Market Conditions: A Renter’s Dream Market?
We’ve been chattering about rent versus owning comparisons since Crib Chatter first started in 2007.
But lately, the rental equation has gotten a lot more juicy as landlords have been throwing incentives to try and get their units rented.
Just how good is it out there for renters?
The RedEye investigated:
How would you like to live in a two-bedroom, two-bathroom condo, complete with gleaming hardwood floors, granite countertops, stainless steel appliances, a Jacuzzi tub and–drumroll, please–an in-unit washer-dryer?
Sound out of your league?
Maybe not, if you’re a renter currently in the market for a new apartment. A silver lining of the economic crisis is that there are some great deals on apartments and condo rentals.
For example, the aforementioned condo, located at 2001 W. Jarvis Ave. at the northern edge of the city in Rogers Park, is offered at $1,100 monthly rent, plus two months free rent on an 18-month lease, and no security deposit.
The gut-rehab was developed as a condo building geared toward first-time home buyers, but all the units were converted to rentals in the fall of 2007, when it started to become difficult for people to get loans, said James Osier, a Realtor with brokerage firm Lohan Realty.
Despite the rent incentives and the condo’s bells and whistles, Osier said he’s had a hard time finding tenants.
“I’ve been racking my brain,” Osier said, “and the only thing I can think of is that people are staying put.”
The large luxury apartment buildings are offering several months off of rent, free gym memberships, flat screen tvs and other incentives. But the market favors renters right now. There is too much supply and not enough demand.
Though winter is always slow for renting, demand for apartments is weaker than usual because fewer people are coming to Chicago for jobs, and those already here are staying put or saving money by moving in with roommates or their parents, said Maurice Ortiz, marketing director of the Apartment People, a Lakeview apartment search service.
“It’s a great time to be renting,” Ortiz said.
Planned Properties, which manages 26 buildings in Lincoln Park, Lakeview and the Gold Coast, for the first weekend in February threw in a free 32-inch LCD TV, Blu-ray player or Wii system if renters signed a 12-month lease on any one of 10 apartments.
To directly address economic woes, Planned Property recently launched a rental assurance guarantee, which states that any new tenants who lose their jobs while under a lease with Planned Property can break their lease, so long as they show proof they were laid off and filed for unemployment.
“We were sensing a lot of fear out there, a lot of people were shaky about making the commitment because they’d heard rumors of layoffs at their company,” said Dan McDonough, advertising and marketing director for Planned Properties.
April is historically the start of a busy rental season in Chicago (and one of the “peak” months.) But landlords don’t sound so positive this year.
“This is uncharted territory now,” said Rick Mroczkowski, leasing manager for Prospect Equities, a real estate brokerage in Lincoln Park. “I have no idea what’s going to happen.”
Rent-O-Rama: Looking for an apartment? You’ve got plenty to choose from [RedEye, By Alexia Elejalde-Ruiz, Feb 26, 2009]
That’s great news, as I’m going to start looking for a new place soon. Anyone have specific tips on getting a good deal?
My landlord rents out 2 condos and he was very willing to negotiate if the applicants were low risk and willing to stay for more than 12 months – rent is 1/3 of gross income, low dti, no past due accounts, etc.
Eh, plunging rents are irrelevant without jobs. Obama needs to stop giving away unemployment money and start giving breaks to companies that create jobs.
If you have solid credit…some references and a security deposit you can really negotiate (especially if you want a longer term lease)….I would say knock off at least 10% off asking…I recently some units at Trump and they were asking 3,000 but the agent said they were really renting for 2,600. You are in the drivers seat for sure..have fun searching. I also saw some desperate landlords on Craigslist!
Think Small:
FACT CHECK: GOP adrift on small business claim
http://news.yahoo.com/s/ap/fact_check_budget;_ylt=AoGmzN1xQo1Sc1Z.M7DYpmYDW7oF
But for one thing, most small businesses don’t create jobs. They tend to be lawyers, accountants and other professionals who earn some of their money from partnerships or otherwise organize themselves as a business entity…As well, many small businesses with employees don’t earn enough to put their owners over the threshold for the higher tax rates…Indeed, most of them — like Joe the Plumber of presidential campaign fame — would probably get Obama’s tax break for the middle class…Obama also proposes to eliminate capital gains taxes on small businesses and make a research tax credit permanent. He would expand a provision that allows money-losing companies to get refunds from taxes paid in previous years, when the companies were profitable…The U.S. has roughly 6 million businesses that employ people, and 20 million businesses without employees.
