Market Update: Urban Growth, Larger Buildings, and Competing for those “Savvy” Renters

Happy Friday! Let’s check in with the news and see what’s been happening in rental real estate lately. This week we’ve got multifamily buildings getting bigger, Seattle’s ranking nationally as a place to invest in rental properties, a breakdown of the affordable housing challenge, Seattle’s urban growth, and a profile on the renters developers are now competing for. Enjoy!

NAHB: Average size of new multifamily housing on the rise

The average size of newly-built multifamily units rose at the end of 2013; that’s after rising during the years of the housing boom, and falling during the Recession. During the fourth quarter of last year, the average square footage in multifamily housing construction starts was 1,225 (that’s according to the Census Bureau). These numbers look a lot like those we saw between 2001 and 2003. While the average size of a new unit is still far below the averages we saw during the housing boom, these unit sizes are now sitting high above the historic low we saw in 2005. Read more.

PSBJ: Seattle’s market great for investing in rentals

A new report shows Seattle ranks within the top ten markets nationally to invest in rental properties in. Seattle was outranked by just six cities on the list, which ranked Grand Rapids, Mich. as the very best market to invest in. Also high on the list were Tampa, Nashville, and San Jose. San Jose and Seattle might have made it higher on the list, the article explains, if cap rates were just a bit higher. Meanwhile, Dayton, OH was ranked as the worst city for rental property management. Read more.

Metrotrends: Best, worst counties in America for affordable housing

Low-income Americans have struggled to find housing in recent years; now, Metrotrends has mapped the shortage of affordable housing for extremely low-income households (ELIs). The biggest gaps between need and availability were found in counties in Georgia, Florida, and Texas; the smallest gaps were found in Massachusetts and the District of Columbia. According to the article, for every 100 ELI households across the US, there are just 29 affordable units available. That number holds true for King County as well. Read more.

SeattleTimes: Growth in Seattle finally surpasses suburban growth

Census data is showing that for the first time in over 100 years, the city of Seattle is growing faster than its surrounding suburbs. Back in 1910, the article reports, Seattle’s population had nearly tripled over the past ten years; no one could predict that suburban growth would soon outpace growth in the city. But since that time, suburban King County has continued to grow–even in times when Seattle saw a downturn in population. Things changed in 2010 and 2011, when growth in the city pulled even with the suburbs; and now, the urban growth is continuing to pull ahead, putting Seattle’s rate of growth eighth-fastest for urban growth in the nation. Read more.

DJC: Apartment developers are competing for young, “savvy” professionals

Employers in Seattle, particularly the tech companies, have spent decades working hard to pull in the best people for jobs in their companies. Now, apartment developers are starting to follow suit. Because so many apartments are slated to open up over the next few years, multifamily developers are starting to look at what kind of renters they wish to attract. Increasingly, this renter may not need to own a car; they may want plenty of common spaces and a strong sense of community in the building…and they’ll definitely want good internet access. These “savvy renters,” mostly young professionals working at companies like Amazon and Microsoft, are the target audience of a lot of the new multifamily projects popping up around town. Read more.

 

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.

Rental News Roundup: Best of November

Can you believe it’s December already? Hopefully you had a wonderful Thanksgiving last week, and getting back to work this week hasn’t been too crazy. As we go forward into a cold December, we thought we’d take a quick look at some of the main rental news headlines from the past month. (Q&A will be back next week with a rundown of tenant responsibilities.)

Wall Street Journal: New homes are being built with renters in mind.

11/3/13: As homeownership declined in recent years, real estate investors first focused on purchasing foreclosed homes to convert into rental properties. But now that there are fewer foreclosed homes on the market, investors are developing single-family homes, as well as purchasing newly-completed ones, in order to rent them out. In fact, a full 5.8% of the 535,000 single-family homes that were started last year were being built as rentals; that’s up 4.8% in 2011. Read more.

The Herald: Homeownership was down in Q3 over the previous year.

11/5/13: Homeownership rates remained low in the third quarter of this year, the Herald reports. While the rate was 65.5% in the third quarter of 2012, this year’s third quarter saw a slightly lower rate of 65.3%, according to the Census Bureau. The last time a third-quarter rate was this low was in 1995, when it hit just 65%. So what’s keeping homeownership down? Among other reasons, new household formation is still low, with 36% of adults ages 18-31 still living with their parents, the highest number in 40 years. Read more.

Marcus & Millichap: U.S. Hiring rate “exceeds even optimistic expectations.”

11/12/13: While the government shutdown could have affected the housing market adversely, firm Marcus & Millichap is reporting that October’s hiring rates exceeded all expectations. Employers across the country added 204,000 jobs in October, with August and September posting gains as well. According to the report, about 83% of the jobs lost during the recession have now been recovered; if things continue as they are currently, the country will be on track to add over 2.2 million jobs this year. That’s good news for Seattle and beyond! Read more.

