Vacancies low, renters stay put

After several years of flat rents and high vacancies, the local apartment market is tightening, thanks to folks like Seattleite Matt Rivett. He's a 32-year-old aerospace engineer who ran the numbers on renting versus buying earlier this year after his first foray into house hunting.

"I decided I didn't like what I was looking at," Rivett said. He found houses overpriced and balked at busting his budget to get a house he liked.

But what really shut down his search was doing the math.

Why buy, he reasoned, when steep house prices and rising interest rates make owning so much costlier than renting. That wasn't true a few years ago, and renters then chose ownership in droves.

Instead Rivett's happily committed to a rental duplex near Ballard that has "a beautiful view, all the amenities, for about half of what a mortgage would have been in a neighborhood further out, in a house I wasn't particularly fond of," he said.

Bucking the siren call of homeownership puts Rivett on the cusp of a trend that apartment expert Mike Scott says is one of the factors causing demand — and hence rents — to rise.

The Puget Sound-area apartment market is turning from one whose high vacancies has favored tenants to one that's tipping toward landlords, said Scott, of Dupre+Scott Apartment Advisors.

He just released the firm's spring report based on a recent survey of almost 178,000 apartments in the Puget Sound area and in complexes with 20 or more units.

The survey found that:

• The regionwide vacancy rate is 4.6 percent — down from 6.5 percent a year ago.

• Average rents have climbed 4 percent in the past year; three-quarters of the apartment managers said they planned to raise them within the next six months.

• Move-in incentives, such as two weeks' free rent, are evaporating. Last year 64 percent of landlords offered incentives, which had an average value of $591. This year 26 percent are offering them, and they've fallen to $456 on average.

Scott says several factors are fueling the change.

Foremost is the improving economy. The addition of 50,000 jobs to the area last year, and potentially as many again this year, give a big boost to apartment demand.

Second is the condominium-conversion trend. Some 9,200 apartments in the region have become condos since 2000, according to Scott's calculations. Last year saw the biggest change — about 4,000 units converted — and resulted in a net loss of rental units because it exceeded the number of apartments built.

Conversions are "certainly affecting the supply of apartments, and so from that standpoint it's putting pressure on rents," observed Scott Hanson, president of SeaMark Properties, an apartment and condominium developer.

"Significant land costs, which have been driven by condo development in general, are also putting pressure on rents," Hanson added.

High housing prices are another factor, according to Scott.

"The monthly mortgage payment on the median-priced home today is more than double the average monthly rent in the county," he noted in Dupre+Scott's newsletter. "It's more than it was a year or two ago because housing prices have risen significantly."

Renters are staying put, saying they're "willing to pay $2,000 in rent, but not willing to pay $3,000 in mortgage for the same type of housing — same carpets, same finishes, same lifestyle," said Carmen Esteban, a commercial-mortgage loan underwriter.

"I think they're examining their lifestyle choices. Yes, there's the investment piece of it," Esteban said, referring to homeownership, "but it doesn't get you a cup of coffee in the morning."

As for Rivett, he was "very relieved after I made the decision not to buy. Now, I'm not house poor like I would have been after a home purchase. I'm not tied down and can afford to maintain my lifestyle. I'm willing to wait it out for a few years."

In the meantime, he's investing more than $1,000 a month — the difference between his rent and a mortgage payment — for an eventual down payment.

Elizabeth Rhodes: erhodes@seattletimes.com