I dont understand how you could be looking at renting there with all of the negative remarks here on CC about the Trump building.
You’re really throwing your money away for a name.
a–I don’t think anyone thinks renting there is a bad idea. Buying there is another thing–it really is overpriced. But they’re really cool units, with beautiful views, for people with a taste for modern. If I were interested in renting, I’d def. be interested in the Trump.
I know a builder for that building, he says none of the materials or finishes are anything different than any other new construction condo/office building.
You quite literally are paying for a name.
It doesn’t matter if you’re renting and paying for a name. Many people are brand conscious and if you’re looking to impress some gal it could definitely make sense for a single guy to rent there.
Its not for me but brand names work with young gals.
The building has a good location for work…great amenities as well…the finishes are just OK. It seems quiet there as well. I would agree with Kenworthey, it is a good rental but would not buy there! I wonder how many will go rental before the board takes over? 20-30% or more?
What do leases for condos that are on the market for sale typically say will happen if the unit sells? Does the renter get to stay for the duration of the lease or are they kicked out?
Or is this mostly a case-by-case thing?
JPS: In American Invesco buildings you get kicked out. I would know, mine sold and they gave me 2 months to get out of the building or 2 weeks to accept moving into another unit in the building.
JPS,
Typically when the unit is up for both and you sign a one year lease then they will take it off the market for that time (at least until 60 or 30 days before your lease is set to expire). They could sell it to someone else while you are in it but in that case the new landlord would still have to honor your lease till the end of its term.
But yes, be sure to read your lease carefully. I have no doubt that American Invesco gives you a very crappy contract.
“Its not for me but brand names work with young gals.”
Bob, so does alcohol or a sense of humor.
By the way where is T2.. not fun calling for 6200 w/o him to yell at me.
Deaconblue/Turd Ferguson/T2 will just show up as another sock puppet, only to be discredited again…
G.. at 6200, 4000, or 2000 he will eventually be right and then laugh in my face. My bet is his long positions got him demoted at work to T5.
Ask japan how the topix has performed since 1990…I think it hit an all time low a few days ago…the ‘teens of this new century will be our lost decade. Japan is what happens to post-industrial countries during a recession or depression.
Meanwhile the industrialized countries of Asia with rudimentary social safety nets (i.e. China) will undergo what America went through in the 1930’s – a full blown depression. The enormous drop off in exports and industrial production in Asia is shocking, just shocking, and the volume won’t return for years. The recent figures aren’t just an aberration or bad data points on a chart, it’s the end of the boom.
“Its the perfect time to rent” sounds a lot like “its the perfect time to buy” circa 2005. I wonder…. do doctors ever say its the perfect time to get sick?
It is a good time to rent. I have a one bedroom in-town in the heart of the Gold Coast and I am not rich, white, nor do I have good credit. I love it and I have a great time walking to all the bars, clubs, and shops with my s.o. I don’t think that would have been possible even two years ago. I would love to buy the unit that I am renting, because I think it is a great time to buy too. Buy low and sell high-that is always the way to make money.
Oh Bradley: the thing with renting is you sign at most a 12 month lease. You’re not betting your financial future on an asset class, which happens to be depreciating rapidly these days.
Now IS the perfect time to rent. Its never really the perfect time to buy unless you know you’ll live there forever. Long-term appreciation is out, my friend. Its just not in the cards anymore given the steep declines we’re seeing over the next several years.
And lets be honest Bradley, bragging to your friends that you “own” is sooooo 2006, my friend.
Compare cash flows of renting vs. owning, which everyone should’ve been doing since the start of this bubble. You’ll have your answer there which is better. Oh yeah and I don’t have to pay taxes so others can send their kids to schools either and I’m not making an idiot banker wealthy by borrowing a ridiculous amount of money. So its the intangibles too I suppose 😀
What I don’t think people understand is that this economic downturn is GLOBAL. All the industrialized countries of the world are entering into a recession/depression at the same time. This hasn’t happened in a couple of generations. There will be much economic pain the world over. All I can say is stock up on food and keep your powder dry. Everyday that passes I get more and more freaked out.
HD,
Just take comfort in the fact our economists influencing policymakers have learned something from the 1930s. Also from looking at aggregate data (real gdp, nonfarm payrolls, industrial production, real manuf & trade sales, real personal income) on WSJ tonight so far this downturn is not as bad as the 1974-75 one.
