(What in the World is going on?)
No doubt, owners have noticed that the vacancy rate for their 3 bedroom apartments have spiked recently. According to the “Washington Center for Real Estate Research / Washington State University; Spring 2009” report, 3 bedroom units in Kootenai County are 15.5% dark as of early this year. Although that number is down slightly from spring of 2008, it has climbed dramatically from 4.7% in spring of 2007.
So, what in the world is going on? Well, several factors are convergent on this particular type of unit which is creating the pressure. First time home buyers are taking advantage of the Federal Government’s Tax Credit ($8,000) incentive. Secondly, “Shadow stock” (distressed and foreclosed housing) is creating an alternative for those tenants who would otherwise be renting 3 bedroom units. And finally, the over-supply of unsold condo stock is diluting the rental pool as those owners are offering vacant units for rent.
Owners of 3 bedroom rental units today should use this time to repair and present their unit in the best possible light to be competitive. If rent concessions are necessary, grant them in exchange for longer lease commitments from tenants. Furthermore, many times, tenants are attracted by slightly lower rents, while owners can negotiate utility “pass through’s” to help maintain the desired gross rent target.
As the over-all economy starts to improve and the housing market begins to stabilize, expect interest rates to rise and the 3 bedroom apartment unit to re-gain favor in the rental market.
Until next time,
Glenn
