News
01-05-2007, 10:54 AM
Cold Sales Give Renters a Break
Vacancies, Prices Affected as Owners Lease What They Can't Unload
By Dina ElBoghdady
Washington Post Staff Writer
Friday, January 5, 2007
As home sellers grew more frustrated with the slow local real estate market in recent months, they abandoned their for-sale signs and put their homes up for rent. That has increased choices and cooled prices for tenants in one of the tightest and most expensive parts of the country.
"This is the first sign that the cooling housing market is having an impact on the rental market," said Gregory H. Leisch, chief executive of Delta Associates, an Alexandria research firm that is scheduled to release a report today showing more vacancies in the region's apartment complexes.
The report links the shift in the market to the surge in condos, townhouses and single-family houses for rent -- both by sellers-turned-landlords and by investor-landlords who snapped up condos during the market boom.
As competition for tenants intensified, apartment rents did not rise as sharply in the past three months of 2006 as they had earlier in the year, the report said. But they did rise, increasing 4.7 percent to an average $1,410 per month from $1,302 a year earlier.
Yvonne Carter, a cardiothoracic surgeon at Georgetown University Hospital, didn't know this when she was looking for somewhere to live a few months ago, but she considers herself lucky because she found a great place quickly.
In previous years, her choices may have been limited to apartment buildings. But in October, she spotted a condo for rent by the owner at the Alta on Thomas Circle in Northwest Washington. The Alta, with loft-like apartments, big windows and stainless-steel kitchen appliances, is one the many luxury condos that popped up around the city in the recent building frenzy. Carter snagged it at less than the asking rent.
Most appealing to her, however, was the landlord's accommodating style. He held the unit for her for more than a month. He allowed her to bring her dog at no extra cost. And he offered underground parking, again free, she said.
"All those things made a condo much more attractive than the apartment," Carter said.
Carter's landlord, Maurice Philogene, said he has bought at least 20 condos since 2001, with the intention of renting them out for the long term. Philogene, a software engineer, said he planned to live in the unit Carter now rents but changed his mind. He cut Carter a break on the rent because she signed a two-year lease. The unit, he said, is "pricey -- it was nerve-racking to cover the mortgage."
Other landlords got caught in the condo glut, including Sudarshan Goel of Arlington. Goel said his two grown children bought him a condo at the Monroe in Arlington as a retirement gift two years ago, at a time when people were lining up to buy new condos. When the condo was ready in November, Goel and his wife decided they didn't want to move and figured it would be easy to sell.
But the climate had changed: Fewer than 700 new condo units were sold in the fourth quarter in the region, according to Delta, compared with 1,327 in the third quarter and an average of more than 3,000 units per quarter in 2005.
"My Realtor advised us to rent the condo for a few years, which is what I'm trying to do," Goel said. "Eventually the condo market will improve. But at this time, it is oversupplied."
Some developers who planned condos are switching their buildings to rentals. In the fourth quarter, developers announced they have or will switch 5,915 such units, according to Delta.
Condos aren't the only part of the market where there are more rentals. According to Delta, the number of condos, townhouses and houses listed for rent rose 23 percent in November from a year earlier on the region's multiple listing service, commonly used for for-sale properties but also for rentals handled by real estate agents.
Big landlords said the shift has affected them to varying degrees.
"It's not catastrophic or injurious, but it's material," said Tim Cutrona, senior regional property manager for AIMCO, a national company that manages 12,000 apartments locally. He said his company received 30 percent fewer inquiries about its units in the last quarter of 2006, compared with 2005. Some properties went from being 99 percent occupied to 96 percent, he said.
"We are offering specials to move what we call aged inventory, apartments we've been sitting on for more than 30 days. I would not have been doing this last year at this time," he said.
Thomas S. Bozzuto, chief executive of the Bozzuto Group, a home builder and apartment manager, said his Greenbelt company is not offering rent specials that are out of the ordinary for this time of year, but he's acutely aware of the market dynamics.
"The nonprofessional rental market is clearly having an effect on the conditions that we're seeing in the marketplace, but it's by no means disastrous or even depressing," he said. "What this is doing is making it possible for people who are less concerned about amenities or service and more focused purely on price to have a choice."
In its report, Delta said that even with the fourth-quarter results, the region's apartment market remains one of the nation's strongest, with low vacancy rates that rival those in New York and Los Angeles.
Still, the area's vacancy rates are the highest they have been since 2003, edging up to 2.9 percent from 2.5 percent a year earlier and from 1.4 percent in the third quarter, Delta reported. The company measures vacancy rates only in larger buildings, not in small buildings or individual units.
If the overall housing market remains cool and more sellers become landlords for another few quarters, apartment hunters might start seeing lower rents, researchers at Delta and some apartment management companies say.
"Brokers say that come spring, the housing market will be back, and if they're right, then this phenomenon with the apartment market is a one-time blip," Leisch said. "If they're wrong and the housing market stays cool, which I'm betting on until fall of 2007, then the phenomenon will likely continue."