And if the downturn is global that can only be good news for us given our government’s current strategy of spend the F out of everything. If everyone is tanking we’ll keep the reserve currency status. Afterall we’ve got the biggest and most accurate Hbombs and the country with the biggest and most accurate Hbombs won’t be a “going concern” as the accountants like to call it (that means risk of going away).
This will turn eventually. Given how quickly real estate is falling I’m more optimistic now than a few months ago. I truly believe in 5-7 years things could be back to normal. Yeah we’ll have a huge national debt to deal with and gov’t entitlements to cut, but this is not the end of the world.
In the beginning of the bloodletting it may seem dire but know that eventually the pain will pass. Hell I’d even be looking at bank stocks lately if Uncle Sam didn’t want to call shots on that chessgame from the sidelines. 2010 will not be as bad as 2009 is my guess. It won’t be pretty but 2009 will be the big bath year. And some of these bank stocks might breakout like USG did in 2002: 1.20 -> 120 within 5 years? You can take a lot of losses on other hail Mary’s with those kind of returns.
Bob, ARM resets and recasts extend far into 2011/2012. Quite a few of the ‘loan mods’ I’ve seen only delay the pain of reset/recast a few additional years. And as more and more people go underwater, more will return the keys to the bank, which could extend the foreclosure crisis even further. It takes about a year to a year and a half (in IL) to go from being 30+ days late on the mortgage, through foreclosure, judicial sale, eviction, listing on the MLS and eventual sale. Being conservative, the last wave of foreclosures will have concluded in 2013/2014. Figure in a few years after that to clean up the mess of the previous 6 years (08-14) and we’re looking at a 2016 to 2018 before things are ‘normal’. You say 5-7 I say 7-9 years. I just don’t see how insolvent banks can: 1) recover from enormous losses and 2) repay government money and 3) begin making reasonable profits until foreclosure return to normal i.e. pre-bubble levels. And as I described above, healing can’t even begin until the last ARM recasts or resets and defaults. Of course there’s always the unknown variables, like job losses and people throwing in the towel early. But that being said, I won’t be looking to buy a house until foreclosure levels subside. The REO attorney in my office said he closed 60 properties in Chicagoland last month, a personal best, but at the same time opened files for 100, another record. Do the math.
I’m not joking or exaggerating about the 60 files closed – 100 opened figure. I had a conversation with that lawyer late Friday. Anecdotal as my story is I give that statistic some serious credence. Anybody who claims a second half recovery or even a 2010 recovery is imminent is out of their mind.
Back on topic here (seems to be a hard thing to stay on topic…open forum please!! for random finanical chats) it is a great time to rent here in Chicago. I spent a few days checking out some fantastic buildings in the downtown area and the larger buildings are doing what they have to to fill the many units available. A few things I was offered in two days: LOL along with all the cookies and soft drinks I could consume while waiting for a rep.
No deposit (I have spotless credit)
Two and three months free rent on 18 mo or greater length lease…done of course as a reduction on rent over the lease time. Highest rent ($2800/mo reduced to $2100 on a near top floor in Lakeside East with awesome lake and city views. This included a free gym membership for the lease length (in addition to the in building full gym) also included was free (all) utilities including basic cable and internet access.
Half price parking.
There are some great deals out there to be had and it has me seriously staying a renter for a few years.
This of course after I signed a yr lease here in W Loop for $1700/mo! Of course all of my must haves…AC, heat, water and cable, full size W&D, heated garage and no pet fee for my monster dog. This is for a recently full gut job building with above average appliances and a decorator paint job. A true loft (18 ft ceilings) with a MP room and huge bathroom and usable balcony. I am happy here, but I have started my search for a new apt for a June departure!
