Ten Days of Buzz: June 18-28, 2012

Welcome back to Ten Days of Buzz! This week we’ve got taller towers in South Lake Union, growth in Bellevue, renting trends in urban housing, and more…enjoy!

“We fully intend to be on the crest of the wave.”

Greg Johnson, President of development company Wright Runstad. Developers plant seeds for ‘Spring District’ growth in Bellevue, Seattle Times, 6/18/12.

“There is clearly an opportunity, lots of REO [bank-owned] properties coming into the market over the next few years. …So the next thing is to say, how do you assemble a pool with some geographic diversity, how do you take homes from different markets, so how do you put that pool together?”

Vandana Sharma, S&P. Investors Get Creative with Hot Rental Market, CNBC, 6/20/12.

“I deliberately chose to not live near work because lifestyle was more important than having to commute.”

Nathan Manley, renter who works for Microsoft but lives downtown. Renting Trends in Urban Apartments, Zillow.com, 6/21/12.

“Seattle’s economy is recovering faster than many other cities in large part because of growth in South Lake Union.”

Mike McGinn, Seattle Mayor. City plan would allow taller towers in South Lake Union, Seattle PI, 6/25/12.

“As a result of these various interests, forces and developments, there is an increase in real estate investors that are realizing good rate of returns with the increase in the number of renters.”

Mary Ann Clark, Coldwell Banker. Investors seek rental properties, Greenwich Post, 6/27/12.

“Today’s recession-scarred young people are placing greater emphasis on where high-quality, high-paying jobs are created. Seattle’s technology workers represent a growing workforce that is just slightly smaller than Silicon Valley’s.”

Ross DeVol, director of regional economics at Milken Institute. Boom! Here come the apartments, Daily Journal of Commerce, 6/28/12.

“Just under $900 million in 5 unit and larger apartments sold so far this year in the tri-county market (King, Pierce, and Snohomish counties), compared to $380 million by this time last year and $150 million by June 2010.”

Dupre + Scott, from the June issue of Apartment Advisor.

That’s all for this week! Have a great weekend. And speaking of Apartment Advisor, we’ll have a full rundown on the latest issue for you next Friday. Until then, happy renting!

Wall Street Journal: “Renting Beats Owning” in Seattle

The Marketwatch column from the Wall Street Journal caught our eye this week with its article on the 5 housing markets where renting beats owning…and guess what fair city was smack-dab in the middle of the short list? It turns out it still makes good financial sense to rent in Seattle–as well as in some other key cities around the country.

The article explains that as housing prices and interest rates have fallen over the past few years, it’s been easy to wonder whether it might not start to be practical to look at home ownership again; and yet, even with these incentives, housing sales dropped again in May. The US Census put homeownership at 65% at the end of the first quarter this year–the lowest in 15 years. Since homeowners have to do something with the houses they can’t move, they’re renting them out–a win-win, since renting is so popular at the moment.

While renting is popular and convenient all over the country, there are areas where it is currently cheaper to buy a home–but not so in the places listed in the Marketwatch report. Northern New Jersey, Long Island, the whole of California, and Honolulu all made the list–along with Seattle, of course.

According to Marcus & Millichap, average Seattle rents are currently $377 cheaper per month than average monthly mortgage payments; that’s over $4,500 saved per year. The National Association of Realtors puts it this way–if you want to afford a typical home in the Seattle area, you’re going to need a gross income that’s a whole 5% higher than if you rented a similar home. Cost breakdowns are given on owning vs. renting in Dunlap, Maple Leaf, and Green Lake–and renting wins every time.

For the numbers and more info, check out the article. In the meantime, we’ll rest easy knowing that renting in Seattle makes everyone happy–landlords and tenants alike. Kind of sweet, isn’t it?

Freddie Mac’s June Outlook: Rental Market “a Sign of Strength”

The June 2012 US Economic and Housing Market Outlook is now out, and Freddie Mac is pleased as punch about the rental market. They’ve got the numbers–culled from a veritable Who’s Who of surveying organizations–and we’ve pulled together some of the report’s main statistics and conclusions for your benefit.

The rental market has continued to tighten over the past two years.

Between March 2011 and March 2012, an additional 1.5 million households moved into rental housing. That’s an increase of about 4% (and rising!). The ever-increasing reach of the rental-housing trend has caused the market to tighten over the past couple of years, according to the National Multi Housing Council; the Census Bureau has confirmed this conclusion, saying rental vacancy in multifamily units has dropped over 2%. Meanwhile, Axiometrics has reported that occupancy clocked in at over 93% at the end of the first quarter, with an even higher number for high-end properties. That’s a lot of tenants!

Rents are up, too–and that’s good for property values.

