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Rents soar, blame the condos

By Matt Goyer June 24, 2007

Seattle Times, Rents soar through the roofs:

Average rents are up 12 percent on the Eastside this year, the highest rise ever recorded for that area.

In Seattle, it was 8 percent, below the modern record of 9 percent in the dot-com years.

Driving it all is a booming economy and the condo craze. So many apartments are being converted to condos that last year the region had a net loss of 4,000 rental units. This year we’re going to lose 3,000 more.

I know some of you gave me a hard time for not continuing to rent when I bought at Trace. However, I seriously looked for high end spaces for rent on Capitol Hill and came up short. If you’re looking in the $1500+/month category there is almost zero inventory and so I bought. Months later as rents continue to climb I really don’t have any regrets.

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55 responses to “Rents soar, blame the condos”

Foster says:

June 25, 2007 at 7:20 am

Rents are nuts in this town.
Foster says:

June 25, 2007 at 7:20 am

Rents are nuts in this town.
Foster says:

June 24, 2007 at 11:20 pm

Rents are nuts in this town.
EconE says:

June 25, 2007 at 8:41 am

They should interview me. LOL
EconE says:

June 25, 2007 at 8:41 am

They should interview me. LOL
EconE says:

June 25, 2007 at 12:41 am

They should interview me. LOL
newbuyer says:

June 25, 2007 at 2:07 pm

Who thinks it’s a good idea for all of these “condo conversions” to keep happening? I say stick with the new construction and keep apartments as apartments. Soon there is going to be such a surplus of condos and such a shortage of apartments and everyone will be looking around saying : “what happened?”
newbuyer says:

June 25, 2007 at 6:07 am

Who thinks it’s a good idea for all of these “condo conversions” to keep happening? I say stick with the new construction and keep apartments as apartments. Soon there is going to be such a surplus of condos and such a shortage of apartments and everyone will be looking around saying : “what happened?”
peckhammer says:

June 25, 2007 at 2:29 pm

“In Seattle, it was 8 percent…”

I call BS on this. Of course, if the illusion of higher rental prices somehow justifies a person’s decision to buy — or better yet, if it can help a real estate agent slide you into a ridiculously priced condo — then so be it. Everyone is entitled to their own delusions.

The question that is not being asked is, “how is that 8% being determined?” Instead, countless real estate cheerleaders will haplessly repeat it without question. IOW, does that 8% take into consideration all the SFHs and Condos that are being rented or is it only based on apartment buildings that have 20 or more units?
peckhammer says:

June 25, 2007 at 2:29 pm

“In Seattle, it was 8 percent…”

I call BS on this. Of course, if the illusion of higher rental prices somehow justifies a person’s decision to buy — or better yet, if it can help a real estate agent slide you into a ridiculously priced condo — then so be it. Everyone is entitled to their own delusions.

The question that is not being asked is, “how is that 8% being determined?” Instead, countless real estate cheerleaders will haplessly repeat it without question. IOW, does that 8% take into consideration all the SFHs and Condos that are being rented or is it only based on apartment buildings that have 20 or more units?
peckhammer says:

June 25, 2007 at 6:29 am

“In Seattle, it was 8 percent…”

I call BS on this. Of course, if the illusion of higher rental prices somehow justifies a person’s decision to buy — or better yet, if it can help a real estate agent slide you into a ridiculously priced condo — then so be it. Everyone is entitled to their own delusions.

