Home for Rental Market Still Favoring Renters
The home for rental market is still favoring renters throughout the country, based on rent data gathered by research firm Reis.
In the third quarter of this year, effective rents dropped for the fourth consecutive quarter, the first time it occurred since Reis began monitoring rents in 2008. Effective rent refers to the final amount after incentives such as free one-month rent are deducted.
Victor Calanog, head of research at Reis, also said that in addition to freebies and incentives, landlords have also been lowering their asking rents sharply to entice tenants. They figured that lower income is better than nothing.
According to Calanog, tenants can ask a lot of concessions from landlords. Some landlords are even offering up to 4 months of free rent. Others are offering interior design upgrades, repainting work and free gym memberships. In some cases, if renters ask for assurance that their rents are not going to be raised after their one-year lease contracts expire, they get the pledge.
Based on data from brokerage Marcus & Millichap, the cities offering the most concessions are Atlanta, Denver, Charlotte, Phoenix and Austin.
In Atlanta, landlords are offering an average of 1.5 months free rent; Denver and Charlotte offering 1.4 months; Austin, 1.3 months; Phoenix, 1.2 months; Dallas-Fort Worth and Detroit, 1.1 months; Portland, 1 month; and Orlando and Salt Lake City, offering 0.9 months.
The cities with the weakest home for rental market are Omaha, Memphis and Indianapolis, but these cities are not in the list of cities offering concessions. As vacancy rates increase in these three cities, landlords are advised by analysts to reduce their rents or provide incentives.
According to Calanog, the depressed rents are not likely to reverse their direction in the next several months because of the continued increase in low-priced residential properties and increase in the unemployment rate.
Nonetheless, there are markets which are experiencing increases in rents such as Long Island and Colorado Springs. Both markets showed a 1.6-percent increase in rent in the third quarter.
In the next two quarters, rents are not expected to increase because historically these quarters are slow rental periods, according to Reis analysts. They projected that the rental vacancy rate will increase from the current level of 7.8 percent and surpass 8 percent in the middle of next year.
According to analysts, the home for rental vacancy rate has already surpassed the peak vacancy rate of 7.2 percent in 2004.
