I saw a lot of rental moving vans around Chicago over the weekend even though October 1 is the big move-in/move-out day.
The Chicago Tribune is reporting that the red hot apartment market is now starting to cool as fall approaches.
We’ve been chattering about this for several weeks- with just anecdotal stories- to back it up. It appears renters are no longer fighting it out for those dream apartments.
From the Tribune:
Less than a month before moving, first-time renters Esther Levine and two friends toured four three-bedroom apartments on a Saturday morning and found two places they loved.
The friends settled on the apartment that’s within their budget and close to public transportation and a park.
“It is a little less than what each of us had agreed to pay (in rent), so we are saving some money,” said Levine, 23, a project director for a market research company.
Levine and her friends are among many renters witnessing a transformation in the Chicago-area rental market.
As recently as a year ago, many renters were stunned by skyrocketing rates and forced to make on-the-spot leasing decisions because the rental market was so tight. But a housing rebound and a boom in apartment construction in downtown Chicago appear to be making a difference.
“It is still a landlord’s market, but demand seems to be dropping, especially as Chicago’s warm weather rental season is nearing its end,” said Maurice Ortiz, director of operations for Apartment People, an apartment locator company in Chicago. “That should give renters more selection and hold rents steady.”
The outlook is brighter from a renter’s point of view. “Renters now have four or five choices rather than one or two,” Ortiz said.
The key to the downtown market is to watch for incentives. As soon as you start seeing “2-months free” ads, you know that it is a tenant driven market.
So far, we haven’t seen new rental incentives. But thousands of new units are expected to come on the market in the next 12 months.
“A lot of our clients are relocating to Chicago or have never lived in the city. They want the urban experience and are seeking to be located near work,” he said. “The people who are renting these luxury apartments are mostly would-be condo buyers who are choosing to rent.”
However, Galvin explained, “We are seeing a definite divide in the market between the newest luxury properties coming online this year and those built during the last wave between 2009 and 2011. The newest buildings are leasing faster than ever, and prices are the highest Chicago has ever seen.”
It is different for buildings built just a few years ago, he said.
“Those properties were commanding the top market rents and had almost 100 percent occupancy earlier this summer,” Galvin said. “Now they are trying to keep residents from jumping ship to the newest kid on the block. They are offering at least one month of free concessions, and prices are dropping as we move closer to winter. Renters are saying, ‘Why should I pay the same thing for a 3-year-old building when I can get brand new at the same price?'”
Ortiz says he has not seen any rental price drops.
“A few buildings may be offering insider incentives to renewals,” he said, but he is not aware of incentives for new renters.
Most downtown properties have switched to computer systems that price rents daily, like airline or concert seats, and fluctuate with demand, said Ron DeVries, vice president of Appraisal Research Counselors.
What does this rental slowing mean to the condo market? (if anything?)
Apartment outlook brightens for Chicago renters [Chicago Tribune, Sharon Stangenes, September 2, 2013]