Occasional apartment market observations

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Published April 24, 2009

Editor's note: This is not the complete article. Read this article by logging in to your free account or creating a free account.

Here are occasional postings of market observations and data analyses for the Seattle metropolitan area's apartment investment and rental market, prompted by comments and questions from subscribers and participants.

Although this is not a daily "blog" or "tweet" (you probably don't care to know what we eat for breakfast every day - usually steel cut oats), we would appreciate your comments about these posts.

We would also appreciate your questions about trends. We won't promise to post a response to every question, but we'll consider each request seriously.

Note: Some of these posts show trends over the past 30 years or so. That has prompted some subscribers to ask where we got all that "old" data from. We'd like to say we got it from our grandparents when we took over the business from them, because we aren't even that old. But that's not true. We're at least 30 years old. We designed this research ourselves in the late 1970's, and have been collecting and analyzing trends ever since, as well as adding new research and upgrading our methodologies and technology continually. Time flies when you enjoy what you do.

Seattle apartment market trends

April 24, 2009 - At the request of the City of Seattle Office of Housing, we prepared a PowerPoint presentation showing apartment market trends specifically for Seattle. We will present it to members of the Seattle City Council this afternoon. Apartment Advisor subscribers can download a PowerPoint summary.

The presentation looks at a number of trends since 1997, including: rent trends by unit type; neighborhood rent changes for 15 Seattle neighborhoods, apartment sales prices, sales volume, development, and the impact of condominium conversions and reconversions.

Isn't it time for Fleetwood Mac?

April 17, 2009 - A subscriber found our April Apartment Advisor disturbing:

I'm still recovering from reading the April Apartment Advisor. Good grief. I think I'll pick up some art supplies at lunch and make up some signs that I can carry out on Mercer- "I will manage real estate for food" I'm in denial on this - I'll have to put away my Blood, Sweat & Tears vinyl and get out Fleetwood Mac, "Tell me lies, tell me sweet little lies." Maybe that will help me feel better. Hopefully things will look up a little by the end of the year. (R.F., Seattle)

What's up with anticipated cap rates?

April 16, 2009 - One subscriber found current investment trends discussed in the April Apartment Advisor puzzling given current rental market trends and our five-year forecast.

Question: Sorry, but I just can't get my mind around it.... Actual capitalization rate versus anticipated cap. The graph in the weekly investment update makes sense. Antic. has fallen on top of actual but in the new larger write up you say that actuals are 6% while antic. are 7%. If you think rents are going down, costs going up, and NOI down why wouldn't the anticipated be going down? (T.S., Tiburon CA)

Response: Good questions - first, the weekly investment update shows monthly cap rate trends while the discussion in the new issue of the Advisor is about the 2009 YTD cap rate. The anticipated cap rate isn't going down because (a) buyers either realistically or unrealistically expect to raise rents over the next 3-6 months either because they think rents are below market or because they plan some upgrading.

Capitalization rates and interest rates

April 5, 2009 - A subscriber asked, "This may be a tough request, but do you happen to have a chart or graph that has tracked cap rates and interest rates for the past 20 years? I have clients that have made the request to see the correlation."

So we put together a graph and Excel table showing both "actual" and "anticipated" capitalization rates for 20-unit and larger apartment sales in King, Pierce, and Snohomish counties, and also plotted interest rates on loans made for apartment property purchases since 1980.

Note: The following graph is only visible to our participants and subscribers (once logged in). In addition, subscribers to our Apartment Investment Report can download the Excel file with the data and graph. It's the link called Random Thoughts in your subscriber resources section.

Eastside capitalization rate trends

March 30, 2009 - The online version of our Apartment Investment Report gives subscribers the ability to create custom reports showing trends since the beginning of 2000. A subscriber was interested in looking at earlier capitalization rate trends for the Eastside market.

We created a table and graph showing "actual" capitalization rates by year for the Eastside market from 1980 through 2008, for 20-unit and larger properties.

Note: The following graph is only visible to our participants and subscribers (once logged in). In addition, subscribers to our Apartment Investment Report can download the Excel file with the data and graph. It's the link called Random Thoughts in your subscriber resources section.