There was a time when it was a landlord’s market and landlords couldn’t believe what they were getting for rents. I would often say to the owner when we would get a unit rented quickly and for more money than what they expected don’t get too comfortable with this climate what comes up will have to one day come down. For Roughly, six years landlords were experiencing a climate where it was good to be a landlord, and now the tide is changing in 2014 to a renters paradise.
I decided to go on MLS and look at the inventory and typically in September we are at the lowest point of inventory on market and as of Sept 15th, 2014 on MLS there were 147 listings on market in the Back Bay. Out of the 147 Listings on market 81 listings had been on market for over 30 days that is roughly half of the inventory in the Back Bay has been on market more than 30 days. When you look at the numbers where inventory seems to have the biggest slow up it starts at $2600 and goes up from there. Some folks might ask why is that.
In 2007 we started to see the sales market start to change buyers were feeling uncertain about the economy and folks decided it was better to rent than to buy a home and building equity. The federal Government kept dropping interest rates trying to get buyers off the sideline and back in the game, but they couldn’t get buyers to get back in until the end of 2013 and eventually we saw an uptick happen first with investors entering the market since money was so cheap to borrow and eventually the home buyer. We experienced a buying frenzy, and everyone was seeing it all over the country. Eventually, we went from a sales market where we have too much inventory which was pulling prices down dramatically to a market where we had no real inventory on market making it a challenge for buyers to find their dream home and making the seller king once again and driving prices up.
The rental market had the same issue not enough inventory to satisfy the demand which drove prices up, and now those renters who would typically rent a 1 bed for $2600 is doing the math and going I could own a place and build equity, pay myself to live there and not have to deal with rents going up year to year and get a tax exemption in many cases. So those folks who normally would rent something else are either in the buying market or they sit in their apartment they don’t love till they can find a place to live they want to buy.
What is a landlord to do? Landlords who want to rent a unit have to really make it attractive for a potential renter. They have to realize the market has slowed down so their home that might have rented in under 30 days now might take longer to rent, The bidding wars or high rents they received in the past are gone. They need to drop their prices deep or price them correct the first time. Don’t fight your broker when they give you news you don’t love. They don’t love telling you this news either. Owners can’t use the argument I was getting this rent last year, and the year before we got this rent. We are in a market where renters have many options in their price point and they know it.
The Landlord who thinks a renter hasn’t done their homework before they meet the agent is a landlord in denial the market has changed. I had spoken to an owner who listing a home late in the season and said I don’t want to increase rent I just want to keep it where I am currently getting which was $3200 for one bed near Copley square. I looked at the owner and said I think you should reduce your rents. You have listed it late in the season and what it’s up against your unit doesn’t have. I suggested they rent it for $2800 since one there was a real gap in that price range for a 1 bed and what it was competing with was putting it on equal or ahead of the game with inventory. The owner agreed to price reduction from $3200 to 2950 and I said don’t be mad at me when this doesn’t get the traffic it should if you want to rent it for Oct 1st move-in date. I again told the owner you need to put it at $2800. The unit is still on market and has had less interest since it hit the market. Besides landlords being in denial they need to be prepared to do things they might not do in a normal market pay half the fee, make adjustments in their unit from update things, paint. Just think the cost of work you do now you will get a unit rented quickly, but when you go to sell it one less thing to do later. Also if you do the work while you’re renting it out the renter in one to two months should pay the cost you shelled out to do the work in the first place. A vacancy for each month can be much more costly than doing the work in the first place.
Take a minute as a landlord and look around are the high rises being built more throughout the city and are those available for rent? How does the job forecast look in your area? Are employers adding new jobs? How’s the furnished market rental market doing? Have you checked out Craiglist lately, Zillow to see what inventory looks like? Right now in Boston, we have more high rises being built geared towards renters making it a bigger supply which is great if the sales market wasn’t having a supply problem and surge of folks wanting to buy? We have too much rental inventory on the market which drives prices down. Furnished rentals historically do well in a market when we have a strong sales market and all signs are showing furnished rentals are moving again quickly. Job Forecast in Boston isn’t terrible, but we still don’t have as many jobs in the market as we had before 2007. Craiglist has more inventory on market and it’s quite common for you to see the same listing more than once either at the same price or with a reduction which just tells a renter no sense of urgency.
If you’re a landlord and you want a renter you will need to bend over backward right now to get a unit rented, and if your agent brings you an offer you’re not super please just think of alternative a vacancy that could drag on for awhile so maybe you should work with the offer that is presented and realize we are in a rental market where it is lean times for landlords. If you still don’t like the climate maybe you should sell chances are it will sell quickly with no real inventory. As they always say what comes up must come down and right now we are the downward rental market which is great news for the renter who has paid through the nose in rent over the past few years, but bad for the landlord who has gotten too comfortable with the times of the past.
If you’re a renter looking to rent I am happy to help you, and if you’re a landlord and wondering why your place hasn’t rented I am happy to do a market report to see if your unit is priced right or needs an adjustment. As always Buyers and Seller I am happy to also help you as well. Contact me anytime and we can set up a custom plan that works for you.
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