New Geography: Could Seattle become the “next tech capital?”

11/15/13: While Silicon Valley has long been recognized as “the nation’s hub of technology,” New Geography reports that Seattle may be on track to emerge as the California region’s biggest competition. Our unemployment rate of just 5.9% and the draw of tech companies like Microsoft and Amazon don’t hurt; but what really puts the city in the spotlight is its affordability. Contrast Seattle’s affordable housing, for instance, with the San Francisco Bay Area’s housing prices, which have actually increased over 20% just in the past year alone. Seattle also has more affordable office space, with average rental rate coming in at just $20.86, compared to San Francisco’s $25.80. Read more.

LA Times: Lenders may soon reward owners & landlords with energy-efficient homes

11/24/13: Good news could soon be on its way for owners whose rentals are ecologically friendly–there is now a push in Washington to implement regulations that would see lenders reward owners for energy efficiency. So just how would this work? According to the Times: “Owners of homes that reduce energy consumption pay lower utility bills, so why not factor these out-of-pocket savings into calculations of debt-to-income ratios and appraised valuations?” The concept, which has been adopted in other countries, is currently pending as bipartisan legislation in the Senate. Read more.

The Atlantic: Americans want walkable, mixed-use communities; some still looking for the suburban dream

11/25/13: The National Association of Realtors recently released their latest National Community Preference Survey; and while the results of the survey definitely favored smart growth and walkable communities, plenty of respondents reported that they still favored the idea of suburban homes on large lots. A quick look at the results: While 47% placed a high priority on revitalizing cities and reducing traffic congestion, just 37% prioritized creating new development outside of cities. And while 57% of respondents reported that they would prefer to live in a suburb or rural area, 30% of those who wanted to live in the suburbs reported that they would prefer a mix of houses, shops and businesses in their neighborhood. Read more.

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!

Rental News Roundup: West Seattle’s Draw, Summer’s Low Vacancies, and 2014′s Mayoral Budget

Seattle Times: West Seattle attracting new crowd

As the city grows, many families are finding West Seattle, a place resident Heidi Matzen calls “a small town next to a big city,” a welcome alternative to full-fledged city living. In fact, since 2005, over 3,800 new housing units have been built in West Seattle, with another 1,258 currently in the works. And as the housing sprouts up, West Seattle is evolving beyond its strictly blue-collar past, with more cafes and restaurants than it had back in the old days–including a place that sells the best Reuben in Seattle, at least according to the Times. Read more.

Wall Street Journal: Summer brought higher rents, lower vacancies across U.S.

This summer saw rent increases across the country, according to a new article from the Wall Street Journal. In fact, rents increased even more than industry experts expected them to; that’s a change from the rent-growth slowdown that was expected for the summer months. As mortgage rates and home prices jumped during the summer, people continued to rent, keeping the rental market strong. Cities with strong rent growth included New York, with a 2% rent bump; San Jose CA, with a 5.2% climb; and Seattle’s whopping 7% year-over-year rent gain lead the nation’s. Read more.

PSBJ: Rainier Square redevelopment on its way

Changes are on their way for Seattle’s Rainier Square. The PSBJ reports that the University of Washington will lease 1.4 acres of property around Rainier Tower to a development company, which could develop over one million square feet of office and retail space on the site. Construction is currently expected to begin in 2015 and be completed by 2017, with businesses and units opening in the last quarter of 2017. We’ll have to keep an eye on the block as it develops! Read more.

Seattle Times: Mayor’s budget for 2014 reflects economic rebound

Education and transportation are key areas of focus in Mayor Mike McGinn’s $1 billion budget for 2014. After four years of cuts required to balance the budget in harder economic times, the new budget reflects the recovery in its funding of popular programs such as preschools and senior centers. In addition, McGinn hopes to “change the way the city invests in transportation,” increasing walkability and bike access throughout the city. Increased law enforcement funding and homeless initiatives are also included in the budget. Read more.

UNITS: Can appliances lure Gen-Y renters?

Finally, a note from the latest edition of UNITS, from the National Apartment Association. We all know certain things that Gen Y renters love in an apartment (for instance, a nice strong internet connection). But can appliances lure young renters? GE is hoping they can. The company has launched a new range of low-price, “high-design” appliances designed to appeal to Gen Y renters in order to build brand loyalty among the demographic. The product line will cost landlords about $2,400 for a fridge, microwave and dishwasher; GE is betting that millennials will get hooked on the appliances and later go on to purchase their own. Read more.

 

Eye on Seattle: Washington Incomes, Downtown Condos, and a Discussion on Density

Since we were focused on the rental market across the US last week, this week we decided to stick a little closer to home. Here are some of the stories we’re following concerning the rental market in and around Seattle. Enjoy!

