Last week I was interviewed by Angela King at Q13 about current rental market conditions and it looks like it surfaced this morning- click here for the entire clip!

I am glad the interview came up when it did because our rental market has been severely impacted by the decrease in sales activity and financial crisis.  Hundreds upon hundreds of owners in the Seattle area have recently taken their condos and homes off the sales market and placed them into the rental pool in hopes of benefiting from our “stellar” rental market…but only to find out they are about 4-5 months too late.

Every Monday morning, SRG agents get together to discuss market trends/experiences and for the past 3 months, we have all been feeling the pressure of an oversupply, decrease in demand, and the dreaded reduction in rental rates.  I personally started to feel this crunch in August when there were a couple properties that just wouldn’t move- properties that would have leased for $2500 months prior (and in mere weeks) were below $2000 and still sitting.

Here are a couple issues that come up during our discussions, please feel free to comment or contact me with questions.

Tightened Pocketbooks: Due to the financial strain and economic state, renters have definitely been paying more attention to their bottomline and planning for the worst.  The most common scenario is that people are trying to consolidate and downsize in order to rent a 1 bedroom + den instead of needing a 2 bedroom or a townhouse instead of a home.  Renters are more price sensitive than ever and in some cases lower rental rates are the motivating factor rather than quality of building or home finishes- could come down to a difference of $50!

Apartments vs Condos/Homes: We have two rental markets- the private market with individually owned condos and homes, and the apartment rental market.

One of the challenges the private market has in competing with the larger apartment buildings is the ability to offer specials like “1-2 Months FREE” or “waived security deposits.”  Private landlords have the flexibility to reduce the rental rates to compensate tenants for such specials but in no way should reduce standard security deposits as they take on more liability when renting their property.

Some advantages the private market has is that the monthly rental amount often includes utilities, parking and additional storage.  These items are covered in HOA dues and therefore passed down to the tenant in a lump sum or included in the monthly rental amount.  This is easily missed by renters when searching so be sure to clarify what is included!

Note: Over 6600 apartment units are supposed to come on the market in 2009 and even more in 2010- just one of the many items discussed at the IREM Forecast Breakfast last Friday.  One of the better Forecast Breakfasts I have attended!

Where Are All the Renters? What we could be experiencing right now is an extreme case of the cyclical blues in combination with all the above.  We are approaching the dead of winter and typically Spring and Summer are the most common months for moving- so lets just hope that activity bursts in March!  We are seeing signs of this and have been getting a lot of inquiries for Feb/March move-ins…just hoping that the properties available NOW, don’t have to wait that long.

So in short, we are advising all of our clients to be market sensitive and price aggressive.  Renters have been starting their searches a lot earlier than in the past (1-3 month prior to their desired move-in) and rental rate negotiations are occurring left and right.

I hate to be a total pessimist so I will depart on this note… although this all may sound grim, relative to other markets, Seattle is still amongst the top in the nation!

This past Sunday, The Times featured a worth-mentioning piece on the stalled condominium and apartment buildings downtown Seattle and Bellevue.  With over 23 projects in Seattle alone, the lack of construction financing is the number one contributing factor for the dead sites. 

1. 151 John Street (17 Apartments, 1st & John)
2. Icon (283 Condominiums, 6th & Denny)
3. Insignia (646 Condominiums, 5th & Battery)
4. 2030 8th Ave (230 Condominiums, 8th & Lenora)
5. Stewart & Minor Lofts (150 Apartments/160-Room Hotel)
6. 7th & Westlake (365 Condominiums/342,000 SF Office)
7. 1800 Terry Ave (261 Retirement Apartments, Terry & Howell)
8. 2nd & Bell (102 Apartments)
9. 2700 Elliott Ave (100 Condominiums, Elliott & Cedar)
10. The Martin (170 Condominiums, 5th & Lenora)
11. AVA (236 Condominiums/190-Room Hotel, 8th & Pine)
12. 1519 Minor Ave (80 Condominiums, Minor & Pine)
13. Art House (140 Condominiums, Elliott & Battery)
14. Western & Blanchard (113 Condominiums)
15. Heron & Pagoda Towers (400 Condominiums/200-Room Hotel/267,000 SF Office, 5th & Virginia)
16. 2000 3rd Ave (441 Apartments/40-Room Hotel, 3rd & Virginia)
17. 1915 2nd Ave (175 Condominiums, 2nd & Virginia)
18. 1 Hotel & Residences (51 Condominiums/44 Suites/192-Room Hotel, 2nd & Stewart)
19. SkyGarden (116 Condominiums, First Hill)
20. 5th & Columbia Tower (760,000 SF Office)
21. Colman Center (170,000 SF Office, Pioneer Square)
22. Smith Tower Condo Conversion (12 Condominiums, 2nd Ave & Yesler)
23. 200 Occidental Ave S (62 Condominiums/130,000 SF Office, Pioneer Square)

The total is close to 4,200 residential dwellings! Click here to read more.

