Rental housing stock soars in 2008

You can ask property managers what happens in an economic slump when buildings don't sell after a development boom.

Renters have the pick of new housing.

Throw in a new 138-unit apartment complex on the housing side of the supply-and-demand balance and Sequim has a flooded rental housing stock.

But that doesn't necessarily mean those who do not own a home can afford to rent one; the rental rates falling within the past year or two are mostly older two- to three-bedroom homes.

So what do landlords do with a rental unit surplus without an adequate demand of renters? They wait it out.

Kevin Bell, who co-owns the A-1 Auto Parts building in downtown Sequim, did just that with units he has above the store. After months of having a nearly empty building in early to mid-2008, he's beginning to see tenants again.

Waiting for renters

"After Elk Creek opened up and the economy took a dive, I lost a number of tenants," Bell said, indicating they either ended up living with family or searching out the subsidized rental units at the new apartment complex on the east end of town.

"I'm getting new ones in now, but it was a rough ride in '08."

Bell manages four of the apartments in his building himself and has Landmark Property Management rent out the remaining six.

Heidi Ennes, a broker at Landmark, said her agency experienced a large influx of home rentals over the past two years, but not apartment rentals because Elk Creek is the only new apartment complex in town.

"There was a slight increase (in all units) overall, but our availability list started growing ... at the height of the building boom when properties were purchased as investments, so there was mostly an influx of newer single-family homes," Ennes said.

Ennes added amid the boom she also lost tenants because they couldn't afford to pay rent.

"Historically, these lease breakers have been tenants who went on to buy," but now Landmark is losing renters because they "cannot afford to stay where they are," she said.

Low-rent demand

Due to the economy, many of the unsold homes up for rent are sitting empty or are waiting longer than usual to be filled while apartment owners like Bell and Elk Creek are seeing the increased low-rent demand.

"We have been continually full since we opened in April," said Elk Creek Manager Betty Handly. "That's not to say we've had the same tenants though."

Handly said even those with subsidized rent are beginning to be unable to afford their first-of-the-month payments.

"The economy is such that those individuals and families with lower incomes get hit first," said Handly, who also manages the subsidized senior apartments, The Vintage at Sequim.

"I can tell you the economy hasn't had as big an impact on The Vintage because the income of those tenants is set so there isn't the same turnover that results from these struggling younger people and families."

Bell said he's taken in more tenants by managing some of his units himself.

"Landmark requires tenants to have an income three times that of what the rent is, which prices some people out of the unit," Bell said, indicating it's a protection he wants for his property.

"But there are people and situations where that ratio isn't met but I can still accept them into the building and I do that on my own and assume that risk based on my read of them and remarks from their prior landlord."

Action Property Management's owner and broker Walt Schubert said he often makes the same exception, but indicated he rarely deals with low-rent units.

New units coveted

Schubert said he was not affected by Elk Creek's opening because he only rents houses and duplexes.

"What I've seen happen in my niche is the older two-bedroom homes are not getting filled. That's where the glut is for me," he said. "Due to the number of unfilled new homes going for $1,000 a month, some of the older homes are not getting the same attention and have even lowered some of their asking rents."

Ennes said she has seen a similar trend toward the newer apartments, making the older apartments harder to fill.

"Demand is beginning to even out," she said. "But the newer Elk Creek Apartments are definitely the first choice for apartment seekers."

All the property managers agreed a continued or reoccurring inflation of housing without renters may mean further reductions in rental rates. But Schubert warned property owners often don't meet mortgage and taxes with their rent revenues and Ennes said her organization had seen foreclosures on rental homes for the first time since Landmark opened in 1986.

"It's something to consider," Schubert said.

The high and low of monthly rental

unit prices at the end of 2008:

• Furnished three-bedroom home on West Sequim Bay Road with an acre of open space is $2,000.

• Unfurnished studio apartment near the highway on Sequim Avenue with utilities included is $425.

Buying a house for the first time? Here's help

Free classes for first-time buyers navigating the home purchase process are offered by a partnership of North Olympic Peninsula organizations including Olympic Community Action Programs (OlyCAP), Homeward Bound, Clallam County Housing Authority, Habitat for Humanity Clallam County, Habitat for Humanity East Jefferson County and Jefferson County Housing Authority.

Open to all, the free six-hour class helps buyers maximize their purchasing power.

Classes begin at 9 a.m. Saturday, Jan. 10, at the Skookum Building, 385 Benedict St., Port Townsend, and Saturday, Jan. 17, at the Port Angeles Public Library, 2210 S. Peabody St.

Classes also will be held in Sequim, Forks, Quilcene and Port Hadlock.

For more information or to register, call OlyCAP at 360-385-2571 ext. 6303 or 452-4726 ext. 6100.

Washington State Housing Commission-trained instructors provide information about purchase assistance programs, eligibility requirements and the options for using current lending programs, including FHA and VA. Participants learn about below-market interest rate loans, lending programs for low and moderate income borrowers, sweat-equity home ownership and new lending limits.

Instructors also will address important credit-related information, what the prospective home buyer can do about credit issues, budgeting information, tips for avoiding predatory lenders, assessing what you can afford to buy, how to negotiate the sales price, how to get the best loan and information about title, escrow and the closing process.

Participants receive a certificate of completion that unlocks various lending programs and self-help home ownership programs. Additionally, participants have the opportunity to schedule a one-to-one consultation with a housing counselor and a credit evaluation and work-up with a consumer credit counseling service, both at no cost.

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