Landlords and building owners want to know one thing: When can they start raising rents again? And when they can start cutting back on the concessions they’ve made to entice renters to their buildings?
Charles Meyer, managing director of Columbus, Ohio-based Red Mortgage Capital, said that these days may be coming sooner rather than later.
As the economy shows some signs of life, apartment-building owners will be able to demand more from their renters, Meyer said, within reason.
“The ability to pull rents up is coming,” Meyer said. “It’s not here yet, but as jobs begin to get created again, as the employment picture improves, we will see this happen. And you’re already seeing many of the concessions disappearing.”
The troubles of the housing market are helping this along. Residential mortgage lenders, chastened by the criticism they received for their lax lending standards leading up to the Great Recession, have now moved in the opposite direction. Many conventional mortgage lenders are requiring borrowers to come up with down payments of 20 percent of a home’s purchase price before they’ll approve mortgage loans.
Lenders are placing an even greater emphasis on credit scores, too, sending many credit-challenged borrowers to FHA loans as their only hope to acquire mortgage financing.
As borrowers struggle to qualify for home loans, a greater number of them are renting. After all, they do have live somewhere.
At the same time, many former homeowners, who have either lost their residences to foreclosure or who walked away from upside-down mortgages, are viewing renting as the sounder economic decision in today’s challenging economy.
All of these factors lead to a stronger rental market.
At the same time, most Midwest markets haven’t overbuilt when it comes to multi-family properties. This has led to solid vacancy rates in most major metro areas.
“It’s worked out that there is now greater demand for multi-family housing but less stock available,” Meyer said. “That’s kept the multi-family market a strong one. It’s kept vacancies relatively low.”