Dupre + Scott Apartment Advisor has reported on the rental market for King County and Seattle for March 2008. Here are some interesting highlights from their report.
- In March, 4.1 percent of King County apartments and 3.1 percent of those in Seattle were vacant, only up a smidgen from March 2007 when vacancies were at 3.9 percent in the county and 2.8 percent in Seattle and still less than half of the 2003 vacancy rates.
- One big reason vacancies have started increasing is that the housing slump has dramatically slowed down new conversions of apartments into condominiums.
- 2006 conversion bonanza: conversions hitting the market went from 900 in 2003 to 1,800 in 2004; 3,600 in 2005 and more than 6,000 in 2006 — fueled the drop in the vacancy rate during those years. But conversions fell to 2,800 last year (subtracting 1,200 units that started to convert, then reverted to rentals) and just 168 units have converted or are scheduled to convert so far this year.
- Conversions in the past three years outpaced new development by a total of 5,400 units.
- Apartment rents averaged $1,026 in King County and $1,071 in Seattle in March 2008, up about 8.5 percent in both cases from March 2007.
Overall, this is good news for condo owners who are already renting out their units or considering renting them out in the near future. For renters, it appears that while rents won’t be going down anytime soon, they are not likely to be continuing to increase as much as they did last year.
To all my favorite alarmists out there (esp my man econ), if condo property prices are cratering, shouldn’t rents be going down, not up? or are you gonna come up with some mangled rationalization for this as well?
Off topic, but Wendy, do you know the auction results for the condos at The 400, Bremerton that was held last Sun, Apr 20?
No. I’m not familiar with that project.
“To all my favorite alarmists out there (esp my man econ), if condo property prices are cratering, shouldn’t rents be going down, not up? or are you gonna come up with some mangled rationalization for this as well?”
The cycle that has been observed in other cities is that rents initially rise as a result of condo conversions, and as a result of condos and SFH being unoccupied as owners try to sell them. As real estate prices fall, a flood of condos and SFH hit the rental market, as owners decide that they would rather rent out the units and wait for the market to improve, sharply driving down rents. It remains to be seen whether this cycle will occur in Seattle, but if sales continue to be slow this summer, there will probably a lot of failed sales put on the rental market by the end of summer.
Based on @random’s logic, given that rental prices do not seem to be going up as much as last year, than condo prices should be stable.
The fall in rental prices is a lagging indicator – first RE prices start falling; and then rents follow afterwards, as would-be sellers give up and rent out their places. There are 4,000 condos for sale in King County, and it’s still April.