Weekly Market Update: Dupre & Scott

Rents up, vacancies few

Renters have been saying loudly that rents are rising steeply and vacancies are few. Now comes fresh proof they’re right. Average rents in the…

By Elizabeth Rhodes
Seattle Times business reporter

Renters have been saying loudly that rents are rising steeply and vacancies are few. Now comes fresh proof they’re right.

Average rents in the region jumped almost 2 percent between the first and second quarters of this year and are now 9.1 percent higher than this time last year, reports apartment analyst Tom Cain, of Cain Inc. He surveys 149,000 King and Snohomish county apartments quarterly. The current two-county average is $1.14 per square foot, or $967 per unit. Meanwhile, the vacancy rate continues to drop, now at 4.24 percent for the two counties. Anything under 5 percent is considered tight.

“The rental market will continue to tighten as a result of job growth, in-migration and a combination of an insufficient amount of new construction to fill demand and apartments leaving the rental pool for conversion to condominiums,” says Cain, publisher of Apartment Insights Washington. Two areas — South Everett and Lynnwood — are leading with annual rent increases above 13 percent. Average rents in those communities are now $885 and $896 respectively for all size units combined, putting them still below the areawide average.

Four additional areas have seen rents climb 11 percent or more: East Bellevue, West Bellevue, Southwest Seattle and North Seattle between North 85th Street and North 145th Street. Some of these neighborhoods have lagged others in rent increases and are only now catching up. There are also some areas where increases have remained modest, Cain found. It’s “ironic,” he says, that affluent, fashionable Kirkland leads them.

Kirkland “has the unique distinction of having the highest rents and the highest vacancy rate over the past year,” he says. “It also has had the lowest annual rent increase on a percentage basis — 3.4 percent.” Cain attributes this to “price resistance among renters” who can find lower rents elsewhere. Kirkland’s average rent goes from $956 for a studio to $2,264 for a three-bedroom, Cain found. Compare that to nearby Redmond, where studios average $845 and a three-bedroom is $1,606.

Several other areas also reported below-average rent increases (but not necessarily below average rents). They are Des Moines, Kent, Sammamish, Issaquah, Arlington and Marysville. Each has experienced annual rent increases in the 5 percent range. In King County, the toughest places to find an apartment are in Seattle. The north-central part of the city has a vacancy rate of 1.88 percent — essentially a full house. Other neighborhoods with few vacancies are Queen Anne, Magnolia and Capitol Hill. South King County, from SeaTac to Federal Way, had above-average availability, with vacancies ranging from 4.5 to 6.3 percent. In Snohomish County, “Boeing’s Everett plant is having a substantial impact on this area,” Cain says, and that’s why its vacancy rate is falling faster than King County’s.

The tightest vacancy rate, 2.15 percent, was in Marysville and Monroe, he found. Eleven hundred apartments were converted to condos in the second quarter of this year. That’s slightly more than were replaced by new construction. “The level of converted units has surged in 2007,” Cain reports, with the highest conversion activity occurring on the Eastside. Seattle is a close second. Developers are constructing 2,231 units in properties with 50 or more units. Half are on the Eastside, 40 percent are in Seattle and the remainder are in South King County. An additional 8,000 units are in the planning stage.

Elizabeth Rhodes: erhodes@seattletimes.com

See original article here: http://seattletimes.com/html/realestate/2003788343_rents15.html

10 Ways to Welcome Home A New Tenant

Have you ever heard the saying, “A happy tenant, is a good tenant?”, or “First impressions matter?” Both of these saying are very true, especially when it comes to welcoming home your new tenant. The real estate and property management …

Is Buying a Home (or Rental Property) a Good Investment in 2013?

WRITTEN BY: Diana Hill
PUBLISHED BY: Online Trading Academy

One of the most common questions I receive is: “What will the real estate market do in the coming year?” Well, I don’t have a crystal ball, (wish I did) but I can look at data and see where things are trending. There are very few experts that don’t agree that the real estate market has hit its bottom and is on the rise. But what will the rise look like and will it be sustainable?

I read an article recently by Robert Aldana that likens what is happening in the real estate market to bouncing a basketball; he calls it the “basketball effect.” “Take a basketball and hold it up high, then drop it.  That first bounce is the basketball’s fastest upward bounce.  During that first bounce, it begins to travel slower the higher it rises.” Why this is relevant is that we are seeing the initial bounce in property values?

I do believe that an upward trend in values and sales will continue through 2013.  We will not see the appreciation acceleration at this same level however. I do think that we will continue to see good appreciation through the spring of this year.  As I’ve mentioned before, one of the things driving appreciation is the lack of inventory.  I think this year we will see more homes coming on the market that are standard sales not distressed sales. Once that happens, the market’s appreciation should slow to a healthy rate of 2-3 percent over the next few years. Please keep in mind that real estate is extremely localized and you need to consider how your area is doing with relationship to jobs, rents and other economic factors before making a buying decision.

One of the other driving factors in the market is household formation. Household formation, as I’ve talked about before, is increasing. The graph below demonstrates why it’s so important:

We have seen large growth after the almost historic shrinking in 2006. Growth started in 2010 with 357,000 new households, 2011 near a million, and it’s predicted that 2012 rose to over 1.3 million. This helps drive the residential sales market as well as the rental market.  But is it smarter to buy than to rent?  Let’s do the math:  if you purchase a $400,000 home with a FHA (Federal Housing Administration) loan, at 30 years with a fixed rate of 3.5 percent and put $14,000 down, it will cost approximately $1,733 a month (for principal and interest – you would also have to add on taxes and insurance).  In California taxes and insurance would cost you about $150 to $200 a month for a $400,000 home.

Once you add the tax deductions for mortgage interest and property taxes you are SAVING $500 a month and building your wealth. Another consideration is that your payment will remain fixed where rent will continue to rise as does the cost of living. Now if you are an investor and want to buy this house to use as a rental does that math still make sense?

Well, two things we should add to the equation is 1) appreciation of the asset 2) depreciation of the asset for tax purposes.  Right now our tax laws really benefit the landlord. If we use the same math with a mortgage payment plus taxes and insurance you are paying $2,640 a month, now subtract the tax break and appreciation you receive (about $1,100 a month) and your effective payment is $1,500. If you rent the property for $2,200 a month you will have a positive cash flow.  But now consider what that will look like 10 years down the road.

If you want to learn more about investing, make sure you register for my upcoming class in February.  It is online and there will be only one class a week for 4 weeks.

– Diana Hill

See article here: http://lessons.tradingacademy.com/article/is-buying-a-home-or-rental-property-a-good-investment-in-2013/

Looking for the right person to manage your investment property? Call  Charissa:

Charissa Frerichs

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