Congratulations on having such a decession proof job. I’ve seen in the last few days reports of institutions claiming to hold the notes that back specific mortgages from those that were securitized not being able to prove it. Apparently things got so sloppy with the securitized loans that paperwork may not have been filed. As a result, people are demanding to see the original paperwork and in some cases are able to stave off forclosure. As if things weren’t bad enough with all the liar, no-doc, negative ARM, etc. loans that were securitized.
http://www.nytimes.com/2009/03/01/business/01gret.html
Homedelete:”And as more and more people go underwater, more will return the keys to the bank, which could extend the foreclosure crisis even further. It takes about a year to a year and a half (in IL) to go from being 30+ days late on the mortgage, through foreclosure, judicial sale, eviction, listing on the MLS and eventual sale.”
juliana, I don’t sell the REO’s, it’s the attorney in the office next to mine. nevertheless, I’m looking for a rental deal; I want to move closer to downtown. I just don’t want to pay $2,150 a month for a 2/2 in river west. Like Bob said, “Give me $2,150 or zero. OK you’ll get zero.” hhahahahahahha
Anyway, I don’t mind the offtopic chats so much, especially on the weekends, when no new topics are posted. The off topic chats don’t prevent anyone from posting about the subject property so I don’t see what the problem is.
If rates are lower now than ever, why would resetting ARMs matter? I know a bunch of people who’s rates are actually going down!
The off topic chats are kinda grating. This is called blog is called “Crib Chatter” not “Financial Forcast Chatter”. I look forward to seeing what gets posted, and the response to what was posted. When it starts getting four and five posts deep about derivatives and 10 year market spreads and what is going on at so and so’s office, it detracts from the fun and gets to be a bit of a drag.
homedelete- the rentals are there to be had. and I’m talking the good stuff in the prime ‘hoods-Gold Coast, Old Town, River North, etc. Anybody who is paying 2g’s for an apartment just likes to throw money away. In this economy and in this market there is just no reason.
JJones, at least my office post was related to real estate! The posts the other day about trading derivatives with deltas and betas was a little high brow – but when I get annoyed I press this nifty little key on the right hand side of my keyboard with four letters: PGDN and it zooms right past the posts I don’t want to read. It’s amazing! but I’m so thirsty, if I could just get the TAB key to work…
The posts about what “so and so” knew at someone’s office ARE related to housing (as I’m assuming you’re talking about Homedelete’s posts.)
He works as a bankruptcy attorney and others in his office are handling foreclosures. He’s on the “front lines”, you might say, about what is going on in the housing market (from the dark side of it.)
As for the financial chatter on this site- it’s nearly impossible to separate the financial crisis from housing. They are playing off of each other. So, I don’t mind the discussion as long as it doesn’t get too out of hand.
Thanks Sabrina.
Streetervilliam, quite a few subprimes and alt-a loans are guaranteed to reset at the same rate or higher irrespective of interest rates going down. For example a mortgage might be written as: 6-month libor + 3% never to go lower than 7% and never more than a 2% at each 6-month reset. The loans were rigged in favor of the lender. Argent Mortgage (no longer in business) had this provision in virtually every loan they ever wrote. In my example above the borrower’s rate stayed the same; but when the loan was written usually between 2004-2006 the Fed raised rates every time it met for 17 months straight. (I know the Fed doesn’t control the LIBOR but for all practical purposes they mirrored each other fairly consistently until recently). Option ARM mortgages had teaser rates which will reset into higher rates and recasting is something differently entirely but is still a force to be reckoned with. How is this post relevant to the topic “Market Conditions: a renter’s dream market?” My rent has stayed the same for over three years and I imagine it will stay that way for a while. No resets or recasts in my future.
“#Streetervilliam on March 1st, 2009 at 6:36 pm
If rates are lower now than ever, why would resetting ARMs matter? I know a bunch of people who’s rates are actually going down!
“If rates are lower now than ever, why would resetting ARMs matter? I know a bunch of people who’s rates are actually going down!”
Well resetting ARMs and recasting ARMs are two totally different things. Recasting is a term used for option-ARMs where the debtor now has to start paying their negative amortization mortgage loan at a more normal rate. So if they were paying a teaser rate of 2% the difference between that and a regular payment is getting capitalized and added onto their mortgage balance, when it recasts a few years later at a 5% rate of the entire capitalized mortgage balance their payment more than doubles.
When option-ARMs recast its my guess the vast majority go into default. These things really should’ve never been brought to market and all major originators of them are gone now.
I’m sure the option-arms are out there but I’ve never met anyone who has one. Does anyone know how many were issued in the city?
A significant portion of option arms are in california with the rest scattered throughout the country. I don’t have any hard figures (maybe G or anon(tfo) do) but in my experience they’re not unusual or rare but they are uncommon. I know for a fact many of the major lenders offered them in IL at the height of the boom including WaWm, Countrywide and Wachovia (all of which are out of business!). I have a friend living in a McMansion right now with an option arm: $3,000 a month the first year, $4,000 the second, $5,000 the third, and so on and so on. The property is in foreclosure of course they couldn’t flip it fast enough.
