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Renters employing buyer tactics as markets become more competitive
By Justin Hunter
From 2000 to 2005, most home buyers
felt they were actually in a war with
other buyers as it was everyone for
themselves. Trying to get the best
possible deal on the best possible
home was a difficult task as buyers
were outbidding one another, basically
left and right.
Since the start of 2006, this has
no longer been the case. Home sales
are marking record declines, allowing
serious buyers more time to pick and
choose the property of their choice
for a reduced price.
As a result of the housing slowdown
and high interest rates,
renting has become just as competitive
as buying once was.
The article, “Bidding War May
Be Moving To Rental Front” printed
in the October 11, 2006 edition of
The Wall Street Journal and written
by columnist Christine Haughney, explains
how renters are taking some old tips
used by buyers during the housing
“boom” and using them
to bid against other would-be renters.
“As rising interest rates and
flattening home values have made renting
more attractive, renters are beginning
to resort to the same one-upmanship
tactics to secure a choice apartment.”
Many apartment complexes in major
rental markets such as San Francisco,
Boston, Manhattan and Washington D.C.
have waiting lists of over 20 people
and are allowing renters to pay a
year’s rent in advance or even
more than the asking price, just to
get the apartment
over another suitor.
“In August, Adrian and Amanda
Liang agreed to pay $5,300 a month
for a two-bedroom apartment on Manhattan's
Upper West Side -- $100 more than
the asking rent and $1,000 more than
they intended to spend. ‘I just
wanted to get this done as soon as
possible,’ says 31-year-old
Mr. Liang, who moved to New York from
San Francisco with his wife after
selling his software-services company.”
So far the winners are the rental
landlords. On average, nationally,
a 1,000-square-foot unit has increased
3.7 percent to $1,389 per month, from
$1,339 this time last year, according
to data collected by Boston-based
research firm Property
& Portfolio Research Inc.
“A big reason for the rising
rents -- and the emerging bidding
wars -- is a smaller stock of apartments,
caused partly by developers who built
condominiums instead or converted
existing apartments into condos to
take advantage of the once-hot housing
market. Rental vacancy rates dropped
to 5.3% in the second quarter of 2006
from 6.2% in the second quarter of
2005. The vacancy rate could shrink
to 5% by year end, according to Encino,
Calif.-based real-estate investment
brokerage Marcus & Millichap.”
It may take a couple of years of a
bad market for unsuccessful condo
conversion to revert back to apartment
rentals. Once this happens, the vacancy
rate will slightly increase, or maybe
not because less condos means more
renters.
But landlords deserve this current
apartment surge, even if it lasts
for only a little while.
“The boom in demand for rental
apartments follows several brutal
years for landlords. From 2002 to
2005, 438,000 renters from age 20
to 34 nationwide took advantage of
low interest rates and became first-time
homeowners, says Hessam Nadji, managing
director of Marcus & Millichap's
research services. Landlords offered
free rent for a time and paid brokers
to find them tenants.”
Buyers are becoming renters because
of rising interest rates and already
high prices. But then these renters
are competing with other renters and
offer more than the asking monthly
price. When will it end? Perhaps landlords
rigged the current housing market
because they seem to be the only winners
here.