Renter heaven: Apartment hunters have more choices these days

From the boom times just four years ago that spawned an uncomfortably tight rental market, the Puget Sound region is now experiencing the highest apartment vacancy rate in 20 years, reports local property expert Mike Scott.

That's brought flat or falling rents, and caused a record 70 percent of landlords to offer move-in specials. Some are even relaxing their tenant-screening standards, taking a chance on renters who during the late-1990s boom years found their tarnished financial history meant they need not apply.

While landlords are anything but happy, this shift is good news for renters. They can credit everything from new-apartment construction to the soft economy — even the war — for their reversal of fortune.

"There's opportunity in this market," notes Scott, who with his partner Patty Dupre regularly surveys managers of 184,000 apartment units throughout the Puget Sound region. Renters "can get housing they may not have been able to get before. With concessions they can afford more, and the easing of credit requirements gives them time to get their credit healed a bit."

"Landlords are certainly extending the boundaries of their acceptable credit risk," confirms Shawn Hoban, president of Coast Real Estate, which manages 8,000 apartments throughout the area. "So tenants are in a position to negotiate attractive terms, and landlords are willing to accept a bit more risk when renting, just to fill units and gain some income."

That's good news for everyone from the credit-impaired, to pinched renters who've been doubling up, to young people who've had to move back home to cut costs and now find they can afford to live on their own.

These findings come from Scott and Dupre's semi-annual Apartment Vacancy Report, which reflects the rental situation for complexes with 20 or more units. (Another report, which comes out later in the spring, covers smaller buildings and rental houses.)

Obviously the shaky economy is a major force behind the softening rental market, but Scott says it's more than that.

Take the apartment vacancy rate, for example. Certainly the area's loss of 100,000 jobs over the past few years has played a big part. But also significant, Scott says, has been the addition of 1,316 new apartments in the past six months. "Our region added only 765 new renter households in the same period," he notes.

Or consider the effect of record-low mortgage interest rates, now floating just below 6 percent.

"We've lost a lot of people due to home purchases because the interest rates are so low," observes Sandi Repetowski, senior vice president of ConAm, which manages 8,000 Puget Sound apartments.

The war is also taking a toll, says Scott, noting that troop deployments have had a marked impact on rentals in Snohomish, Pierce and particularly Kitsap County. Those first two counties have seen their vacancy rates climb about half a percentage point in the last six months, to 6.7 percent for Pierce and 9 percent for Snohomish.

Anything over 5 percent is considered a soft market favoring renters.

Kitsap, however, has seen its vacancy rate jump from 2.7 percent — the region's lowest last spring — to the region's highest: 9.1 percent now. "It's unbelievable what's happening there," says Coast Real Estate's Hoban. "It just shows you the impact the military can have on a small market."

By comparison, King County is posting 7.5 percent vacancies.

So it's probably no surprise that the average rent, from Bellingham to Olympia, is now $800, or just $2 more than a year ago. "The rent change sounds minuscule, but it's not insignificant to actually stop rent growth," says Scott. "That's a pretty major turn."

Moreover, Scott says $800 is deceptive because it includes the many new apartments, which are invariably pricier than older ones. Remove new apartments from the mix, and Scott suspects older-unit rents "have probably not done even as well as the overall trend suggests."

And they don't reflect the record-breaking use of move-in specials, called concessions, which effectively push down rents.

Here's an example from a recent want ad:

"Issaquah: 2 months free, 2 bedrooms from $895."

Knocking two months off cuts the annual rent to $8,950, or $745 a month. As Walt Smith, president of HSC Real Estate, reported to Scott: "Most property owners in King and Snohomish counties have now resigned themselves to the fact that they need to lower rents moderately, and offer concessions, to help generate more rental traffic and new leases."

Smith is just one of the property managers Scott contacted who reported seeing more interest in lower-priced apartments. That means rents and availability on older one-bedroom units, and also those with two bedrooms and one bath, may not be softening much.

Conversely, luxury-apartment owners are reporting significant openings and price concessions as cash-strapped tenants trade down to more affordable lodgings.

Again from recent want ads:

"Hot! Hot! Hot! Brand New Apartments reduced $200 per month. Free parking and Metro bus pass — a value of over $700 a year."

However, Repetowski reports some landlord resistance to offering concessions. "Sometimes they have decided to lower rents instead of giving concessions. It's a market correction" due to declining apartment demand and oversupply of new apartments.

"So that's bringing some of the younger renters back," Repetowski notes. "That's a reversal of a trend of them moving in with each other or their parents, which is good news."

Scott says property managers "are less optimistic about increasing rents than we have seen in the 18 years we have been asking them about their rent increase plans. Only 8 percent of managers surveyed in King County plan to raise rents in the next six months. Offsetting that, 18 percent expect to lower rents."

He doesn't expect the rental situation to change until Puget Sound's economy improves. Coast Real Estate's Hoban seconds that.

"I don't have a crystal ball, but no sooner than 12 to 18 months," speculates Hoban. "It's going to be driven by more jobs and higher mortgage interest rates."

Until then, it's a great time to be a renter.

Elizabeth Rhodes: erhodes@seattletimes.com