“job. I’ve seen in the last few days reports of institutions claiming to hold the notes that back specific mortgages from those that were securitized not being able to prove it.”
First got press almost a year ago–foreclosure suits in Ohio challenged on the basis that the party seeking foreclosure (the servicer of the RMBS–DB or Bear, I think, in that case) was not the real party in interest b/c the chain of assignments didn’t lead properly from the original lender to the foreclosing lender. Then (iirc) the lawyers made a real hash of things by creating and submitting the assignments–all duly authorized, etc, but judges don’t like ex post facto “fixing”. If they’d buttoned everything up before filing the suit, it probably would have been okay.
Whoever handled the documentation and administration of those MBS (and any other that are challenged on similar bases) really, really, f’d up. I would be unsurprised by one or more large law firms being sued for malpractice, even if it was actually the bankers’ fault, esp b/c (as HD noted) several of the big originators no longer exist.
Perhaps the “Map of Misery” can help:
http://www.businessweek.com/common_ssi/map_of_misery.htm
“[option arms]”
A little dated (January 2008, I think), but it’s not like they were issuing lots of new ones after then (although Wachovia didn’t end their option arm program until June or July of 2008):
http://images.businessweek.com/gen/map_of_misery.jpg
Not sure if those are metro areas (for the cities that are metros) or if they are city limits–although I think that they are metros, where aopplicable. It’s about what you’d expect–Chicago is worse than most of the places with little bubble pricing, but nowhere near as bad as the sand states, the Pac NW or the Bo-Wash metroplex.
Surprises include the high percentage in Fargo and (if you don’t follow Minnesota news) Minneapolis, and I am surprised that Atlanta didn’t register as a high Option ARM metro–maybe the attempts of the state legislature to regulate lending scared off the lenders from pushing them in Georgia.
Bob: “the country with the biggest and most accurate Hbombs won’t be a “going concern” as the accountants like to call it”
Small, but important, point–it’s a “going concern” “warning” or “notice”–as in “substantial doubt about [the entity]’s ability to continue as a going concern”. If the USA “won’t be a going concern”, that implies that the USA will cease to operate, not the opposite, which seems to be what you wrote.
Bob: “USG did in 2002: 1.20 -> 120 within 5 years”
USG was in bankruptcy in 2002 (filed June 25, 2001), for asbestos liabilities–the combination of the asbestos liabilities and the BK filing seriously depressing the share price. Just emerging from BK w/o the asbestos plaintiffs claims being against a trust instead of the company accounts for a big piece of that gain (which also, for a time, priced in the likelihood of a federally funded compensation fund)–and most of the rest is attributable to the construction boom which ain’t coming back soon. The same *will* happen for banks if something like the “bad bank” gets implemented *and* there is a future boomlet in bank revenue (which I don’t necessarily forsee). But that’s serious contingency.
“But that’s serious contingency.”
You don’t get 10,000% returns without serious contingencies. Its worth betting a little bit of $ on, anyway. Today I threw a couple k at Citi…its a lark but who knows. With Uncle Sammy in my side of the ring I think I’ll at least get $2 per share. He seems to like that number.
Bank shares have taken such an extraordinary hit those that survive are bound to bounce up significantly. They were like 22% of the S&P at their peak in 2006, now they’re expected to be ~7% which translates into a -66% price for a share of a smaller pie. Many are already below this.
I think we are nearing capitulation soon because I no longer hear chatter from bargain hunters talking about what a good time to buy it is. Remembering that the market always bottoms before the economy this has to bottom at some point.
Bad move. Citi will become nationalized or seriously restructured along with BAC and your equity will be worth zippo. A lot of people thought AIG was a good buy at $2 a share too, only a 75% loss since then in a matter of one quarter.
Sonies,
Yeah they might, but the thing is the govt just did their third bailout so they’ll be reluctant to nationalize within the next two weeks. I bet I get a pop to $2 before then. Yeah its risky but its poker money. Its not down nearly as much on a percentage basis as the other banks today and that indicates a potential bottom.
Bob,
I have to agree with Sonies. I bought citi before the first bailout and sold it a couple weeks later for a nice trade. But now I don’t think there is any short-term trade left, longterm its going to zero.
I have 4k. See you there 🙂