Rental market outpaces the nation again

Cost and occupancy growth rate up 3.3%

`Really an exception'

Residential picture is bleak in much of U.S.

April 13, 2003|By Nancy Jones-Bonbrest | Nancy Jones-Bonbrest,SPECIAL TO THE SUN

Baltimore's metropolitan residential rental market has outperformed the national average due in part to the state's stable job market and because of the large number of government and military employees housed here.

In 2002, Baltimore placed 12th among 70 apartment markets studied by Axiometrics Inc., a Texas-based real estate research firm. During the first quarter of 2003, Baltimore moved up to the ninth spot.

The area's growth rate in terms of rental costs and occupancy stood at 3.3 percent during the first three months of this year while the national average posted a 1.8 percent decline.

The Baltimore area has outpaced the national average in each of the past four years as many rental markets continue to experience little or no growth.

"Baltimore is really an exception to the market right now," said Ron Johnsey, president of Axiometrics Inc.

While real estate sales have posted records during the past two years, the national apartment industry has been depressed.

An overall sluggish economy has kept potential renters out of the market and pushed apartment owners around the country to deal with higher vacancy rates and increased competition. Johnsey said he does not expect the national apartment picture to improve until next year.

At the same time, mortgage interest rates are at the lowest levels since the 1960s, turning many would-be renters into buyers.

Real estate agents have spent the past two years focusing on first-time buyers because low mortgage rates can bring monthly mortgage payments to the same price range as the rent bill.

For example, Joseph Landers, executive director of the Greater Baltimore Board of Realtors, said borrowing $100,000 at 5.5 percent over 30 years equates to a $567 monthly payment of principal and interest.

"It almost makes no sense to rent when you look at the interest rates," Landers said.

But buying is not an option for everyone, apartment owners said.

"There are good reasons to rent, and there are people who prefer to rent," said Jim Caffey, executive vice president of Maryland Multi-Housing Association Inc.

"We're finding empty-nesters are looking for a living situation that does not have a lot of maintenance involved. There's a number of arguments you can make for the advantages of renting."

Recent data support the notion that increasing numbers of households prefer apartment living, even though they could afford to buy a home.

In the 2001 Fannie Mae National Housing Survey, 41 percent of renters surveyed say they rent "as a matter of choice" and not out of necessity. This is up from 32 percent in 2000 and 28 percent in 1999.

Area homeowners Bob and Caroline Kelly have decided to take advantage of the hot real estate market by selling their home.

Although the Kellys are still at least one year from retiring and moving to property they own in Florida, they decided to sell their house in Columbia, put their belongings in storage, bank the savings and move into an apartment.

"We decided to get out while the market is good," said Bob Kelly. "We were willing to forgo any increase in the housing market in the next year or so."

The Kellys secured a sales contract on their 5,000-square- foot home in 1 1/2 days. The price: $505,000. They are scheduled to settle in late April.

Until Bob Kelly retires, they will spend their time in a 1,100-square-foot apartment in Columbia Crossing, paying $1,100 a month.

"I thought now was a good time to downsize so we can spend our spare time, instead of doing yardwork and maintaining a big house, doing other things like playing golf," Kelly said.

Enticing renters

To entice renters, apartments are being designed with more amenities and services. Apartments typically are larger, and many times include attached garages, private alarm systems, gas fireplaces and Jacuzzi baths. On-site services can include fitness centers, cyber cafes, business centers and recreation rooms.

Apartment-leasing offices also help set up cable television, phone service, purchasing rental insurance and other services.

"We've been focusing on amenities for our residents so they can live in a very nice and well-serviced community," said Michael Nelson, president of the Maryland Multi-Housing Association and executive vice president of Mid-Atlantic Realty Management Inc., which represents about 2,700 apartment units in Baltimore.

National Multi Housing Council Chief Economist Mark Obrinsky believes that until there is appreciable job growth, demand nationally for rental units is expected to remain stagnant for at least the near future.

'A soft quarter'

"The anecdotal data we have for the first quarter of 2003 indicates it's been a soft quarter with no signs of improvement in the national picture," Obrinsky said.

"Nationally we are continuing to lose jobs. If jobs are not there, the demand for apartments is not there either."

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