The Apartment Blogger

Anyone following the news recently knows that the economy has taken the front seat in the headlines. Gas prices, home sales, mortgages, The sub-prime sector, interest rates, the economic stimulus package, the stock market and most importantly Britney Spears’ mental health and what REALLY happened to Heath Ledger.

How does it all affect the rental market?

Well, my prediction is that the rental market is going to heat up gradually, not explode immediately. But overall, locally and beyond, rents will go up and inventory will go down.

Usually when the sales market struggles people tend to rent and when more people rent it gives the rental market a boost.

Based solely on that fairly sensible theory, the rental market is bound to explode since the sales market is free-falling to one of the worst slumps in its history.

The reason I think the rental effect will be more gradual is that a lot of real estate investors, large and small, amateur and professional, went into what’s known as “The Flip Craze” (The purchase of property for the purpose of quickly renovating/building and selling for a profit. In many cases it involved converting the legal status of units into condos) That craze overwhelmed the market with a huge inventory of condos.

A lot of those developers are now faced with some difficult decisions:

1. Try and sell anyway for their desired price and wait an indefinite amount of time for that to maybe happen
2. Sell and take a loss, just to try and minimize the damage (short sale)
3. Foreclose
4. Rent the unit. Which in many cases allows them to hold on to the property until the market bounces back.

I see a lot of number 4’s out there.

That said, foreclosure rates are close to or past all-time highs in certain areas, many of those properties are multi-family homes or multi-unit buildings. Mortgage companies and banks that foreclose on those properties usually try and sell them.

Because selling a vacant property is a much easier task, if the property that is foreclosed upon has tenants those tenants will be evicted, forcefully, like by cutting off heat, electricity and water. So many people find themselves in a surprise apartment-hunt situation which makes for some more competition than usual. The result is rents will go up and broker fees will be harder to avoid.

Although I can’t control rents going up I can say that smart renters will use GrandCentralApartments.com and will avoid Broker Fees ; )

IG

Filed under: Current Trends by IG on 02.01.2008
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Last month the Boston City Council voted unanimously to petition the Boston Zoning Commission to change zoning rules so that no more than four college-level students can occupy an apartment.

There has been some outrage over this from the SPOA (Small Property Owners Association). The only reasoning I was able to find as to why they are changing the zoning rule and almost blatantly discriminate students as a “Problem Tenant” is the need to reduce partying in certain residential areas were students live.

Overall I don’t think it will have much affect on the rental market as a whole but it will certainly cause a spike in lack of availability and lead to higher rents in the student-congested areas in and around the city.

After working with hundreds if not thousands of students to find them housing I can maybe remember a dozen cases were more then 4 people were sharing the same unit.

It’s also worth mentioning that there is always a very low inventory of 4+ bedroom units regardless of who is looking.

Apartments tend to be smaller in the city. Landlords have an easier time renting smaller apartments. At one time there were larger apartments, but property owners broke those larger units into many smaller ones because they could make more money.

Living on top, under and beside students at various periods of my life I find that you don’t have to live somewhere to participate in a party, so the argument of less people living there = less partying is, to me, irrelevant.

Overall I find the argument that led to the zoning change outrageous but I don’t think it will have much affect on the market.

IG

Filed under: Current Trends by IG on 01.22.2008
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