My experience exactly. Most of my units rent in the $750-$1200 range, with $1800 to $2800 due at lease signing. Meanwhile I had the mortage guys offering my target renters 100% financing. I didn't dare raise my rents too high. Things have changed. I placed a for rent ad in the paper this week. Last year I rented this small one bedroom unit for $625. I put it in for $750. The phone has been ringing off the hook. Today I had two different renters show up with cash in hand, ready to move in tomorrow. They thought the apartment was a steal. I should have listed it for $800. I know this is just my personal experience, in my local area, but I am glad I resisted the temptation to sell a few years ago.
REIT Review Spring 2007 Cornerstone Apartment: The poor performance by the Apartment REIT sector that began in the fourth quarter of 2006 continued into 2007 as the sector underperformed the broader REIT index by 586 basis points in the first quarter. We attribute the performance lag to further signs of slower rental rate growth and weaker than expected earnings growth. Indeed, according to Axiometrics, the national apartment vacancy rate increased 80 bps to 6.2% grew only 2.9% year over year. Signs of weakness in the condominium market and units converted to the for-sale market returning to the rental pool also likely weighed on the sector. Indeed, a number of Apartment REITs have indicated that they are looking at busted condo deals as potential rental properties. Despite a higher vacancy rate, we believe underlying apartment fundamentals remain strong nationwide. We expect continued job growth to support demand, partially offsetting the impact of condo reversions. Whatâs more, due to the uncertainties in the for sale housing markets, many tenants who would have become home purchasers in recent years may rent for a longer period, thereby supporting rent growth in excess of the long-term average. The underperformance of the Apartment sector has resulted in the group now trading at a discount to NAV. Thus, investors are left to weigh slowing growth rates versus widening discounts between the private market value of the portfolio and the public value of the REITs. With this in mind, we have bifurcated our Apartment strategy, focusing on names with exposure to high-barrier coastal markets that began their recoveries later in the current apartment cycle (Northern California and Seattle) since those markets should provide above average earnings growth, and companies that are trading at the widest relative discounts to NAV. http://www.cornerstoneadvisers.com/research/CREA_REIT_Review_2007_Spring.pdf
The next wave of the US Housing Market Crash - Apartment REITs Housing-Market / US Housing Mar 09, 2007 - 09:24 AM By: Money_and_Markets I told you about the housing sales and pricing declines before they happened ⦠I told you that the subprime mortgage industry would end in disaster before the stocks blew up ⦠And today, I want to tell you about the next major group of companies that I think are going to get hit from the housing bust. I'm talking about apartment Real Estate Invest Trusts (REITs). The Rental Market Has an Achilles Heel: Too Much Inventory I first mentioned these companies this past November in â Apartment REITs Ready for a Fall? â I told you then how investors were flocking to REITs, especially companies that own and manage apartment complexes. As I explained, their basic investment thesis was: Housing is unaffordable, and both sales and prices are falling. Since people have to live somewhere, they'll end up renting. That will push demand up, supply down, and rental rates through the roof. I was skeptical. I said if you'd already made big money in the run up, it was a good time to bag your gains. Today, I'm more convinced than ever that apartment REITs are primed to fall, maybe sharply. Why? You see, the bulls argue that traditional apartment construction has been weak. And to a certain extent, they're right â companies haven't been building all that many 200-unit or 300-unit rental complexes. But here's the problem with that argument: Too many homes, townhomes, and condominiums WERE built â and sold to buyers as investments. In other words, they were sold to people who were going to turn around and rent them out anyway! And even more homes were bought as âflipsâ â houses that would be quickly fixed up and resold. Heck, some buyers never even thought they'd have to go through the fix-up stage ⦠they figured they'd be able to sell for higher prices with no additional work whatsoever. Unfortunately, the housing market plunge has turned many of these flippers into unintentional landlords. They can't sell, and they can't afford to pay mortgages, insurance, and taxes while their houses sit there empty, either. So they're trying to rent their properties to staunch the cash flow bleeding. In other words, while the construction of traditional apartment complexes may have lagged during the boom, plenty of town homes, condos, and single-family homes were churned out along the way. The result: Hundreds of thousands of those units are now sitting empty! The U.S. Census Bureau says 2.7% of the country's homes were vacant in the fourth quarter of 2006 â the highest percentage in U.S. history! It's Not a Tight Market Anymore ⦠So Watch Where You Invest All those excess, empty homes have created a gigantic glut of âshadowâ supply in the rental market. And that's causing apartment fundamentals to deteriorate. The evidence is everywhere: The National Association of Home Builders (NAHB) publishes an index tracking apartment availability â the higher the number, the âlooserâ the rental market is. That indicator jumped to 54.8 in the fourth quarter of 2006 from 38.9 a quarter earlier. That's the weakest showing for this measure in two years. About 9.5% of the apartments covered by the NAHB survey were sitting vacant as of the fourth quarter of 2006. That's up from 6.3% a year earlier. A separate survey from the National Multi Housing Council confirms the deteriorating outlook. The group's quarterly âmarket tightnessâ index slumped to 54 in January 2007 from 70 in October 2006. That's the lowest reading in three years. In other words, it's getting easier to find an apartment these days, which means landlords are being forced to offer more concessions or reduce base rents to attract tenants. The major apartment REITs will likely see their earnings suffer. Most of the stocks in this sector, like AvalonBay Communities, kept rising after my initial piece. But they peaked in early February and have since given back essentially all of those gains. The next big leg down could be fast approaching. Bottom line: I don't think this rental market storm is over, so if you've got a stake in this segment of the housing market, I urge you to act accordingly. Until next time, By Mike Larson This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit www.MoneyandMarkets.com http://www.marketoracle.co.uk/Article489.html
Moved to a nicer place for 26% less in san diego. I can easily buy, by why the hell would I do that when rent is half price and home prices are falling??? Buying can be really stupid in the wrong market at the wrong time.