Renters in the Seattle area should enjoy another year of lower rents.
When Jennifer Worick, a 41-year-old Seattle social-media consultant and author, began window shopping for a new apartment in July, she had an ambitious wish list: She wanted a place bigger than her 650-square-foot Wallingford studio, she wanted to live in a walk-friendly neighborhood near public transportation and she wanted to lower her $1,050 monthly rent.
Typically, moving into a better apartment and paying less for it is improbable. But these aren’t usual times for the Puget Sound apartment market.
Mike Scott, of Dupre + Scott Apartment Advisors, says that landlords are facing the worst market they’ve seen in three decades. Excessive new condo inventory, job losses and home prices falling to levels comparable to rent have pushed the Puget Sound vacancy rate to 7.2 percent, up from 4.8 percent a year ago, according to Dupre + Scott data.
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And rents that fell 4 percent during the 12 months through September to an average of $959 per month are expected to fall another 8 percent during 2010 and another 1 percent in 2011 before slowly turning around.
For renters, falling housing costs are one rare perk in a tough economy. Concessions such as a month of rent free or free parking have also become commonplace. It’s not surprising then that the 1,000-square-foot Ballard apartment Worick began leasing Nov. 1 costs her less than her former studio.
Not only that, but the owner-landlords were flexible: They agreed to waive a pet deposit, stagger move-in payments, and even offered to let Worick pick the apartment’s next paint colors rather than just applying a standard shade of contractor white to the new tenant’s walls.
With high unemployment and unsold condos and single-family homes that unintentionally became rentals, landlords face competition for their abundant apartment supply. Some 59 percent of all apartment buildings are offering concessions, according to Dupre + Scott. Typically, concessions include free or reduced rent for one or more months in exchange for committing to a one-year lease. The pricier the apartment, the fatter the concessions, perhaps not surprising given that apartment units priced at $1,800 or more per month currently have vacancy in excess of 20 percent.
Renters are noticing the change. Worick said that the market seems softer than it was the last time she moved four years ago.
“It seems like there were a lot of vacancies,” Worick says of her recent apartment hunt. “Landlords were getting creative.”
When she moved out of her Wallingford building, management asked her if she wanted to talk about her rent. (She didn’t; they’d raised it four times between 2005 and 2009.) Many of the larger buildings Worick researched were hawking one month free with a 12-month lease. Some offered discounts on the first month’s rent to cushion the price of deposits and other move-in expenses.
She’s not the only renter to notice deals.
Corey Koniniec, a 27-year-old freelance cinematographer, recently returned to Seattle after six months away and is apartment hunting with his girlfriend. The duo have budgeted $1,300 a month for a two-bedroom apartment, ideally in a contemporary building that offers covered parking and is located close to the I-90 corridor. They’re looking in West Seattle, Bellevue and points in between. They’ve also posted their wants online.
“Things have changed a lot. People are really willing to negotiate,” he says. “There’s definitely something out there for us.”
Koniniec says he’s seen apartments that cost $1,850 earlier this year advertise rents of $1,350. He’s also received numerous rental offers from his online “housing wanted” posting, some from investors seeking renters for failed home flips and some from resourceful landlords.
“Owners have been quick to adjust their rents to try and maintain occupancy levels,” says Tom Daniels, executive vice president at Riverstone Residential Group, which manages 17,000 apartment units in the Northwest.
Daniels confirms that among Riverstone units in the Northwest, many located in high-rise buildings, rents have fallen about 8 percent in the past year. Concessions almost always come in the form of free months of rent, he says.
“Renters seem to want that cash discount,” he says.
The difficult market, he says, is likely to linger although in the past two months downtown buildings in Seattle, Bellevue and Redmond are starting to show improvement. Aside from flexibility on rent price, he says, many building owners and property-management companies are starting to forgive poor credit on lease applications if the cause of low scores is a home foreclosure, versus other causes, such as poor credit-card management.
One last factor threatens to keep the apartment market soft for at least the next few quarters — and that is this: It’s now cheaper to own a condo than to rent a two-bedroom, two-bathroom apartment in King County, Pierce County, and Kitsap County. In Snohomish County, owning costs about $100 more, while in Thurston County it costs about $60 more.
While home-price appreciation is less sure than it has been in the past, the extended first-time buyer $8,000 tax credit and low monthly payments may turn fence-sitters into owners.
Scott and apartment managers think that owning won’t be cheaper than renting for long, though, especially if the housing market bottoms out in the next year or two. Rob Kellum, COO of Suhrco Residential Properties, which manages 6,000 apartments and 8,000 condo units in the Puget Sound region, says renters are deciding to end leases and become homeowners. Kellum says that his company and the building owners for whom it manages apartments review prices frequently — and, in some cases, adjust them if an applicant makes a verifiable claim that a rival or nearby building offers better concessions.