The question that is not being asked is, “how is that 8% being determined?” Instead, countless real estate cheerleaders will haplessly repeat it without question. IOW, does that 8% take into consideration all the SFHs and Condos that are being rented or is it only based on apartment buildings that have 20 or more units?
Bob says:

June 25, 2007 at 2:39 pm

$1500 can get you into a lot of nice digs on the hill. Large spaces too but older. You just have to check craigslist a few times a day. But if you want new construction with amenities, then yeah, the choices are limited.
Bob says:

June 25, 2007 at 2:39 pm

$1500 can get you into a lot of nice digs on the hill. Large spaces too but older. You just have to check craigslist a few times a day. But if you want new construction with amenities, then yeah, the choices are limited.
Bob says:

June 25, 2007 at 6:39 am

$1500 can get you into a lot of nice digs on the hill. Large spaces too but older. You just have to check craigslist a few times a day. But if you want new construction with amenities, then yeah, the choices are limited.
Cameron says:

June 25, 2007 at 5:33 pm

If there is a glut of condos a new building can be rented rather than sold as condos. I had a contract on a new condo unit in Kirkland. The builder decided that sales were not going fast enough….and canceled all contracts and is going to rent the building out instead. 50+ buyers who thought they had a place to move to September are now scrambling to find something else. That can happen just as easily in Seattle.
Cameron says:

June 25, 2007 at 5:33 pm

If there is a glut of condos a new building can be rented rather than sold as condos. I had a contract on a new condo unit in Kirkland. The builder decided that sales were not going fast enough….and canceled all contracts and is going to rent the building out instead. 50+ buyers who thought they had a place to move to September are now scrambling to find something else. That can happen just as easily in Seattle.
Cameron says:

June 25, 2007 at 9:33 am

If there is a glut of condos a new building can be rented rather than sold as condos. I had a contract on a new condo unit in Kirkland. The builder decided that sales were not going fast enough….and canceled all contracts and is going to rent the building out instead. 50+ buyers who thought they had a place to move to September are now scrambling to find something else. That can happen just as easily in Seattle.
Dan C. says:

June 25, 2007 at 5:39 pm

Newbuyer,

In many cities, (Phoenix being one I think) a cap has been placed on condo conversions in the last year. This means NO new permits for conversions. I believe you will see this occur in Seattle (if it hasn’t already…anyone know?) in the next 4-6 months as affordable rental unites erode further.

We may also see many of these guys “reverse converting” back to apartments once they find out that these units aren’t selling.
Dan C. says:

June 25, 2007 at 5:39 pm

Newbuyer,

In many cities, (Phoenix being one I think) a cap has been placed on condo conversions in the last year. This means NO new permits for conversions. I believe you will see this occur in Seattle (if it hasn’t already…anyone know?) in the next 4-6 months as affordable rental unites erode further.

We may also see many of these guys “reverse converting” back to apartments once they find out that these units aren’t selling.
Dan C. says:

June 25, 2007 at 9:39 am

Newbuyer,

In many cities, (Phoenix being one I think) a cap has been placed on condo conversions in the last year. This means NO new permits for conversions. I believe you will see this occur in Seattle (if it hasn’t already…anyone know?) in the next 4-6 months as affordable rental unites erode further.

We may also see many of these guys “reverse converting” back to apartments once they find out that these units aren’t selling.
Brian in Seattle says:

June 25, 2007 at 6:20 pm

Well, I was renting a 400 sq foot studio in Eastlake and was on month to month tenancy. In May, 6 months after the last rent increase of 35.00, they wanted to raise the rent 100.00 at one time, a 14 percent increase. I called and complained, they dropped it in half to a 50.00 increase. I started looking casually for something in the same price range but larger. Found it this month and moved up to Capitol Hill. Of course there’s no real reason given for the rent increase except “increased taxes, blah blah blah”. I really would rather have someone either break out the figures for the building or just say “I want a bigger profit margin”. LOL.
Brian in Seattle says:

June 25, 2007 at 6:20 pm

Well, I was renting a 400 sq foot studio in Eastlake and was on month to month tenancy. In May, 6 months after the last rent increase of 35.00, they wanted to raise the rent 100.00 at one time, a 14 percent increase. I called and complained, they dropped it in half to a 50.00 increase. I started looking casually for something in the same price range but larger. Found it this month and moved up to Capitol Hill. Of course there’s no real reason given for the rent increase except “increased taxes, blah blah blah”. I really would rather have someone either break out the figures for the building or just say “I want a bigger profit margin”. LOL.
Brian in Seattle says:

