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Changes ahead for landlords as real estate market changes

4/6/2013 | Real Estate Blog

A recent article in the Wall Street Journal took a look at the changing face of the rental market, and it looks like changes may be ahead for landlords.

In the first quarter of 2013, there was a continued increase in apartment rents, though signs are increasing that landlords may be losing leverage as new supply comes into the market and single-family real estate market improves. Average monthly rent for March registered at $1,054, which is a 0.5 percent increase since the end of 2011, according to a recent report released by Reis Inc., a real-estate research firm. The national vacancy rate, for its part, decrease to 4.3 percent from 4.5 percent in the fourth quarter.

Over the last handful of years, landlords have benefitted from a combination of solid demand from consumers unable or unwilling to buy homes and relatively few new apartments. Since 2009, rental rates have increased over 9 percent. The recent rebound in the housing market, though, is causing more renters to look into homeownership, and the supply of new apartment units is rising quickly, affecting landlords in its wake.

Experts are particularly concerned about the multifamily apartment sector, that it may have already peaked and become unsustainable.

In terms of stocks, real estate investment trusts that own apartment buildings were the worst-performing sector in the first quarter.

Sources didn’t mention any thing particular about the Philadelphia area, but overdevelopment is a concern nationwide among experts. This year, the nation’s 54 largest metropolitan areas can expect to see roughly 150,000 new units this year, followed by another 300,000 in 2014 and 2015 combined.

Source: Wall Street Journal, “Rent Rises Showing Signs of Cooling Off,” Dawn Wotapka, April 3, 2013