with their viewpoints, and Seattle firm R.C. Hedreen Co. has an idea for a project they think could do well. The Seattle proposal sits affordable housing in a building not with upscale apartments or condos, but a luxury hotel. Check out the video and read more here.

Easy updates can make rental properties more secure

Having units in the city can sometimes make home security systems a necessity; but if you’re renting out a single-family home or condo, the Seattle Times has some easy updates you can make to the property to make it less accessible for burglars. The tips include: installing lights to illuminate all doors and pathways to the house; planting thorny hedges near windows; and trimming back more friendly bushes and trees that give an intruder places to hide. Read more.

City’s fastest-growing private companies revealed

The Puget Sound Business Journal announced Washington State’s 100 fastest-growing private companies in an awards ceremony last week; of course, plenty of Seattle-based companies made the list. The top ten companies included John F. Buchan Homes at no. 1, Level II at no. 2, and Rooster Park at no. 3. Accepting awards for their companies, executives touted everything from supportive spouses to inspiring beer for their successes. Check out the awardees here–your next tenant just might work at one of the companies!

Market Snapshot: State of the Nation’s Housing

Have you checked this year’s State of the Nation’s Housing yet? The report, compiled yearly by Harvard’s Joint Center for Housing Studies, is a great tool for taking the temperature of the nationwide housing and rental markets. You can read the whole section on Rental Housing here, if you’ve got some time; meanwhile, here are the highlights.

Rent growth marks eighth year of expansion

First of all, the number of renter households in the United States continues to rise; in fact, it rose by over 1.1 million over the past year! That marks the eighth consecutive year of rental expansion in our country, with renters accounting for all net household growth. While rent growth like this may not be sustainable forever, according to the study, this “unprecedented strength” has rent growth in this decade on track to blow past the rent growth of the 2000s.

Face of the “typical renter household” is changing

As of early 2013, a full 35% of households were renter households. So what does a typical renter look like at this point? We can start with some old standards that are still proving true…at least up to a point. Take age, for instance: renters are younger. Currently, the median age for renters is 40, while the median age for homeowners falls at 54. Then there’s median income, which is falling at $31,200 for renters, with about twice that for homeowners. According to the study, 47% of renters are currently minorities, with just 22% of homeowners falling into that category. Finally, we have more single-person households among renters, with 37% of renters living alone, and just 23% of owner-occupants doing the same.

However, the study is quick to point out that the face of the typical renter is changing, with renters no longer “confined to just these groups.” While renters are younger than homeowners on average, there has actually been more rent growth among older households; in fact, between 2002 and 2012, renter households aged 35-44 increased by 8%, and renter households aged 55-64 increased a full 80%. Married couples with children are renting more than they have in the past, and during the past seven years, nearly one-third of the growth in renter households was among people in the highest income categories. It’s clear that over the past few years, renting has opened up as an option for many people who would not have considered it in the past.

Median asking rent in 2012 “highest in U.S. history”

Finally, let’s talk a little bit about nationwide market conditions. Harvard reports that the HVS median asking rent for vacant units across the country in 2012 was $720; that’s the highest in U.S. history, and the upward trend continued throughout the first part of 2013. The consumer price index for rent of primary residence rose as well, by 2.7% between April 2012 and the same month in 2013, a rate which outpaced the overall inflation of 1.1%. Nationwide, rents were up 3% on average in Q4 2012 over the same period in 2011, with rents climbing in 90 of the 93 metro areas Harvard’s source, MPF research, tracked.

Meanwhile, vacancies have continued to fall; the U.S. vacancy rate for 2012 came in at 8.7%, down from 9.5% in 2011 and 10.6% in 2009. In certain metro areas, such as Seattle, vacancies are falling even more dramatically.

That’s all we’ve got for you today, but you can check out the full report here. In the mean time, have a great weekend–we’ll see you next time!