June 25, 2007 at 10:20 am

Well, I was renting a 400 sq foot studio in Eastlake and was on month to month tenancy. In May, 6 months after the last rent increase of 35.00, they wanted to raise the rent 100.00 at one time, a 14 percent increase. I called and complained, they dropped it in half to a 50.00 increase. I started looking casually for something in the same price range but larger. Found it this month and moved up to Capitol Hill. Of course there’s no real reason given for the rent increase except “increased taxes, blah blah blah”. I really would rather have someone either break out the figures for the building or just say “I want a bigger profit margin”. LOL.
newbuyer says:

June 25, 2007 at 6:56 pm

It makes sense to put a cap on condo conversions. I wonder if this will happen soon in Seattle? Condo conversions seem like they affect renters and rental prices much more than new construction does.

We will be renting for the next two years as our place is being built and I hope that prices don’t go up because I already feel like we’re paying quite a bit in rent.
newbuyer says:

June 25, 2007 at 6:56 pm

It makes sense to put a cap on condo conversions. I wonder if this will happen soon in Seattle? Condo conversions seem like they affect renters and rental prices much more than new construction does.

We will be renting for the next two years as our place is being built and I hope that prices don’t go up because I already feel like we’re paying quite a bit in rent.
newbuyer says:

June 25, 2007 at 10:56 am

It makes sense to put a cap on condo conversions. I wonder if this will happen soon in Seattle? Condo conversions seem like they affect renters and rental prices much more than new construction does.

We will be renting for the next two years as our place is being built and I hope that prices don’t go up because I already feel like we’re paying quite a bit in rent.
mhays says:

June 25, 2007 at 7:25 pm

Rents rise to what the market will bear. It’s pretty simple. With relatively few rental units getting built (except condo rentals per above) we can expect tightening, and big increases in rents. Fair to renters or not.

Normally, if vacancies were this low you’d see a lot more construction. But construction prices have skyrocketed, so the bar is much higher (lower?). Construction proceeds when projected rents are high enough to support construction.

Interesting point that the rental price surveys only list apartment buildings above a certain size, and miss the owner rentals as well as small buildings. Condo owners are probably nicer than big real estate firms, to the point of being pushovers in many cases, so maybe their rates increase more slowly. But both types are subject to the same realities and probably show similar trends.

I agree that condo conversions are a wierd move right now. They’re diving into a slack market right as rentals become scarce.
mhays says:

June 25, 2007 at 7:25 pm

Rents rise to what the market will bear. It’s pretty simple. With relatively few rental units getting built (except condo rentals per above) we can expect tightening, and big increases in rents. Fair to renters or not.

Normally, if vacancies were this low you’d see a lot more construction. But construction prices have skyrocketed, so the bar is much higher (lower?). Construction proceeds when projected rents are high enough to support construction.

Interesting point that the rental price surveys only list apartment buildings above a certain size, and miss the owner rentals as well as small buildings. Condo owners are probably nicer than big real estate firms, to the point of being pushovers in many cases, so maybe their rates increase more slowly. But both types are subject to the same realities and probably show similar trends.

I agree that condo conversions are a wierd move right now. They’re diving into a slack market right as rentals become scarce.
mhays says:

June 25, 2007 at 11:25 am

Rents rise to what the market will bear. It’s pretty simple. With relatively few rental units getting built (except condo rentals per above) we can expect tightening, and big increases in rents. Fair to renters or not.

Normally, if vacancies were this low you’d see a lot more construction. But construction prices have skyrocketed, so the bar is much higher (lower?). Construction proceeds when projected rents are high enough to support construction.

Interesting point that the rental price surveys only list apartment buildings above a certain size, and miss the owner rentals as well as small buildings. Condo owners are probably nicer than big real estate firms, to the point of being pushovers in many cases, so maybe their rates increase more slowly. But both types are subject to the same realities and probably show similar trends.