Low vacancies, rising rents and a cooling condo market has made Seattle?s apartment market more appealing to out-of-state investors, according to a report just released by Marcus & Millichap.

- Over 34,000 jobs are expected to open in 2008
- Vacancy rates are expected to be at 4.7% by the end of the year
- The average rental rate is expected to reach $1023 per month- a 6.2% increase from last year

Click here to read more!

Also, check out the National Apartment Association?s Housing Survey on how renter?s feel about our real estate market- 69% of renters plan on continue renting for as long as 5 more years!

In the most recent news, UrbanCondominiums.com shared their optimism in our thriving downtown market and projected that the downtown core will continue to top nationwide trends moving forward.

Agreeing with all they have to say, experts sited that with local job growth, limitations on sprawl, commuter traffic congestion and increasing gas prices makes the condominium lifestyle even more viable than ever before. Click here to watch the May 5th interview!

A colleague of mine passed this article to me this morning- click here! It is a piece on why the housing market has scared off first-time buyers (falling prices, foreclosures, loan approvals, on and on) and also touches on how it has momentarily affected the rental market.

The National Association of Realtors reports that hundreds of thousands of young Americans are just waiting for the clouds to part and are not buying or renting:

“There’s probably 700,000, maybe 800,000 people out there that are not getting into the market either as a renter or as a homebuyer,” said Walter Molony, spokesman for the NAR. “Where are these folks? They’re out there, they’ve got jobs. Some of them are moving back with their parents, never left the house, they’re doubling up with roommates.”

While on of the largest U.S apartment owners, Equity Residential (downtown communities: Centennial Tower & Court, Olympus, Metro on First, 2300 Elliott, Harbor Steps, Summit at Lake Union and 7th & James) have seen fewer people moving out of their apartment buildings in the last year.

The bottom-line is that buyers can no longer make a strong profit in owning a property for just a year or two and even though Seattle?s market is stronger than most, it is still important to plan for the future. If you feel that you can?t commit to staying in Seattle (or in one place) for 3 to 5 years, as an alternative there is always the option of renting your home.

The image says it all- homebuyers are having a more difficult time securing financing, foreclosures have reached record highs, unsold homes flood the market and prices have dropped dramatically, however the one thing we can be thankful for?is that all regions experienced drops in sales except the West.

On Friday, the Commerce Department reported that sales of new homes in the Midwest dropped 27.6%, the Northeast plummeted to 19.3%, the South fell to 6.4%, but in the West, sales rose 4% from October 07 to November 07. (Click here to read more)

We have continued to remain one of the strongest housing markets in the US, but over the last 12 months, sales nationwide have decreased by 34.4% (said to be the largest annual slide since early 1991) and many economists are predicting a housing crash is in the near future. Of course media coverage only seems to worsen perceptions of the housing market so I am interested in knowing what some of you think will happen in 2008 in Seattle and on a national level?thoughts?

In the 20-city S&P/Case-Shiller Home Price Indices survey released this morning, the nation’s average prices fell over 6% from one year ago BUT Seattle experienced an increase of 3.3% along with Portland (1.9%) and Charlotte (4.3%).

Out of the 17 cities showing declines, Miami sits at a 12.4% decrease while Tampa (11.8%), Detroit (11.2%), San Diego (11.1%), Las Vegas (10.7%) and Phoenix (10.6%) follow close behind.

Click here to read the full report

A couple weeks back when I attended the IREM Forecast Breakfast, Mike Scott (from Dupre + Scott) talked a bit about the rental market and where it is heading. The topic of conversation seemed to go a little like this?

Seattle?s economy is stronger than ever, apartment vacancy rates are down and rents are still on the rise, but come 2009 we should expect to see the rental market flatten a bit due to a large amount of new construction apartments entering the marketplace.

The Seattle PI covered the topic today (and all the contributing factors) while announcing two new apartment high-rises that are well on the way.

- The Olivian will be a 27-story luxury apartment building with 224 units located at 8th & Olive?right across the street from Olive8.

- The Aspira, which was first slated as condominiums, broke ground yesterday and will soon be a 37-story apartment tower located on the corner of Stewart & Terry Ave.

Click here to read more

P.S. I am back!