Rental News Roundup | Seattle Rental Market Performing Well; Strong Demand for Rentals Continues Nationally

From the LA Times: Rental demand “unprecedented,” according to Harvard study

Good news for landlords across the country: a recent study from Harvard University says that the demand for rental housing is still on its way up. According to the study, over 1.1 million renters were added to the market during the 2011-2012 year, an increase which “marked the eighth straight year of expansion.” Other good news in the report included information about multifamily loans–the number of loans to builder, owners and investors was up 36%–and apartment vacancy, with a rate of just 4.9% nationally in 2012 for buildings with 5 or more units. The rest of the findings are fascinating, too! Read more.

From the USA Today: Micro-apartments driving “urban renaissance”

They began as an answer to low vacancies and high rents–but now, micro-apartments and other small living spaces which have made a splash in the rental market are a driving force for the “Urban Renaissance.” According to a new article from USA Today, these tiny apartments, which are often no more than 250 square feet, are allowing millennials to live in the heart of the cities they love–and with young professionals putting a premium on location over vaulted ceilings or plenty of space, the trend isn’t likely to go away any time soon. Read more.

From Redfin: Seattle among top cities for single, successful women

With women in the past few decades surpassing men in the attainment of bachelor’s degrees, Redfin decided to take a look at the top cities in which these successful, single women might want to live. The website rated US cities by the percentage of college graduates and high-income earners, among other criteria. Of course Seattle made it to the top ten–It turns out that 56% of Seattle’s residents are college graduates; 32% are high-income earners, and 18% are single and between the ages of 25 and 39. Plus, there’s a 16% single-men surplus. That puts us at number six! So who beat us to the top of the list? Read the article to find out. Read more.

From MHN Online: Seattle, Portland’s rental markets continuing to overachieve

“This is the best performing region in the country in terms of recent revenue growth in multifamily.” That’s according to Greg Willett of MPF Research, as quoted in a new article from Multi-Housing News Online. The article cites current occupancy levels in metro Seattle at 95.7%, with rent growth at 4.2%, compared to 2.6% nationwide; meanwhile, Portland occupancy is 96.4%, with annual rent growth at 3.9%. These numbers place both Seattle and Portland in the top ten metro areas nationally, with “great job growth” as the icing on the cake. What’s not to love? Read more.

Is Seattle Ready for Another Large Condo Project?

Image Courtesy of Puget Sound Business Journal

The Puget Sound Business Journal recently wrote an article on Nat Bosa’s choice to build a 41-story condo building in the Denny Triangle. I think the Seattle real estate market is able to handle a new condo high rise project, especially with it being two blocks from Amazon.  We have hundreds of professionals a week relocating here for work.  A lot of these professionals are moving here to work for Amazon and Microsoft.  This influx in hiring is creating a demand for homes and rentals which in turn is causing rental rates to rise and home prices to rise.  This project will create more supply of homes in a very desired area, which we need with so many transplants.  I feel this is a great opportunity for the developer and also for the Seattle market.

Signs of a Housing Market Recovery?

It has always been my assumption that as the home sales market weakens for various reasons–interest rates, inflation or an economic recession–the rental market quickly strengthens. It just seemed like common sense; people may not be buying, but they will always need somewhere to live! But it was all just an assumption on my part, until the hard data that came out this week confirmed the theory.

Home prices have been continuing to fall, but new data shows the rental market is finally strengthening. Analysts are saying this could be an early indicator that housing on the whole may be headed into recovery.

Fueled mainly by the foreclosure crisis, we have seen the number of renters increase, many with less than perfect credit records; this slows their becoming homeowners again. Additionally, the current difficulties in getting a mortgage are adding to the number of renters.

Even with this added demand, inventory has stayed relatively constant, as many investors are buying up foreclosures and converting them to rentals. According to Zillow, median rents rose 3% from January 2011 to January 2012 nationally, while home prices declined 4.6% during the year.

