The October issue of The Apartment Advisor is now available. Given all that is impacting the Puget Sound region's apartment investment market right now, this is a special 16-page issue.
- If you subscribe, log in to your account now to download this new issue.
- Apartment Advisor subscribers can also download another special report we published today, a 24-page Apartment Lender Directory.
Some think the worst is over and it’s time to party. We disagree, and were chastised for our less than unbridled optimism a couple weeks ago by a long-time friend and investor at our presentation to the Washington Multi-Family Housing Association at their annual event in Bellevue.
Finding meaning in old vinyl
If it is time to party, then the only party song that sprung to mind as we prepared this review and forecast was Lesley Gore’s, "It’s my party and I’ll cry if I want to." We don’t think the worst is over, but we do see a turnaround beginning in about a year. Later, we got an email from another long-time friend and investor telling us we might have considered another song, Carly Simon’s, "I haven’t got time for the pain." Someone else suggested a tweak on the righteous Brothers, "I’ve lost that wealthy feeling."
A record breaking year
These songs will make more sense when you consider all the records our apartment market has broken this year, or is about to break. These aren’t good records to be proud of, like Roger Federer’s tennis achievements. No, these are distinctions we’d rather not have.
Here are some of them:
- Fewer apartment units will sell this year than in any of the past 35 years.
- Apartment rents fell more in this recession than at any time in the past 30 years.
- The apartment vacancy rate will peak at the highest level we’ve seen in more than 30 years.
- Rent concessions are greater than we’ve found since we began tracking them.
Wait, there’s more.
- It now costs less to make the mortgage payment on the median priced condominium in King County than to pay rent.
- Apartment developers will open as many units this recession year as they did in the boom year of 2000.
- The average assessed value is higher than the sale price for the first time in more than 30 years.
Well, there’s one new record we’re about to set that is good news, at least it’s good news for apartment investors who have been beaten up by the market this year. We expect developers will open fewer apartment units in 2011 than in any other year in the prior 50 years. That’s right, developers even built more apartment right after the 1970 Boeing bust than they will in 2011. That’s the first time we lost the supersonics, but more about that later.
This issue takes a detailed look at all of these issues, plus:
- Apartment vacancy trends: overall market and gross vacancies, vacancy rate distributions, vacancies by rent ranges
- Annual rent changes
- Rent increases or decreases based on rent ranges
- New condominium development from 2000 to date, with estimates to 2013
- A study of long-term rent performance compared to inflation
- Rent incentives
- Credit loss
- Water and sewer charges
- Parking charges
- An analysis of the cost of home ownership compared to renting
- The relationship between peoples' incomes and rent, and what it means for the future
- condominium conversion and reconversion
- New construction trends and forecast
- Top ten active apartment developers
- New construction rent trends
- New apartment construction financial feasibility
- New apartment construction financing issues
- Results of our new survey for the Apartment Lender Directory
- apartment investment update, including monthly trends for the price per unit, price per net rentable square foot, gross income multipliers, capitalization rates, and expenses
- The changing relationship in 2009 between assessed values and sale prices
- Apartment sales volume trends
- Forecast update for apartment demand, supply, rent, vacancy, development, and net operating income
- A discussion of the opportunity to capitalize on the next boom of potential apartment demand
- An analysis of investment risk and performance given the market changes over the past two years and expected changes over the next few years
- A discussion of "next steps" for investors
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