
U.S. Apartment Market Shows Signs of Losing Steam - prostoalex
http://www.wsj.com/articles/apartment-market-in-the-u-s-shows-signs-of-losing-steam-1460067027?cx_campaign=poptart&mod=cx_poptart#cxrecs_s
======
gsch
>Average rents, meanwhile, increased by 4.1% to $1,248 in the first quarter
from a year earlier, compared with the 2015 first quarter’s 5% increase,
according to Axiometrics Inc., an apartment research company.

So rents increased 4.1% instead of 5% as they did a year ago. Both of these
numbers are higher than the rate of inflation [0]. So rents are still rising
in real terms.

Can we really say the market is "cooling", then? I would think that the "heat"
of a market would be measured by the first derivative of price, rather than
the second.

[0]: [http://www.marketwatch.com/story/us-inflation-rate-in-
past-1...](http://www.marketwatch.com/story/us-inflation-rate-in-
past-12-months-doubles-to-13-in-january-2016-02-26)

~~~
Kinnard
The market could be "cooling" while still "hot".

~~~
gsch
Sure, but in the article (and your metaphor as I understand it), "heating" and
"cooling" refer to the rate of change of the rate of change, i.e. whether the
year-on-year increase in rental price is increasing or decreasing. "Hot" (and
presumably "cold") would then refer to the YOY increase itself.

I'm wondering whether the clearer metaphor isn't to use "heating" and
"cooling" to refer to positive/negative YOY increases, respectively, and "hot"
and "cold" to describe the average prices.

I guess "Market still heating up, just not as fast" makes for a less
compelling headline.

------
greglindahl
My rent in Palo Alto fell 5% on my last renewal, and my apartment complex is
letting me renew for 3 months at the 12 month price. Yes, Palo Alto's market
is usually a lot hotter than the nation as a whole, but yes, it's currently
following the average.

~~~
jdavis703
Almost the same at my rental in Oakland. My landlord has put me on a month to
month lease at the same price as my twelve month lease. I'm pretty sure that
new renters in my building are probably paying less rent than me.

~~~
tostitos1979
What is the reason they are doing the month to month. Did you ask for it? This
is super useful due to the fleeting nature of employment.

~~~
prostoalex
A landlord (or tenant) on month-to-month schedule can provide a 30-day notice
to vacate, while those in 12+ month leases must provide a 60-day notice. So
it's partially about increasing landlord's flexibility (which might or might
not involve raising the rent or kicking the tenant out in case prices go up),
and partially about what the market will accept - it seems that everybody else
is doing 12-month leases and switching MTM afterwards.

~~~
gist
(Landlord here). From my perspective for a residential tenant a shorter lease
is typically better. Mainly because you aren't going to want to spend money on
legal action so with the tenant tying the property up you have less
flexibility (note most of my tenants are commercials and credit worthy so it's
the opposite).

------
Spooky23
A lot of dumb money is funneled into apartment complexes, there has probably
been a lot of overbuilding.

Right now there are probably a dozen 200 unit+ complexes going up -- I live in
a lower population region (say 250k people), and there's no way the market can
absorb that many fancy apartments.

I've also noticed in my area that condo conversions have dried up.

~~~
chrisabrams
Are you talking about Jersey City?

------
godzillabrennus
It costs an insane amount to rent an apartment in a good neighborhood in most
big cities now in the country. San Fran is so expensive folks are leaving. No
surprise that things are leveling out!

~~~
brbsix
Want to know how much a 1br in SOMA / south beach is going for today? $3815
(mean of 292 listings)[0]. Three years ago, I was paying $500 less than that
for a 2br new high end unit in the same neighborhood. Fucking ridiculous.

I'm considering moving to NYC for the lower cost of living. 1br in Brooklyn is
$2220 (mean of 523 listings, excluding fees)[0].

Really happy to see people finally let the market do it's thing and produce a
product (in this case housing) that's in such desperate demand.

[0]: [https://github.com/brbsix/craigslist-rental-
market](https://github.com/brbsix/craigslist-rental-market)

~~~
cylinder
You need to divide Brooklyn into the parts you'd actually want to live in
(commute times and safety). Split it in half. You'll definitely pay more than
$2200 in the more convenient safer areas

------
brownbat
To what extent is there a "U.S." apartment market?

Honest question.

~~~
rco8786
I'm not sure what your question is. There are millions of apartments in the
US. How would there not be a market?

~~~
brownbat
Sorry, to be clear: I mean, is there a single market that's useful to track
collectively, as opposed to just narrowing in on individual cities?

It seems like the apartment markets in Detroit, San Francisco, and Eudora are
all going to be very different, hinging on radically different factors.

Some US economic trends will affect all three, sure, but... my instinct is
that they won't resemble each other very much at all. Apartments that are
hundreds or thousands of miles away aren't exactly fungible commodities.

I don't know much about this area though, so it was an honest question, maybe
they're all more linked than I realized.

~~~
chatmasta
Of course every local market is distinct from every other, but there are some
national factors that affect price in every local market. For example,
mortgage interest rates are generally agnostic to location. Landlords pay a
mortgage to buy the properties they rent, so the "price" of the mortgage (the
interest rate + down payment) will affect the price of rent.

If the US national average for interest rates drops from 5% to 4%, you would
expect to see downward pressure on rental prices across all markets. Sure, not
every landlord is refinancing or getting a new mortgage, but as long as some
contingent of landlords is able to undercut the going rate of rentals, they
will exert downward pressure on the rental price in their local market.

~~~
Someone
I'm not disagreeing with your statement, but _" mortgage interest rates are
generally agnostic to location"_ isn't fully true. 'Risk of default' and 'ease
of finding a new buyer after a default' are factors in determining the rent
one pays on a mortgage, and lenders may use location as a factor in assessing
those.

For example, if a bank has to repossess a house in the valley, it will not
have much problems finding a new buyer. For a house in Detroit, that likely is
different.

That likely doesn't have much effect on deltas in the short term, though, as
those factors are relatively stable.

------
spaceflunky
My gut feeling is that this is just following simple demographics.

Children of the baby boomers are starting to get into child rearing age and so
apts are becoming far less desirable for a myriad of child rearing related
reasons.

So single family detached homes are becoming the new fad, as the boomer's
children want to raise their children like they were raised and no longer want
an urban apt close to the all the bars/nightlife/restaurants.

Also read: bars, nightclubs closing becoming a trend?

~~~
cylinder
Everything seems to follow the development of the 1985 baby boom but nobody
actually acknowledges or realizes it.

------
xenadu02
Just anecdotal but I've heard from 5-6 friends and friend-of-friends that
rental prices have fallen in SF, at least in some areas. IIRC one was offered
a larger place and a small reduction.

No idea if this is true but one can hope.

------
forrestthewoods
Update: the law of supply and demand continues to be a law.

~~~
walterclifford
> the law of supply and demand continues to be a law

There's no such thing as "the law of supply and demand", there's the law of
supply[1] and the law of demand[2]. These laws contribute to the supply and
demand model[3], but you won't find "the law of supply and demand" printed in
any economics textbook.

[1]
[https://en.wikipedia.org/wiki/Law_of_supply](https://en.wikipedia.org/wiki/Law_of_supply)

[2]
[https://en.wikipedia.org/wiki/Law_of_demand](https://en.wikipedia.org/wiki/Law_of_demand)

[3]
[https://en.wikipedia.org/wiki/Supply_and_demand](https://en.wikipedia.org/wiki/Supply_and_demand)

~~~
Pyxl101
So, tack on an "S" and you're good! The laws of supply and demand.