Vacancies, Prices Affected as Owners Lease What They Can't Unload
By Dina ElBoghdady
Washington Post Staff Writer
Friday, January 5, 2007
As home sellers grew more frustrated with the slow local real estate market in recent months, they abandoned their for-sale signs and put their homes up for rent. That has increased choices and cooled prices for tenants in one of the tightest and most expensive parts of the country.
"This is the first sign that the cooling housing market is having an impact on the rental market," said Gregory H. Leisch, chief executive of Delta Associates, an Alexandria research firm that is scheduled to release a report today showing more vacancies in the region's apartment complexes.
The report links the shift in the market to the surge in condos, townhouses and single-family houses for rent -- both by sellers-turned-landlords and by investor-landlords who snapped up condos during the market boom.
As competition for tenants intensified, apartment rents did not rise as sharply in the past three months of 2006 as they had earlier in the year, the report said. But they did rise, increasing 4.7 percent to an average $1,410 per month from $1,302 a year earlier.
Yvonne Carter, a cardiothoracic surgeon at Georgetown University Hospital, didn't know this when she was looking for somewhere to live a few months ago, but she considers herself lucky because she found a great place quickly.
In previous years, her choices may have been limited to apartment buildings. But in October, she spotted a condo for rent by the owner at the Alta on Thomas Circle in Northwest Washington. The Alta, with loft-like apartments, big windows and stainless-steel kitchen appliances, is one the many luxury condos that popped up around the city in the recent building frenzy. Carter snagged it at less than the asking rent.
Most appealing to her, however, was the landlord's accommodating style. He held the unit for her for more than a month. He allowed her to bring her dog at no extra cost. And he offered underground parking, again free, she said.
"All those things made a condo much more attractive than the apartment," Carter said.
Carter's landlord, Maurice Philogene, said he has bought at least 20 condos since 2001, with the intention of renting them out for the long term. Philogene, a software engineer, said he planned to live in the unit Carter now rents but changed his mind. He cut Carter a break on the rent because she signed a two-year lease. The unit, he said, is "pricey -- it was nerve-racking to cover the mortgage."
Other landlords got caught in the condo glut, including Sudarshan Goel of Arlington. Goel said his two grown children bought him a condo at the Monroe in Arlington as a retirement gift two years ago, at a time when people were lining up to buy new condos. When the condo was ready in November, Goel and his wife decided they didn't want to move and figured it would be easy to sell.
But the climate had changed: Fewer than 700 new condo units were sold in the fourth quarter in the region, according to Delta, compared with 1,327 in the third quarter and an average of more than 3,000 units per quarter in 2005.
"My Realtor advised us to rent the condo for a few years, which is what I'm trying to do," Goel said. "Eventually the condo market will improve. But at this time, it is oversupplied."
Some developers who planned condos are switching their buildings to rentals. In the fourth quarter, developers announced they have or will switch 5,915 such units, according to Delta.
Condos aren't the only part of the market where there are more rentals. According to Delta, the number of condos, townhouses and houses listed for rent rose 23 percent in November from a year earlier on the region's multiple listing service, commonly used for for-sale properties but also for rentals handled by real estate agents.
Big landlords said the shift has affected them to varying degrees.
"It's not catastrophic or injurious, but it's material," said Tim Cutrona, senior regional property manager for AIMCO, a national company that manages 12,000 apartments locally. He said his company received 30 percent fewer inquiries about its units in the last quarter of 2006, compared with 2005. Some properties went from being 99 percent occupied to 96 percent, he said.
"We are offering specials to move what we call aged inventory, apartments we've been sitting on for more than 30 days. I would not have been doing this last year at this time," he said.
Thomas S. Bozzuto, chief executive of the Bozzuto Group, a home builder and apartment manager, said his Greenbelt company is not offering rent specials that are out of the ordinary for this time of year, but he's acutely aware of the market dynamics.
"The nonprofessional rental market is clearly having an effect on the conditions that we're seeing in the marketplace, but it's by no means disastrous or even depressing," he said. "What this is doing is making it possible for people who are less concerned about amenities or service and more focused purely on price to have a choice."
In its report, Delta said that even with the fourth-quarter results, the region's apartment market remains one of the nation's strongest, with low vacancy rates that rival those in New York and Los Angeles.
Still, the area's vacancy rates are the highest they have been since 2003, edging up to 2.9 percent from 2.5 percent a year earlier and from 1.4 percent in the third quarter, Delta reported. The company measures vacancy rates only in larger buildings, not in small buildings or individual units.
If the overall housing market remains cool and more sellers become landlords for another few quarters, apartment hunters might start seeing lower rents, researchers at Delta and some apartment management companies say.
"Brokers say that come spring, the housing market will be back, and if they're right, then this phenomenon with the apartment market is a one-time blip," Leisch said. "If they're wrong and the housing market stays cool, which I'm betting on until fall of 2007, then the phenomenon will likely continue."