- The Washington Times - Monday, April 9, 2007

The apartment industry is thriving in the Washington area while the housing market slips.

The average Washington-area apartment dweller is paying $1,256 a month for a moderately priced apartment, 5.2 percent more than a year ago, according to the latest real estate industry reports.

“While not as hot as last year at this time, Washington’s apartment market is still one of the strongest in the nation, with an overall vacancy rate that is nearly half the national average,” said Grant Montgomery, vice president of real estate market research firm Delta Associates.

The average apartment rent nationwide is $939, or 4.4 percent higher than a year ago, according to the real estate research firm Reis Inc. The vacancy rate rose by 0.1 percent to an average of 6 percent. Last year at this time, the nation’s average renter paid $899, compared with $870 in early 2005 and $848 in 2004.

The vacancy rate is likely to rise at a faster rate in the upcoming year, giving renters more choices in places to live, said Sam Chandan, chief economist for Reis.

Renters in the next year should expect “continued rent growth, albeit at a slower pace,” Mr. Chandan said.

For apartment landlords, the District was the place to do business in the past year.

Rents in the District rose 4.5 percent for all kinds of apartments, the biggest increase in the region. Only 2.9 percent of apartments were vacant by the end of March.

Northern Virginia’s vacancy rate was 3.4 percent, while 3.5 percent of suburban Maryland apartments were vacant.

“The District is the only area that saw a drop in vacancy year over year and spike in rents,” Delta Associates said in a quarterly report on the market for moderately priced, or Class B, apartments. Class B apartments are generally older than Class A, which usually are the newest and most expensive.

The newest and most expensive apartments in the District averaged $2,264 a month, up 1 percent from last year. They have a 4.4 percent vacancy rate.

“You have a large base of young professionals that with the renaissance of the District of the last few years have been drawn back downtown,” Mr. Montgomery said.

Despite widespread apartment projects, such as those in Logan Circle and Mount Vernon Triangle, “Supply has not yet caught up with demand,” he said.

Rent control regulations in the District kept rates from rising even higher, according to real estate officials.

In general, the regulations prohibit rates from rising more than 2 percent higher than the Consumer Price Index. They apply to buildings built before 1975 with more than four apartments in them.

The apartment market still is healthy for landlords in the suburbs.

Apartment rents rose 4.3 percent in Northern Virginia and 3.2 percent in suburban Maryland for all apartments in the past year.

The high cost of buying a house is one of the reasons so many residents are staying in apartments.

“Although for-sale housing price increases have moderated from their torrid pace of 2004 [and 2005], high overall prices leave rental as the only alternative for more and more households,” Delta Associates reported.

The other factor is the job market. Job-seekers moving to the Washington area drive up home prices, leaving many no other alternative but to rent.

The firm predicts rents will rise 3 percent to 4 percent during 2007 as 46,000 new jobs are created throughout the region.

“This is more than enough to support a robust rental market,” Delta Associates reported.

During 2006, 49,900 jobs were created in the Washington area, according to the Bureau of Labor Statistics.

Delta Associates says the rate of new job growth is slowing slightly as federal procurement spending slackens.

During the housing boom, many renters were jumping into the housing market to avoid even higher ownership prices later, said Mark Obrinsky, chief economist for the National Multi-Housing Council, a trade association for the apartment industry.

But as home prices stopped rising and in some places fell in the past two years, “That seems to have taken the urgency out of the need to become a homeowner,” Mr. Obrinsky said.

As a result, “They’ll be renting longer.”


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