So while it may take a bit more time for the housing market to recover, we know we can count on the rental market in the meantime–it’s become the dependable housing model for the 21st century.

How Long Should I Sign a Lease For?

If you are looking at a home or condo that is individually owned, most often the term required is a 12 month lease. Apartment complexes can vary a little more, since these look to avoid a glut of openings in any particular month. They may offer a small break on rent due to this, or a varying grid of choices over a certain time span, and signing a 9 month or 14 month lease, for example, may have a slight benefit.

When considering how long a lease is right for you and whether you should consider signing a lease longer than 12 months, there are two factors to be mindful of: 1) Will rent prices rise in the future, and 2) Can you get a break on rent by signing a longer term lease?

First, we continue to see vacancy rates trend lower, increasing rent prices. As housing programs continue to fail, many are forced to rent their homes instead of sell them. Also, homeownership is near all-time lows, which means more and more people are renting and will continue to do so. These factors will continue to push rent prices higher in the future. If you sign a 12 month lease, there is a solid chance in a year that market prices will be higher, and you may be required to pay more rent just to stay in the same place. Signing a longer term lease can help avoid having your rent increase in a year.

Second, it’s important to consider whether it is possible to get a break on the rent price by signing a longer term lease. That can vary from place to place, but generally speaking, it is in to the benefit of the owner, whether individual or corporate, for you to sign a longer term lease. Even if rent prices rise, turning over a rental is costly for the owner. There are commissions to a realtor or property manager, there are cleaning services and there may be small damages or simple wear and tear to repair. Signing a longer term lease is a benefit to the owner, and most often you can negotiate a lower rent price by offering longer than 12 months.

Not everyone can sign a longer lease. Many may stay longer than a year, but the uncertainty of life may not be worth the risk of being locked into lease, no matter how likely it is that you will stay. However, if you can sign an 18 month, 24 month, or even longer lease, you may be able reap the benefits of not having your rent hiked in a year, as well as negotiate up front a lower rent price. The cumulative benefit could very well save you thousands in rent!

People are Moving…to Seattle!

It may be cold and gray out there right now, but the rental and relocation market has been anything but chilly. As a result, our relocation team has been staying busy this year–even during these winter months.

In the past, we’ve often seen a dip in new hires during the winter. But this year, hiring at companies like Microsoft, Amazon and Google has kept going strong, which means there’s a continued market for the rental housing units we represent at Seattle Rental Group.

Our agents are out every week, scouring Seattle for the perfect home for new residents. Recently, we’ve had a lot of young professionals interested in 1-2 bedroom apartments or condos in the Seattle area. With all these new hires, rental units are often only sitting on the market for a week or two, meaning it’s a great time to be a landlord!

 

Ballard is the Next Big Neighborhood

After reading this article, it looks like Ballard might be the new place to live!

Currently Avalon is constructing a new large building in downtown Ballard and now Equity is breaking ground. We are seeing construction all over this city but I believe Ballard is the place to keep an eye on.

Additionally, condo sales are doing pretty well in Ballard these days. There are some new buildings, as well as great deals on buildings that are a couple years old. There are already a bunch of new restaurants and lounges flocking to Ballard, and with all this new construction I believe we will see a lot more growth in the months to come.

Residential Tower in Belltown Moves Forward

Plans for a 40-story residential tower at 2116 4th Ave in Belltown are moving forward as the window for appeals on the current plans close tomorrow. The plans were approved by the Seattle Department of Planning and Development earlier this month.

The mixed-use tower will have nearly 3,000 sq. ft. of retail space the ground level and parking for 329 vehicles. The building will incorporate art into public spaces on the ground level and when it was first announced, plans included a large, outdoor movie theater.

It will also have 365 residential units and it is unclear yet whether the building will be completed as an apartment or a condominium building. Do you think that it can be completed quickly enough to meet the growing need for rental units before the market becomes over-saturated? Tell us your thoughts on Facebook, Twitter or in the comments below.

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