I agree that condo conversions are a wierd move right now. They’re diving into a slack market right as rentals become scarce.
Phil says:

June 25, 2007 at 8:33 pm

So where are all these people buying condo conversions coming from? I bet most are renting, and when they move out – their apartment will go back on the market. Condo conversions have a short term impact while they are being converted, but unless there is a large influx of people to the area, it will balance out.

I’ve lived in tight housing markets in CA, and the Seattle market doesn’t even start to compare. We had a few years of a soft market after the dotcom bust and everybody got used to it. My landlord dropped the price before I moved in, now he has put rents back up – if he tries to put them up further, I’ll move.
Phil says:

June 25, 2007 at 12:33 pm

So where are all these people buying condo conversions coming from? I bet most are renting, and when they move out – their apartment will go back on the market. Condo conversions have a short term impact while they are being converted, but unless there is a large influx of people to the area, it will balance out.

I’ve lived in tight housing markets in CA, and the Seattle market doesn’t even start to compare. We had a few years of a soft market after the dotcom bust and everybody got used to it. My landlord dropped the price before I moved in, now he has put rents back up – if he tries to put them up further, I’ll move.
EconE says:

June 26, 2007 at 4:18 am

I had an owner in my complex (new concrete & steel) downtown ask me what I paid in rent.

I told him.

He obviously wasn’t happy by the look on his face and his exclamation that basically stated “What!!! I thought that they would go for much more.

I called on many other units in Seattle just for fun and emailed a few too. They were all willing to negotiate.

Matt…you got pwned.

You need to learn to work on your negotiation skillz!

;oP
EconE says:

June 26, 2007 at 4:18 am

I had an owner in my complex (new concrete & steel) downtown ask me what I paid in rent.

I told him.

He obviously wasn’t happy by the look on his face and his exclamation that basically stated “What!!! I thought that they would go for much more.

I called on many other units in Seattle just for fun and emailed a few too. They were all willing to negotiate.

Matt…you got pwned.

You need to learn to work on your negotiation skillz!

;oP
EconE says:

June 25, 2007 at 8:18 pm

I had an owner in my complex (new concrete & steel) downtown ask me what I paid in rent.

I told him.

He obviously wasn’t happy by the look on his face and his exclamation that basically stated “What!!! I thought that they would go for much more.

I called on many other units in Seattle just for fun and emailed a few too. They were all willing to negotiate.

Matt…you got pwned.

You need to learn to work on your negotiation skillz!

;oP
Brett F. says:

June 26, 2007 at 4:49 am

The conversion market is cyclical. When rents are soft (lower) it makes economic sense for apartment owners to sell to developers who convert to condos. This was the case for the past few years. Rents are now going up, owners are able to make more money and they are less inclined to sell. Most of the permits for new buildings now will be rentals. This will continue for about two years. Until the over supply in the rental market drives down rental prices and buildings again become economically feasible to convert. Apartment conversions provide more affordable ownership opportunities for first time homebuyers. They serve a need. A few developers who bought buildings and/or land at the top of the market are having a harder time getting the prices they need. Unfortunately for them, they may not make a profit.

The market doesnt need a cap on conversions; you are going to see a dramatic decline in conversions in the next year. In two years you will hardly see any. Then in four years when all the new apartments are built, you will see the same move in specials you now see for condos. Then the conversion market will be ripe again and the condo boom will come back.