According to the Bureau of Labor Statistics, rents were 2.5% higher at the end of the first quarter this year over a year ago (and Reis concurs with this finding). There’s an added bonus, too: more tenants, occupying more apartments, and paying more for them, translates into higher property values. The National Council of Real Estate Investment Fiduciaries Index puts property values 25% higher at the end of the first quarter than they were at the start of 2010. They’re still 14% below their pre-recession peak, but hey–we’re getting there!

Developers have taken notice of this increased demand.

At 93% occupancy, it’s clear we’re going to need more apartments to put tenants in–and developers are all over it. The National Association of Homebuilders puts its Multifamily Production Index at its highest since 2005, and multifamily building starts between January and May of 2012 were 48% higher than they were a year ago. The banks have taken notice of the need for more apartments as well–a recent study from the Federal Reserve noted a “modest easing of credit standards” for multifamily builders.

The report concluded by noting that “further increases in rental demand are likely in the coming year, as newly formed households postpone homeownership,” and that the market will probably continue to tighten for awhile. We’ll raise a glass to that! In the meantime, here’s the full report for your perusal.

The Buzz: Tall Towers, Freddie Mac, and…Fish-Farming Tenants?

Welcome to The Buzz! Here are some stories the rental housing folks are following this week:

Breaking: Seattle is home of the country’s eighth tallest building.

It’s good to know we’re not completely lost in the shuffle–our Columbia Center, which stretches to heights of 936.5 feet, is taller than the tallest buildings in Dallas, Charlotte, San Francisco, and Oklahoma City. We know it’s not the most exciting news you’ll hear this week, but hey, it’s always nice to beat San Francisco at something!

Philadelphia, Houston and L.A. all measured up taller than Seattle, with New York (of course) winning with both the Empire State Building and the incomplete One World Trade Center, which is scheduled to be 1,776 feet tall when complete. Check out the slideshow over at the Seattle PI.

Freddie Mac gives us the June numbers on vacancy & new renters.

Freddie Mac has now released the US Economic and Housing Market Outlook for June. We’ll actually have a full breakdown of Freddie Mac’s report out in the coming week, but for now suffice it to say that vacancy rates have dropped two percentage points in the past two years, an additional 1.5 million households converted to rental housing since March 2011, and multifamily property values are up about 25% since their lowpoint in 2010. Check out the summary from National Mortgage Professional here.

Is it time to add a “no fish-farming” clause to your lease agreements?

The common “back-yard” (living room?) tilapia

When we saw this on our Twitter Feed, we almost didn’t believe it. Leaking water, strange smells, odd noises at night…we don’t know what this New York City landlord expected to find when he responded to complaints about one of his units, but he probably didn’t expect what he found: the tenant was farming fish–yes, raising Tilapia–in his apartment.

It turns out the tenant has a non-profit that actually “encourages city-dwellers to grow tilapia and other fish in their apartments.” The landlord is suing, while the tenant says he isn’t bothered–there’s no such thing as bad publicity. Check out the whole article at UPI.com.

Builders, meet renters.

Multifamily housing construction has ramped up recently, of course–demand for rental housing units is high and just keeps getting higher, and builders were bound to notice sometime. But builders are doing something else as well: some developers are starting to build single family homes–as rentals. As Diana Olick of CNBC puts it, “single family rental demand is soaring, as are rents, and investors are rushing to cash in; if you can’t beat ’em, join ’em.”

High-end homes built specifically as rentals are emerging as people find they are again financially solvent, but they’re not crazy about the idea of turning around and getting another mortgage. “It’s basically offering the product they want, with the financing vehicle that works for them,” Joe Petersen of Insight Real Estate explains. Check out the full article at CNBC.com.

That’s it for now! We’ll see you next week. In the mean time, we’re left wondering…what other kinds of urban farming projects could a landlord be surprised by? The possibilities may be more extensive than we had imagined.

Ten Days of Buzz: June 2-12, 2012

Welcome to Ten Days of Buzz, where all the experts are talking about something…Let’s see what they’re talking about this week!

“Los Angeles-based Kilroy Realty, which owned nothing in the Seattle market two years ago, is on its way to becoming one of the region’s bigger office landlords.”

Eric Pryne, Seattle Times business reporter. L.A. firm buying Fremont, Bellevue office buildings, Seattle Times, 6/6/12.

The online retail giant wants to build three 38-story office buildings, along with other buildings five, six and eight stories tall, with about 1 million square feet of space, on three full blocks along the east side of Westlake Avenue between Lenora and Virginia streets.

Aubrey Cohen, Real Estate Writer for the Seattle PI. Amazon files for downtown development permit, Seattle Post-Intelligencer, 6/7/12.

“Where (people) are choosing to rent, rather than buy, they’re being a little more picky. They want better quality, better space, amenities — more trim work, a little nicer appliances, that kind of thing.”

Jim Gaines, Texas A&M Real Estate Research Economist. Apartment Construction Soars, Amarillo Globe News, 6/9/12. 

