Landlords Faced With Falling Rents And Occupancy Rates
From the Wall Street Journal back on January 17:
To be sure, rents have continued to rise steadily in many markets. And the housing downturn means that more people are looking for rentals as well, increasing demand. Many would-be buyers have become renters because they can’t get a mortgage in today’s tight credit environment, or because they’re sitting tight in hopes that prices drop further.
Eight months later, it’s looking like the party may be over for apartment building owners. From the Journal last Wednesday:
For the past year, apartment buildings have been one of the few bright spots in the real-estate industry as people forced out of the home-buying market by foreclosures or the credit crunch have turned to renting.
But now the specter of job losses is beginning to spread the gloom into that sector as well. As would-be renters are doubling up in apartments or moving in with friends and families, rents and occupancy rates are beginning to fall in many cities.
Journal reporter Nick Timiraos (who, ironically, wrote both pieces) noted:
The one downside of the housing crisis for apartment owners has been the “shadow market,” made up of unsold homes that owners have put on the rental market.
But that competition isn’t nearly as big a problem as job-loss trends. “In many markets, our new prospects are beginning to resist the current and increasing levels of market rents we’ve enjoyed over the past quarter,” David Neithercut, chief executive of Equity Residential, told investors during this month’s earnings call. While the Chicago-based apartment owner, one of the largest in the U.S., reported an increase in funds from operations of 1.5% last quarter, it lowered its estimates for comparable-property revenue growth.
Sources:
“Home Sellers’ Pain Is Renters’ Gain”
Nick Timiraos
Wall Street Journal, January 17, 2008
“Apartment Buildings Lose Their Immunity To Housing’s Chill”
Nick Timiraos
Wall Street Journal, August 20, 2008
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