On another note, Im seeing more projects advertised as steel and concrete, when in fact they are simply steel studs with concrete poured on metal pans. Not post tension concrete slab with solid concrete walls. I personally dont put a whole lot more value in a concrete building than a stick built one. Stick is cheaper to build and is more affordable to buy. Most of the classic brick buildings on Capitol Hill are stick built with brick veneer. They have been around for a long time and have housed a lot of people.
Brett F. says:

June 26, 2007 at 4:49 am

The conversion market is cyclical. When rents are soft (lower) it makes economic sense for apartment owners to sell to developers who convert to condos. This was the case for the past few years. Rents are now going up, owners are able to make more money and they are less inclined to sell. Most of the permits for new buildings now will be rentals. This will continue for about two years. Until the over supply in the rental market drives down rental prices and buildings again become economically feasible to convert. Apartment conversions provide more affordable ownership opportunities for first time homebuyers. They serve a need. A few developers who bought buildings and/or land at the top of the market are having a harder time getting the prices they need. Unfortunately for them, they may not make a profit.

The market doesnt need a cap on conversions; you are going to see a dramatic decline in conversions in the next year. In two years you will hardly see any. Then in four years when all the new apartments are built, you will see the same move in specials you now see for condos. Then the conversion market will be ripe again and the condo boom will come back.

On another note, Im seeing more projects advertised as steel and concrete, when in fact they are simply steel studs with concrete poured on metal pans. Not post tension concrete slab with solid concrete walls. I personally dont put a whole lot more value in a concrete building than a stick built one. Stick is cheaper to build and is more affordable to buy. Most of the classic brick buildings on Capitol Hill are stick built with brick veneer. They have been around for a long time and have housed a lot of people.
Brett says:

June 25, 2007 at 8:49 pm

The conversion market is cyclical. When rents are soft (lower) it makes economic sense for apartment owners to sell to developers who convert to condos. This was the case for the past few years. Rents are now going up, owners are able to make more money and they are less inclined to sell. Most of the permits for new buildings now will be rentals. This will continue for about two years. Until the over supply in the rental market drives down rental prices and buildings again become economically feasible to convert. Apartment conversions provide more affordable ownership opportunities for first time homebuyers. They serve a need. A few developers who bought buildings and/or land at the top of the market are having a harder time getting the prices they need. Unfortunately for them, they may not make a profit.

The market doesn’t need a cap on conversions; you are going to see a dramatic decline in conversions in the next year. In two years you will hardly see any. Then in four years when all the new apartments are built, you will see the same move in specials you now see for condos. Then the conversion market will be ripe again and the condo boom will come back.

On another note, I’m seeing more projects advertised as steel and concrete, when in fact they are simply steel studs with concrete poured on metal pans. Not post tension concrete slab with solid concrete walls. I personally don’t put a whole lot more value in a concrete building than a stick built one. Stick is cheaper to build and is more affordable to buy. Most of the classic brick buildings on Capitol Hill are stick built with brick veneer. They have been around for a long time and have housed a lot of people.
mattgoyer says:

June 26, 2007 at 5:06 am

EconE, if I wanted to live in the Denny Triangle I’m sure I could have found a deal but I want to live in a lofty or modern type space on Capitol Hill and those really are few and far between. There is far less negotiating advantage than at a building with 30-60 resales.
mattgoyer says:

June 26, 2007 at 5:06 am

EconE, if I wanted to live in the Denny Triangle I’m sure I could have found a deal but I want to live in a lofty or modern type space on Capitol Hill and those really are few and far between. There is far less negotiating advantage than at a building with 30-60 resales.
Matt says:

June 25, 2007 at 9:06 pm

EconE, if I wanted to live in the Denny Triangle I’m sure I could have found a deal but I want to live in a lofty or modern type space on Capitol Hill and those really are few and far between. There is far less negotiating advantage than at a building with 30-60 resales.
jo says:

June 26, 2007 at 5:16 am

Bah, I bought at Meritage and Olive8 and haven’t regretted either of the purchases.

Two months before I was set to close on Meritage my rent went up 20%. When I moved out they got (and my place rented out in a week) $50 more than that increase.

EconE – what complex are you in? Finally get out of daddyz basement?
jo says:

June 26, 2007 at 5:16 am

Bah, I bought at Meritage and Olive8 and haven’t regretted either of the purchases.