“We’re seeing a significant growth in the number of San Franciscans who are utilizing websites to share their homes, apartments or couches with visitors from around the world…We need to protect scarce rental housing, make sure visitors are respectful within buildings and neighborhoods, and make sure these practices take into account planning, safety and quality-of-life concerns.”

David Chiu, San Francisco Board of Supervisors President. Short-term rentals disrupting SF housing market, San Francisco Chronicle, 6/10/12.

“People are willing pay a premium to have this kind of carefree living situation; if they see something and they don’t feel like they’re sacrificing anything in standard of living [they could choose to rent], especially if they’re not sure it’s going to be a long-term investment for them.” 

Gary Malin, president of New York real estate firm Citi Habitats. Here’s Why the Rich Are Still Renting, USNews.com, 6/11/12.

“To do this we need strong political leadership that is willing to work with both landlords and tenants to make it more affordable and stable for ‘generation rent’.”

David Clapham of the Joseph Rowntree Foundation. Call for Tax Breaks for Landlords, the Press Association, 6/12/12.

Rents Rise 6% Nationally as NPR Brands Us “Generation Rent”

Trulia has just released the numbers on rising rental prices, and it’s good news for landlords. Nationally, rents rose 6% since this time last year, while Seattle’s 9.6% rise puts it sixth in the nation for rent increases. San Francisco made number one, at 14.4%; in between were Oakland, Miami, Denver, and Boston.

Of the top ten cities, rents actually rose the least in New York, at just over 5%. The secret behind these rising rents? According to Trulia’s chief economist, Jed Kolko, “The economy has strengthened enough to increase rental demand, but has yet to recover strongly enough for renters to become homeowners.”

As the renting culture continues to take root, perceptions of what it is to rent one’s home are changing. While ten years ago, most people might have rented apartments in multifamily housing as they saved to purchase a single-family home, these days, owner-occupied housing is making way for a different model. Homeowners who crave the increased flexibility of renting are leasing out the homes they own, instead of selling, when they decide to move; others are investing in rental properties with no intention of living in them.

Rolf Pendal, a housing expert with the Urban Housing Thinktank, is focused on what that will mean for government officials and others as our priorities shift. “What communities need to do to ensure they are prepared is first to make sure that there are sites where new multifamily housing can be built,” he says. “And the multifamily housing that gets built needs to go in communities with high opportunity, not just communities where the schools don’t perform well and where it’s not safe to live.”

Read more:

The Buzz: Landlord Banks, College Towns, and…Virtual Staging?

Say hello to your new landlord: Bank of America?

Faced with customers who don’t qualify for mortgage modifications, Bank of America has decided to try an unorthodox approach–renting to their customers. The pilot program, in California, Arizona, Nevada and New York, has only just begin, with invitations mailed to 1,800 customers in California alone.

The plan is to sell the homes to investors, which will allow families to stay in their homes; meanwhile, the bank will recoup more costs than if they simply evicted borrowers. Could this be the new model for mortgage defaults? Read more in the Seattle Times. 

Looking for a temperate rental market, investors turn to college towns.

The rental market is strong these days, with ever-falling vacancies–but that hasn’t always been the case. In years when it has been more popular to buy one’s home, there is one demographic that always, always rents: college students.

While college kids generally don’t go for high-end apartments, if you invest in the right kind of place, you can expect to fill units quickly and easily–so the risk can be fairly low. According to Trulia, demand for college-town rentals went up 5% this year. See you in the U District! Read the article from KTAR.com.

This sale was brought to you by the Amazon Effect.

The Plaza 600 building, located at Sixth Avenue and Stewart Street in downtown Seattle, has just sold, the Seattle Times reports. While “historically, Plaza 600 has been on the fringe of the downtown core,” according to Kip Spencer with OfficeSpace.com, the building is just across the street from Amazon’s proposed three-tower complex–and that has really upped the ante for prospective buyers.

While Plaza 600 is primarily an office building, the Amazon towers may be mixed-use–and as the Amazon Effect continues to make the area popular, rental housing is sure to follow. Read about the sale here.

Don’t have the perfect sofa to stage that apartment? Consider virtual staging.

When showing a currently empty unit, it can sometimes be difficult for a prospective tenant to get a good understanding of scale, especially when the empty unit is on the larger size. But finding attractive furniture to stage an apartment with can be difficult–and expensive. Enter virtual staging (or in laymen’s terms, “photoshopping”).

Daniella Schlisser of the Corcoran Group in New York explains. “In an empty space, people can’t really understand how big a couch or a bed is;” but if they tour the unit equipped with the staged photos, “they bring with them the knowledge that everything they want would fit.” Meanwhile, the empty apartment–so full of possibility–still sits before them, spacious and sparkling. And professional virtual staging starts at around $75, making it much cheaper than a rental sofa. Check out the article here.