Results 1 to 5 of 5

Thread: weekend commentary - rents starting to rise significantly ...

  1. #1
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default weekend commentary - rents starting to rise significantly ...

    (snip)"As they and others lease instead of buy, rents have risen 7 percent in the past year, according to a new analysis by Delta Associates. In suburban Maryland, rents for luxury high-rise apartments rose 11 percent.

    About 6,500 additional renters leased units in the past year, up from about 4,400 in the previous year, according to Delta Associates. The Washington area has one of the lowest apartment vacancy rates in the nation, down to 1.7 from 2.4 percent a year ago, compared with a national average of 5.7 percent.

    The rent increases are confounding industry expectations that rents would fall because of the huge number of new condominiums, many of which were sold to investors who have put them up for rent. Experts say prices would rise even faster without the additional condos.

    Even so, rents are expected to rise 5 to 9 percent annually over the next few years, said economist Gregory H. Leisch, chief executive of Delta Associates.

    More than a half-dozen projects have recently shifted from proposed condo complexes to rental apartments. Delta Associates projects about 2,000 units are being shifted or will remain as rentals this year, with another 2,000 going that route next year."(snip)

    " but we've clearly see fatigue on the part of the consumer," Coletta said. "Traffic has dropped off, contracts have slowly declined. You see the writing on the wall at the same time apartment fundamentals are improving. It makes the business decision a pretty easy one."

    Instead of converting the Virginia Commons complex in Dumfries into condos, its owners have decided to spend "several million dollars" upgrading the place and renting it to people who make $70,000 to $90,000 a year -- too much to qualify for housing assistance but too little to be able to afford to buy a home."(snip)


    While the focus of the article is on real estate developers changing projects from condos to rentals, the larger point is clear. People are having increasing difficulty affording / financing the outright purchase of a house / condo. This puts upward pressure on rental prices in the same way that it puts downward pressure on house / condo prices. The segment of the population most affected are exactly who the article says ... people who are earning too much money to qualify for housing assistance but not enough money to be considered 'a good enough credit risk' for a large mortgage... i.e. middle class Americans earning $70k to $90k per year ... i.e. the same group of people who have typically been regular strip club customers ! With economists projecting annual rent increases in the range of 5-9%, on top of projected energy price increases, tax increases, and 'stagnant' earnings, this will not leave much 'discretionary budget' left over to spend in 'middle class' strip clubs !

    But every cloud has a silver lining ... which in this case should be nice long term cap gains and dividends from Apartment REITS.


    ~

  2. #2
    Featured Member lunchbox's Avatar
    Joined
    Sep 2005
    Location
    falling from grace
    Posts
    1,943
    Thanks
    0
    Thanked 8 Times in 6 Posts

    Default Re: weekend commentary - rents starting to rise significantly ...

    I got a renewal letter asking for a 15% increase, and they are adding all kinds of unnamed fees, raising garbage collection rate, etc. etc.

  3. #3
    Member ~Nikki~'s Avatar
    Joined
    Jun 2006
    Posts
    48
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: weekend commentary - rents starting to rise significantly ...

    Quote Originally Posted by lunchbox
    I got a renewal letter asking for a 15% increase, and they are adding all kinds of unnamed fees, raising garbage collection rate, etc. etc.
    Is that legal where you are? I ask because the last time I rented it was not legal to have an increase over 5% rent increase. Ofcourse that was nearly 5 years ago but it may be worth checking into so you don't end up spending more than needed.

  4. #4
    Featured Member lunchbox's Avatar
    Joined
    Sep 2005
    Location
    falling from grace
    Posts
    1,943
    Thanks
    0
    Thanked 8 Times in 6 Posts

    Default Re: weekend commentary - rents starting to rise significantly ...

    Quote Originally Posted by ~Nikki~
    Is that legal where you are? I ask because the last time I rented it was not legal to have an increase over 5% rent increase. Of course that was nearly 5 years ago but it may be worth checking into so you don't end up spending more than needed.
    Techically they cut the specials out, but AFAIK, there is no rent control in Texas.

  5. #5
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: weekend commentary - rents starting to rise significantly ...

    Many jurisdictions that did enact rent controls on privately owned apartments eventually discovered that this led to private landlords being unable to turn a profit, thus many stopped performing building maintenance, allowed the apartment buildings to become run-down to the point where they had to be condemned. Thus landlords abandoned their properties and tenants who could not afford to live anywhere else were eventually evicted. This eventually left those jurisdictions with a double problem, caring for the homeless plus what to do with ugly, useless, dilapidated abandoned apartment buildings in the middle of their city.

    This in turn led to a later wave of construction of 'subsidized public housing' projects which were funded by and owned by the gov't rather than private owners. Public housing solved the problem of the budget gap between the cost of rent dictated by the gov't versus the actual cost of maintaining the apartment building, by filling the gap with tax money. However, the jurisdictions eventually discovered that the 'subsidized public housing' approach obviously concentrated large numbers of low income people who were deemed eligible for public housing benefits all living in the same place - which brought on a new set of problems of its own. Additionally, in New York at least, publicly owned housing authorities are now coming under intense pressure to reduce the budget gap between regulated rents collected and actual expenses. As a result the housing authorities are now enacting new fees on tenants for parking, surcharges to cover the electricity bills generated by tenants operating large appliances etc.



    At any rate, after being 'held down' for years by an oversupply of rental properties as practically anybody who wished to do so was able to obtain financing to buy their own house / condo instead of renting, now that interest rates are rising and credit standards are tightening (not to mention bankrupt homeowners being evicted from their foreclosed houses, or would-be homeowners renting while waiting for property values to fall before actually buying) the demand for rental property is very strong. As a result, rents are going to quickly rise a lot to return to 'market' levels in the near term, and are likely to continue to rise year after year until the housing market 'bottoms out'. Bottom line is that rising rents will go straight to the jugular in reducing 'discretionary spending' of all but the 'rich', those middle class that already own their homes and can afford to keep making mortgage and tax payments, and the 'very poor'. This is likely to show up in reduced customer spending levels at 'middle class' clubs, as well as reduced customer spending levels for all sorts of non-essential goods and services targeted towards the middle class.

    Back to the issue of privately owned apartment properties being a potential good investment, the most recent trend by govt's s to return to using private ownership of apartment properties, but with the gov't directly bridging the gap between the regulated tenant's cost of rent directed by the gov't versus the price of rent necessary for the landlord to turn a profit - via a gov't agency directly injecting themselves as the actual 'renter', collecting regulated rent from the tenant, adding the rent subsidy from public funds, and then sending 'market priced' rent checks to the landlord. This setup guarantees that the landlord will receive 'market priced' rent payments in a timely manner, and basically makes the gov't agency responsible for damages etc. caused by the low income tenant.
    !~
    Last edited by Melonie; 07-09-2006 at 05:50 AM.

Similar Threads

  1. Replies: 1
    Last Post: 11-26-2011, 10:26 AM
  2. Replies: 0
    Last Post: 06-11-2011, 12:24 AM
  3. Replies: 2
    Last Post: 12-18-2009, 03:36 PM
  4. Replies: 0
    Last Post: 12-03-2006, 08:10 AM
  5. Starting this weekend..scared!!
    By heavenlyheidi in forum Newbie Board
    Replies: 2
    Last Post: 10-01-2006, 07:08 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •