MNI REALITY CHECK: US Rents Mixed, At High Levels in Nov/Dec

--Increased Supply Leads To Rents Leveling Off In Some Regions

--New Job Creation Bolsters Rents In Other Areas

By Vicki Schmelzer

     NEW YORK (MNI) - Rental prices across the U.S. were mixed in November and

early December, but remained at high levels into year-end, according to

residential leasing and property managers at Renters Warehouse interviewed by

Market News International for the latest REALITY CHECK. 

     While there were signs of leveling off in some regions of the country due

to rising inventory and overbuilding, new job creation in other areas served to

bolster rents, they said. 

     --SEATTLE, WA

     "Seattle right now is seeing prices flatten, but not necessarily dropping,"

Seth Stephens, Market Vice President at Renters Warehouse in the Seattle area,

told MNI.   

     The average rent on a two-bedroom apartment in Seattle proper rose from

about $2,100-$2,200 a month in January to $2,400-$2,500 over the summer, but

retreated to $2,300-$2,400 currently, he said. 

     Whereas earlier in the year a landlord might be able to increase rents by

$100 to $200 a month and easily find a tenant, now "we have to really nail our

pricing right on or properties don't move," Stephens said. 

     The late-year dip in rents was driven by new inventory coming on the market

as well as some year-end seasonality, he said. 

     On rising inventory, "earlier in the year, we were running at about

1,700-1,800 units available in Seattle proper - that has risen significantly

into the mid-2000s," Stephens said. 

     Nevertheless, "there is no shortage of renters," Stephens said.

     "This is still a landlord-driven market; this is still a good time to be

either a seller or homeowner, a landlord," he said.

     Stephens did not look for a larger drop in rents in the near-term because

of the likelihood of increased demand for rental housing.

     "We have a lot of really big corporations that are moving a lot of people

into this area," he said referring to such firms as Boeing, Amazon, Google,

Starbucks and Facebook to name a few. 

     Some workers moving into the Seattle area are unable to afford to purchase

a house and will opt to rent, and some may be contract workers, who prefer not

to buy. Both contribute to housing demand, he said. 

     "We are moving just about everything we can get our hands on - all the way

from one bedroom homes all the way up to a large five-bedroom home with 6,000

square feet - it's really all moving quite well," Stephens said.

     --PHOENIX, AZ

     At Renters Warehouse in the Greater Phoenix area, Sales Director Joshua

Stearns noticed some leveling off in rent prices into year-end, but this comes

after an average year-to-date increase of between 7% to 10%, "depending on the

style of the unit."

     2017 was a "great year" for rental property managers and owners, with rents

in the Phoenix area at all-time highs, he said. 

     "The amount of rentals that we had did not increase from last year, but the

rents themselves definitely had increased. And so, for homeowners that had a

home that they previously listed with us that came up for a re-list - they were

really able to get more as far as rent," he said.

     The majority of the properties managed by Renters Warehouse Phoenix are

single-family homes and condos, mixed with townhomes and some multi-family

homes. With the annual flock of so-called "snowbirds" fleeing cold winters, many

rentals are short-term and fully-furnished, Stearns said.

     "So, our owners are able to capitalize on that by increasing the amount, by

thousands of dollars at times, depending upon the location in the Valley," he

said of monthly rents.  

     In the Surprise area northwest of the city, which has become hot lately, or

North Scottsdale, another popular area, a short-term rental on a two-to-three

bedroom house would lease out currently for between $2,800 to $3,500 per month,

Stearns said.

     --JACKSONVILLE, FL

     Over the summer, rents in the Jacksonville area rose steadily because large

corporations, such as Amazon and IKEA, opened facilities in the area, Debra

Pappas, Sales Director at Renters Warehouse in Jacksonville, FL told MNI. 

     With these and other companies moving in and three military bases within a

50-mile radius, there has been no shortage of renter demand, she noted. 

     Rents fell "a little bit" in November, but subsequently have recovered into

year-end, she said. 

     "A lot of the larger corporations like to do transfers of their people

before the end of the year. So, we've had a lot of transfers here in December,"

which helped underpin rental prices on the month, Pappas said. 

     Demand in the Jacksonville area is highest for three, preferably four

bedroom rentals, with a master bedroom downstairs, she said. 

     "Average days on market" for these properties are well below normal, and in

sharp contrast to "slow" periods when a rental that was 30 days on market would

have owners "knocking on our door saying, 'What are you doing? Why hasn't it

rented yet?" Pappas said.

     "If it's in the right area and for the right price, they're not even a day

on the market - they're not even on the market yet," she said. 

     --OVER SUPPLY OR UNDER SUPPLY? 

     "There is a lot more supply absolutely, but we're really looking at the

trends of the overall real estate market and how that makes a dip and turn -

every eight to 10 years," said Stearns of Renters Warehouse in Phoenix. 

     After crashing in the wake of the U.S. financial crisis, home prices in the

Phoenix area have clawed their way back towards lofty 2007 levels, he said. 

     If indeed home prices have peaked for now, and renting becomes more

preferable to owning for renters and or for owners, who can't sell their

properties, then rental property managers should be able "to capture that," he

said.  

     In Florida, rents on Jacksonville properties have gone up about 3% annually

in recent years, but this came only after years of decline and or doldrums in

the wake of the U.S. financial crisis, Renters Warehouse's Pappas said. 

     "We are definitely out of the bad part of the downturn and people are

starting to be able to breathe and be able to have some equity in the houses,"

she said. 

     Unlike other parts of the country, which recovered faster and where now new

supply is putting a cap on rents, the Jacksonville area continues to bounce

back, she said. 

     "In the real estate market, we only have a 3% inventory. Normally 6% is an

average market" for homes listed for sale, Pappas said. 

     "Due to the low inventory," developers "just can't build it fast enough

because they stopped building for so long," she said. 

     Because of the low inventory and the new developments being built in the

outlying Jacksonville area, "investors take note" and "are buying these houses

so they can rent them out," Pappas said. 

     --MODEST OPTIMISM ABOUT 2018 PROSPECTS

     Next year, in light of increased City of Seattle regulation and "all the

new building and new properties that are going to be released," the Seattle

market may see rents "level a little bit," with rents seeing only a "single

digit increase of a couple percentage points," said Renters Warehouse's

Stephens. 

     But, for areas north of the city, such as Lynnwood and Mill Creek, and

south of the city, such as Kent, Auburn, Lakewood, and Tacoma, "I wouldn't be

surprised if we see another five-plus percentage points up to maybe an 8 or 9%,

10% increase in rents in those areas in 2018," he said. 

     Stearns in Phoenix remained "very optimistic about what 2018 holds" for

rental property managers.

     "We're going to see a trend of the home prices, as far as rental prices,

decreasing because of the supply, because the majority of homes, we're

predicting, are not going to be able to sell in the optimal time frames," he

said.  

     Indeed, "there are more homes on the market past 100 days than there were

just six months ago," Stearns said.

     Rather than let a property sit vacant and drain bank accounts, owners may

look to explore rental possibilities.

     "Because we are trying to leverage ourselves and help those homeowners turn

that property into an investment by getting a tenant in there, I think that's

definitely going to increase our business here in the valley for sure," Stearns

said.  

     Editor's Note: Reality Check series reports on sentiment among business

people. They are intended to complement and anticipate economic data. 

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com

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