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Higher Rents Could Follow Stabilizing Apartment Market

by Broderick Perkins

The nation's 35 million renting households may want to pull out that lease, give it the once over and determine if there are any negotiating points left to make with the landlord.

In many regions it may already be too late to get a rent break.

One second quarter index from the National Multi Housing Council was higher in the second quarter than it's been in two and a half years and other indexes are lining up to reveal what could be a turnaround in the rental market.

That's good news for investors, owners and property managers, but maybe not so good news for renters.

"While it is still too early to say we have turned the corner, this quarter's survey results offer the first real glimmer of hope," said Mark Obrinsky, NMHC vice president and chief economist.

The NMHC offers a quarterly survey that includes four indexes: a Market Tightness Index, a Sales Volume Index, an Equity Financing Index and a Debt Financing Index.

For each index, a score above 50 indicates improving conditions. In the July 2003 NMHC Survey of Apartment Market Conditions, three of the four indexes were hovering around 50. That suggests the housing sector is at its bottom and poised to move up.

An improvement in the job sector could make all the difference.

"The key is job growth. If the economy strengthens over the rest of this year -- as many forecasters are expecting -- that would set the stage for a solid rebound in the apartment market," Obrinsky.

That would bring higher occupancy rates and with it higher rents.

The second quarter index for apartment market conditions (vacancy rates, rent increases) is already showing improvement. While still below 50 -- indicating that apartment markets are generally getting looser -- the July 2003 Market Tightness Index score of 45 is the highest its been since January 2001 when it was at 47.

Sixteen percent of survey respondents said market conditions were tighter than three months ago, up from 10 percent in July. One quarter of respondents still noted that conditions are looser, while 57 percent sat on the fence because they saw conditions unchanged.

Also, at 51, the Sales Volume Index tends to confirm reports that investors continue to view apartments as a good investment. The index score is a tick up from 48 in the previous quarter and it matches the index from a year ago.

So what's a renter to do?

While there is legally nothing you can do about a legal rent hike, you can appeal to your landlord's business sense and to his sense of fairness, according to "Every Tenants Legal Guide" (Nolo.com, $29.99) by attorney Janet Portman and editor Marcia Stewart.

If you've been a good, solid, long-term tenant who pays the rent on time every month and can convince the landlord any rent hike will make you move, your landlord may back off or reduce the increase. It could cost him more to find a replacement tenant.

If other stable, long-term tenants are likewise considering moving to save on rent and band together, you can increase your chances for at least stalling the rent hike or reducing the increase. Even in tight markets an apartment complex full of long-term, stable, on-time renters is hard to find.

If you must accept the rent hike, but have a month-to-month agreement, seek a longer term lease to lock in your added cost. Even without a rent hike, if you can negotiate now for a longer term lease to lock in your current rent, it could save you money down the road.

If you are new to renting or looking for a move that will let you cash in on remaining low rents and move-in deals, be well-prepared before you visit properties.

You will have a competitive edge if, when you first meet prospective landlords, you have a completed rental application; written references from landlords, employers, friends and colleagues and a current copy of your credit report, say Portman and Stewart.

If you don't have access to an application, you can also prepare a renter's resume with the information typically required on an application. You may have to repeat the information on the application, or the landlord may accept your resume. In any event, you will stand out as well-organized and prepared. Preparedness saves the landlord time, which is money, according to Nolo's tenants' guide.

Seek rental communities with favorable conditions for negotiating. The longer a unit has been vacant and the higher the vacancy rate, the better your chances at negotiating.

Published: August 8, 2003

Use of this article without permission is a violation of federal copyright laws.

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home.

The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services.

The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home.

Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News.

Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake.

He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications.

In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.

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