New York Times: Renting Is All the Rage
September 08, 2011
Brokers these days, wrestling with dwindling sales, would have their clients believe that there is no better time than the present to buy a home. Prices are down, they say, and mortgage rates are at all-time lows.
Unfortunately for the brokers, many clients are not persuaded by that logic. Instead, in increasing numbers, they are choosing to rent — unconvinced that the housing market has yet hit bottom.
Mark Overton and Stephanie Engeln, both in their 50s and residents of Hudson Park, a 560-unit rental complex in Yonkers, said they saw no advantage in buying at this point. “Why would we?” asked Mr. Overton, the head carpenter on the set for the Broadway play “Wicked.”
For one thing, their one-bedroom has stunning views of the Palisades and the George Washington Bridge. For another, he said, “like everyone else, we’re nervous about the housing market and prefer to rent. If we do ever decide to buy, it certainly wouldn’t be in this market.” Ms. Engeln, an operatic scenic designer, also works in Manhattan.
Arthur Collins, the president of Collins Enterprises of Stamford, Conn., the developer that built the first phase of Hudson Park in 2005 and the second in 2008, said he had never seen occupancy rates at the complex as high as they are today, about 95 percent. Nor, he said, has he seen such a broad mix of tenants: fewer young transient residents and more families and empty-nesters who no longer have homeownership on their wish list.
Rents at Hudson Park range from $1,700, for a one-bedroom, to about $2,600 for a two-bedroom with a den on a high floor.
In New Rochelle, White Plains, Elmsford, Mamaroneck and Bronxville, AvalonBay Communities, which developed and now manages 25 apartment complexes throughout the country, is similarly thriving, said Philip Wharton, a senior development director.
“It’s the perfect storm for us,” Mr. Wharton said, describing the decreasing interest in homeownership. “If there are 110 million households in the U.S., and that number drops by 1 percent, that turns into about one million new renters.”
Rents at AvalonBay properties vary, depending on the city. In New Rochelle, where it has two buildings, rents at the newest one (construction began in 2006) range from $1,400, for a studio, to $2,530 for a three-bedroom.
At 66Main in Yonkers, a 170-unit rental complex built in 2008, Kenneth Dearden, a principal with DW Capital, the developer, described the demand for units as “huge.”
“We’re signing leases as soon as there’s even a hint of a vacancy,” he said.
It was not always that way. “Shortly after we opened up,” he recalled, “the economy crashed and we had a surge of vacancies. We cut rates as an incentive, just to keep the place filled. Now, in the last eight months, we’ve seen a real reversal of that, and we can’t keep up with the demand.” Rents at 66Main range from $1,400, for a studio, to $2,750 for a two-bedroom two-bath unit.
At Bank Street Commons, a two-tower complex in White Plains, the occupancy rate is 94 percent, said Julie Smith, the president of Bozzuto Management Company. Prices at the towers — the first built in 2003 with 21 floors, and the second built a year later with 22 — range from about $1,800, for a one-bedroom, to $3,085 for a two-bedroom with two baths.
Reflecting demand, rents this year are up about 4 percent, Ms. Smith said. Meanwhile, resident turnover continues to decrease, because “fewer residents are moving out to buy homes.”
There may, however, be a roadblock ahead in the rental market for developers: the lack of construction financing, which will very likely force rents up even further as supply fails to keep up with demand. “For most companies, the lending pipeline is clogged,” Mr. Wharton said, explaining that AvalonBay, a real estate investment trust, relies on its own capital and has a number of new projects under consideration.
Nationally, vacancy rates for apartments are projected to drop to 4.6 this year, down from 5 percent currently. “Anything below 5 percent is a landlord’s market,” said Walter Molony, a spokesman for the National Association of Realtors, adding that the metropolitan areas with the lowest vacancy rates in the country are New York and Minneapolis.
Condominium owners are catching on to the trend, said Kenneth Sposato, an agent with Better Homes and Gardens Rand Realty in White Plains. “Especially when a condo owner purchased at the height of the market,” he explained, “they can’t recoup their investment in the current economy. They’re underwater, so they try to rent them for a while and wait it out.”
In 2005, Christopher Staley, 28, who builds and tests aviation equipment, bought a one-bedroom condo on the 11th floor of Westage Towers in White Plains. He has since moved to Dutchess County, and the unit is now on the market for $324,000. But there have been no nibbles anywhere near that, so as a result, he has been renting it out.
“I’d love to be able to sell it,” Mr. Staley said, “but it’s a bottom-feeders’ market out there these days.”
Some of the more expensive condos, like those at the Residences at the Ritz-Carlton in White Plains, are owned by investors who then rent them out, said Paul Sarlo, an associate broker for Coldwell Banker in White Plains. Two years ago, he recalled, a one-bedroom condo at the Ritz rented for less than $3,000 a month. That same unit now commands $4,000.
“We’ve seen an amazing surge,” Mr. Sarlo said. “They’re hitting the market and being rented the same day by people qualified to buy, but who choose not to now.”