2005 Housing Market Forecast: Mostly Sunny,Partly Cloudy

by Broderick Perkins DeadlineNews.Com Renters, you were warned and now you are slipping behind the eight ball. There's probably some, but not much, time left for you to take action and lock in rents in some markets. Otherwise, if you plan to stay put in the same apartment in 2005, there's a good chance your rent will rise more than it has in recent years. Higher rent could take a bite out of your savings plan to buy a home. What's worse, home prices will continue to rise and mortgage interest rates are also forecast to follow suit and that could push the American Dream of home ownership even further out of your grasp. Year-old forecasts of rents rising and vanishing concessions by the end of 2004 appear to be on target as landlords rejoice about raising rents and pulling back on special deals. Across the board increase in indicators that reveal an improving market for landlords clearly point to recovery in the multifamily housing market says the National Multi Housing Council. For only the second time in the five year history of the council's quarterly Survey of Apartment Market Conditions, all four indexes lit up like a Christmas tree, yielding numbers better than the previous quarter's. Chiming in were M/PF Research which reported the rental market recovery was well underway in the Southeast and RealFacts, Inc., which said 25 of the top 29 metropolitan areas it surveys in the West were finally showing signs of rent increases. Even in Silicon Valley where rents have fallen since 2001, tenants were experiencing slightly higher rents. Every quarter, the multi housing council surveys dozens of chief executive officers and other senior executives of apartment-related firms nationwide who serve on the council's Board of Directors or Advisory Committee. For the third quarter, the council found: • The Market Tightness Index -- changes in vacancy rates and rent increases -- came in at 60 in the fifth consecutive quarter of improving demand. Anything higher than 50 means more executives surveyed saw improving conditions than those who saw worsening conditions over the past three months. • The Sales Volume Index -- a measure of property sales -- is at 65, the highest level ever. A record high number of those surveyed, 38 percent, said sales volumes were higher than three months earlier, while a record low 8 percent reported lower sales volume. The council expects sales of apartment properties in 2004 to top 2003's record volume. Higher sales mean investors are bullish on the market because it will bring higher rents and occupancy rates, which translate to good returns. • The Equity Financing Index -- a measure of the availability of equity financing -- rose to 59, the ninth time in the past 10 quarters that the index has surpassed 50. Two-thirds of those surveyed indicated conditions were unchanged from the previous quarter, but 19 percent noted conditions had improved and only 1 percent said conditions had worsened. Greater availability of financing indicates that lenders are also bullish on the market. • The Debt Financing Index -- a measure of borrowing conditions -- rebounded sharply to 58, after two consecutive below-50 quarters. The council said the rebound is due to the about face of interest rates, which declined in recent months almost to the year's lowest levels. The year for the apartment market started slow and gave renters ample warning change was afoot. Now you'll have to move fast to cash in on remaining rental deals. "The combination of modest economic growth, strong demographic trends, and the rising cost of home ownership compared with renting is leading to greater demand for apartment residences. Right now the only thing holding the industry back is the still-weak labor market," said NMHC chief economist Mark Obrinsky. Copyright © 2005 DeadlineNews.Com -- Broderick Perkins, is executive editor of San Jose, CA-based DeadlineNews.Com, an editorial content and consulting firm. Perkins has been a consumer and real estate journalist for more than 25 years.