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Costly areas for home rentals
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Sunday, 27 August 2006

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Running for a decent apartment is very hard in many cities specially on rising rents and shrinking inventory.  It's no secret that renters are getting squeezed. But by how much depends largely on where they put out their welcome mat. 

In 2006, rents averaged $896 across the U.S., up 4.2% from the same period a year ago, and occupancy rates averaged 96.2%, according to M/PF Yieldstar, a real estate market research company.  It's the first time since 2001 that rents have outpaced inflation on a year-over-year basis. Top markets such as San Jose, Calif., saw rent increases nearing 12% compared to a year ago, while rents actually dipped in a few locations like Greensboro, N.C. (-3%) and Detroit (-1.6%). In fact, rents declined slightly from the end of 2005, when the average rent was $940.

Mostly, renters find themselves negotiating on everything from price and location to amenities and still face tough competition for available units. 

In Los Angeles, Rob Schultz, a 30-year-old carpenter, says there were no deals to be found, even if he was willing to move a little farther out. "I thought we could get something for a steal in an outlying area," he says. But, "They seemed to get the same rents wherever," they were located.  Alex Khromov, a 29-year-old physician who recently moved from New York to Orlando, Fla., says he underestimated that area’s rents by at least $300 a month.  "Orlando rents are becoming more comparable to New York rents," Khromov says. "Anything less than $1,000 is on the third floor with a walk-up."


Rents in already-steep San Francisco, where 97.4% of the apartments were occupied, climbed another 8.8% in the quarter to an average of $1,947, and will almost certainly surpass the $2,000 mark later this year, to rival the tech bubble peak of $2,100 in late 2000.  In Los Angeles, rents climbed 6.5% to $1,586 in the second quarter on an average occupancy of 97.5%.  But the most expensive place for rents was still New York, where 97.1% of the apartments were occupied, at an average monthly rent of $2,469, according to real estate data firm REIS Inc. (M/PF does not track New York City.)

Some of the biggest increases in rents came in areas where the gap between renting and buying was largest, such as San Jose, Calif., and Phoenix, and the major markets in Florida. Experts blame the tight market in Florida on condo conversions, which took thousands of apartment units off the market.


10 priciest cities for renters

City Avg. rent
 Annual rent chng.
 Occupancy
 
New York** $2,469
 NA
 97.10%
 
San Francisco $1,947
 8.8%
 97.4%
 
Los Angeles $1,586
 6.5%
 97.5%
 
San Jose, Calif. $1,487
 11.6%
 98.2%
 
Orange County, Calif. $1,387
 6.0%
 96.8%
 
Boston $1,332
 2.1%
 96.7%
 
Oakland $1,248
 5.8%
 96.8%
 
San Diego $1,213
 3.1%
 97.1%
 
Washington, DC $1,205
 4.5%
 97.4%
 
Fort Lauderdale, Fla. $1,134
 9.7%
 97.5%

*Source: M/PF Yieldstar; second-quarter snapshot

**Source: REIS Inc.

The fact is that rents are rising everywhere.  The biggest wild cards in the rental market are areas such as Las Vegas, Miami and Fort Lauderdale, Fla. Here, investors snapped up condo conversions for quick resale, only to see the market stagnate.

These units are slowly being added to the rental stock in many markets as their owners find they can't make a profit by selling. This trend could pick up steam, as condo projects started during the housing boom are put up for lease instead.

Until any such decline really takes hold, renters will need to be vigilant in their search. Some renters have resorted to bartering for their rent hoping cooking or massage services are a way to crack the tight market.

Large apartment owners who used to dole out discounts on rent and security deposits are now discontinuing those deals and upping rents in most markets. 

 Tips for a good rental

Look early.  Most prime rental properties are put up for lease when tenants are still living there, about 30 to 40 days prior to the date it’s available for move-in. If you wait until a week or two before you need to move, you could get stuck with the apartment no one else wants.
Do your research.  Check online and classified listings so you know what rents are going for in the areas you are interested in, and, just as important, with the amenities you are interested in. And keep in mind the age and condition of the places commanding these rents.
Prepare financially. Several months before your move-out date, pull your credit report and make sure it is in good shape. If you have blemishes from old landlords, work to get references. Start saving for that deposit, which is typically one month's rent.
Be flexible. Make a list of the amenities that you can’t live without, such as on-site laundry or air conditioning, and decide on the distance of the commute you are willing to endure. Then look for any type of rental property or areas that fits the bill, wherever it is located. While you might not be in a hot neighborhood, chances are you’ll still be satisfied enough to stay there for a year.


-jhd-

 
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