A renters' market

Glen Stubbe, Star Tribune

Murals of LynLake Apartments.

By Jim Buchta, Star Tribune

Last update: February 20, 2009 - 3:01 PM

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new to the market

The 109 apartments at the Murals of Lyn Lake, which opened on Aug. 1, are among nearly 1,200 units that hit the market last year. With occupancy at 56 percent, the first month rent is free on some units. The propect was developed by Turnstone Group, and is managed by Arcadia Managment LLC.

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For much of 2008, the rental market seemed somewhat recession-proof: Rents were rising and vacancy rates were falling. By the end of the year, however, it was clear that even apartment dwellers were showing signs of financial stress. During the last quarter of the year, Twin Cities vacancy rates hit 4.9 percent by the end of the year, up from 4.2 percent at the same time the previous year, according to a recent report from GVA Marquette Advisors. It said that rent prices across the board rose 0.7 percent to an average of $906 during 2008. While the increase in vacancy rates reflects the somber mood in the broader market, this is no crisis for renters or landlords -- the market is said to be in balance when the vacancy rate is the 5 percent range. Still, some landlords have begun offering modest incentives to entice renters. Prospects for more of those deals depends entirely on just how long the recession lasts. "If things don't get any worse than they are now, I wouldn't expect to see widespread concessions," said Tom Melchior, a Minneapolis-based multifamily-housing analyst with Larson, Allen, Weishair & Co. "But if there continues to be a decline in occupancy, you'll definitely see more concessions moving into the market."

Here are five reasons why it's getting easier to find an apartment

The shaky economy is making even renters afraid to commit. When people are worried about their jobs, they're less likely to sign even a short-term rental agreement.

Renters are doubling up. When it's hard to make ends meet, one of the most common strategies is to share an apartment. That's happening among friends, siblings, co-workers and even parents.

People are having trouble paying their rent. Some landlords are reporting increases in default rates on rent payments.

A shadow market is growing. A growing number of people who can't sell their house or condo are instead trying to find someone to rent it to while the market recovers. Those individual units aren't showing up in statistics compiled by companies like GVA, which strictly target larger properties.

New inventory has been hitting the market. New work-force housing is virtually nonexistent, but there's been a flurry of new high-end complexes in the Twin Cities area -- with 1,200 units, to be exact -- that hit the market in 2008. Also, it's not unusual to see something that was brought to market as a for-sale condo being converted back to a rental unit. All of that is bringing new products to the market.

WHAT IT MEANS

Generally good news. You'll find more supply than last year at this time, and you're more likely to encounter a concession -- probably in some of the suburban sub-markets where there's a glut of high-end rentals available. There will also be less upward pressure on prices. Some of the new projects that were planned have been put on hold as developers wait for credit markets to improve. GVA expects only 500 market-rate units to come on-line in the coming year, compared with about 1,200 during 2008.

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