Two months before I was set to close on Meritage my rent went up 20%. When I moved out they got (and my place rented out in a week) $50 more than that increase.

EconE – what complex are you in? Finally get out of daddyz basement?
jo says:

June 25, 2007 at 9:16 pm

Bah, I bought at Meritage and Olive8 and haven’t regretted either of the purchases.

Two months before I was set to close on Meritage my rent went up 20%. When I moved out they got (and my place rented out in a week) $50 more than that increase.

EconE – what complex are you in? Finally get out of daddyz basement?
EconE says:

June 26, 2007 at 4:30 pm

Jo…2200westlake Aria building. 1667/mo

I do miss dads basement however….it’s actually pretty cool with the prohibition cellar and all. ;o) Too bad the elevator only goes down to the first floor. I actually have to walk downstairs to the basement.

anyhow…see you guys at the next (after this one) meetup. I’m gonna be sure to bitch on your behalf so that the Olive8 builders don’t make the same mistakes on your place as they did on mine. (Matt & Jo you are welcome to come check it out) I’m working for you guys now! I wan’t your condos to be PERFECT. No…not so I can buy one later…who knows…I’m thinking of renting in Zurich, Switzerland next. (Not Kidding)
EconE says:

June 26, 2007 at 4:30 pm

Jo…2200westlake Aria building. 1667/mo

I do miss dads basement however….it’s actually pretty cool with the prohibition cellar and all. ;o) Too bad the elevator only goes down to the first floor. I actually have to walk downstairs to the basement.

anyhow…see you guys at the next (after this one) meetup. I’m gonna be sure to bitch on your behalf so that the Olive8 builders don’t make the same mistakes on your place as they did on mine. (Matt & Jo you are welcome to come check it out) I’m working for you guys now! I wan’t your condos to be PERFECT. No…not so I can buy one later…who knows…I’m thinking of renting in Zurich, Switzerland next. (Not Kidding)
EconE says:

June 26, 2007 at 8:30 am

Jo…2200westlake Aria building. 1667/mo

I do miss dads basement however….it’s actually pretty cool with the prohibition cellar and all. ;o) Too bad the elevator only goes down to the first floor. I actually have to walk downstairs to the basement.

anyhow…see you guys at the next (after this one) meetup. I’m gonna be sure to bitch on your behalf so that the Olive8 builders don’t make the same mistakes on your place as they did on mine. (Matt & Jo you are welcome to come check it out) I’m working for you guys now! I wan’t your condos to be PERFECT. No…not so I can buy one later…who knows…I’m thinking of renting in Zurich, Switzerland next. (Not Kidding)
EconE says:

June 27, 2007 at 8:05 am

Jo…no rude retort like usual?

So…now that you know where I live…should I be concerned about my own personal safety or my possessions?

I’m not kidding by the way.
EconE says:

June 27, 2007 at 8:05 am

Jo…no rude retort like usual?

So…now that you know where I live…should I be concerned about my own personal safety or my possessions?

I’m not kidding by the way.
EconE says:

June 27, 2007 at 12:05 am

Jo…no rude retort like usual?

So…now that you know where I live…should I be concerned about my own personal safety or my possessions?

I’m not kidding by the way.
jo says:

June 27, 2007 at 11:01 pm

You have nothing to worry about.

I’m kidding by the way.
jo says:

June 27, 2007 at 11:01 pm

You have nothing to worry about.

I’m kidding by the way.
jo says:

June 27, 2007 at 3:01 pm

You have nothing to worry about.

I’m kidding by the way.
EconE says:

June 28, 2007 at 7:10 am

and people wonder why I don’t want to attend these meetups.
EconE says:

June 28, 2007 at 7:10 am

and people wonder why I don’t want to attend these meetups.
EconE says:

June 27, 2007 at 11:10 pm

and people wonder why I don’t want to attend these meetups.

Rents soar, blame the condos

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