Apodment controversy continues in Seattle

Micro-apartments: depending on who you talk to, they’re either the solution to, or the source of, all rental housing problems in Seattle. Of course, when you plan to replace a single-family home with 43 micro-units, you’re bound to ruffle a few feathers. That’s just what’s happening on  NW 58th Street, where a developer is putting micro-units with shared kitchens (and no incorporated parking) onto a lot where a single home once stood. Community members are calling for changes in permitting, so that buildings housing micro-units will undergo more extensive review; those changes will be up for public comment in October. Read more.

Washington State’s per-capita income 6% higher than national average

Good news from the Puget Sound Business Journal last week: Washington State households are accumulating greater wealth than they have in the past. The per-capita income in Washington State last year was $45,413; that’s 6% higher than the national average, according to the US Bureau of Economic Analysis. In addition, the number of households in the state with more than $1 million in invested assets increased a total of 21% between 2009 and 2012, putting the total number at 148,333. Read more.

Bellevue to address the rise of “dormlets”

Rental houses being utilized as “dormlets,” or high-density student housing, has been in the national news quite a bit lately; now, Bellevue is the latest city to announce a crackdown on the practice. After Bellevue College began the transition into a four-year institution, residents in Spiritwood began noticing that many local properties were being bought up by just a few property owners; the houses were then used as high-density shared student housing, or “dormlets.” At the end of the month, Bellevue will review a drafted motion that would revise the definition of “family” for housing purposes from six to four unrelated people living together, with permitting changes to follow. Read more.

Downtown condo tower set for development

More condos are on the way downtown; Bosa Development Corp. has announced they will build a second condo tower at their downtown Insignia project. The first tower is already under construction, and is slated to open towards the end of 2015, with the second following at the start of 2016. The towers will be 41 stories each and hold about 700 units. Prices will range between $400,000 for one-bedrooms on the lower floors to about $2 million for high-end units at the top of the tower. Read more.

Architect shares tips for livable, “neighborly” density

With denser neighborhoods clearly on the way in Seattle and elsewhere, local architects and designers are putting a great deal of thought into what upcoming single- and multifamily communities should look like. A new article from the Seattle Times speaks to designer Bill Parks about ways in which, in his words, we can “retain a livable, scenic, user-friendly city: density with grace.” Among his key ideals: don’t let towers get too tall; so many interesting density projects happen on a small scale. Check out the whole conversation here.

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: Multifamily sector strong; renter households increasing

Seattle Times: Tenants smart to check their own background, credit reports

With vacancy low, renters searching for apartments must be well-prepared–and according to a new article from the Seattle Times, part of that preparation should include performing background and credit checks–on yourself! Knowledge is power, and prospective tenants can save time and money by arming themselves with knowledge of their own reports, ensuring that those reports paint a full and accurate picture of their histories, working to correct errors when they arise, or raising a problematic credit score over time. Read more.

Wall Street Journal: Better carpets for better rentals

Every landlord knows just how problematic wall-to-wall carpeting can be. Stains can stubbornly permeate a carpet long after a tenant moves out, and replacing the carpeting isn’t always practical. But according to the Wall Street Journal, a new “adult-proof” carpet may be on the way. Various carpet companies are working hard to come up with technologies that will keep blueberries, red wine, mud and more from permeating carpets–an innovation that can’t arrive quickly enough.  Read more.

HousingWire: Multifamily sector remains strong

Good news from the Mortgage Banker’s Association–multifamily delinquency rates dropped in the second quarter of 2013, signaling continued strength in the multifamily market. And the drop was significant; according to Jamie Woodwell, VP of research at MBA, “the quarterly decline in the delinquency rate of loans held in commercial mortgage-backed securities was the largest on record, and delinquency rates for loans held by life companies and the GSEs remain low and fell lower during the quarter.” We’ll toast to that!  Read more.

Seattle Times: Apartment shares increase as rents rise

A tight rental market is leading more tenants to share apartments with friends and acquaintances–according to a study from Experian, there are now 47,000 people in the greater Seattle area sharing apartments with people they’re not related to. That’s up from 2,300 three years ago. In fact, Seattle is the third-highest city when it comes to apartment sharing; 16% of apartment households here are shared, putting us just behind San Francisco and Boston. Read more.

Harvard University: Renter households increased by over 1.1 million in 2012

Have you checked out Harvard’s annual State of the Nation’s Housing yet? We’ll have a full report on their rental section next week. In the meantime, among the highlights of the report: Renter households increased by more than 1.1 million in 2012; at the beginning of this year, renters made up 35% of all households. And renting isn’t just for 20-somethings anymore; the median age of a renter is now 40, compared with 54 for homeowners. We’re seeing the greatest rent growth, in fact, among older renters. Check out the report for more.

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.