Apartment Rents going up up up... how much has yours increased? (Austin: renters, mortgage)

[buffettjr]

Originally Posted by Shredding_Gnar78

I'm not a real estate agent or anything, but it seems to me that... well..

Yes, looking at the market value is a good way to get perspective.

To counterpoint, what happens when multiple apartment complexes decided to keep a 20-30% vacancy pending a 25-75% rent increase on second term leasers? We (the renters) vote with our feet and leave.

So it sounds to me like they just trade tenants every year. Who wins in that situation? Are the new Austin arrivals are willing to pay high tiered rental rates for the same value as what was 1/3rd of the price only a year ago? I guess that depends how many are coming from expensive cities like Boston and San Diego.

But yes, if the supply side maintains high prices, is willing to accept higher vacancy rates, and new arrivals continue to occupy overpriced apartments with poor reviews... well I guess that makes living in apartments a less attractive option.

Moderator cut: Plese, lets use some less offensive, realistic terms.

We gotta stay mobile or leave

The price a year ago is 100% irrelevant to anything relating to the value of a current renter. The only thing that matters to the current renter is how many available apartments they can choose from and how many renters they must compete against. Whether the apartment went for $5 per month or $5,000 per month last year is irrelevant.

[eichlerfan]

In the two years we have been renting an apartment here in southwest Austin, our rent has gone up about $90.00, and I know they are at about 98% occupancy. I can't complain about the price increase at all, and the apartment complex is very nice, and they continue to make improvements since we moved in.

We had planned on eventually buying another home once we moved to Austin, but our monthly cost are so much lower with renting, and in our mid 50's we've decided we really don't want to take on another mortgage and home maintenance (been there done that sort of thing). If we were younger with little kids then we would be singing a different tune. We've owned three homes in the past 30 years, and truthfully at this point in our lives we love the freedom and cost of renting. If we ever decide to buy again it will most likely be in some type of retirement community when we are older. I've been dealing with elderly parents and their issues with staying in their homes, and it's not fun, so I want to be prepared before I ever get to that stage.

[Shredding_Gnar78]

Originally Posted by buffettjr

The price a year ago is 100% irrelevant to anything relating to the value of a current renter. The only thing that matters to the current renter is how many available apartments they can choose from and how many renters they must compete against. Whether the apartment went for $5 per month or $5,000 per month last year is irrelevant.

That's like saying "history is irrelevant". Its important to know how much a place has gone up before you move in. If a family moves into an apartment knowing that the rent will more than likely severely increase in just 12 months, they can plan their budget accordingly. Or perhaps get a longer term lease.

[Trainwreck20]

If a family moves into an apartment knowing that the rent will more than likely severely increase in just 12 months

And how will you know this? If it just went up 50% during the last year, will it go up 50% again, or does it mean that it will be stable for several years? History may be important, but the interpretation of it is more so. My apartment complexes that I lived in (especially the smaller ones) seemed to go up in a 'spurt' ever couple of years (or longer), at which time I often ended up moving. But, looking back, I might have been able to tell when an apartment wasn't going to increase soon by checking when its last large increase was...

[passionatearts]

I was going for a walk on Oakland Ave today and saw a for rent sign for a 1/1 apartment in a duplex. The owner wants $1,400/a month! Who said that Austin is cheap?

[Shredding_Gnar78]

Originally Posted by passionatearts

I was going for a walk on Oakland Ave today and saw a for rent sign for a 1/1 apartment in a duplex. The owner wants $1,400/a month! Who said that Austin is cheap?

WOW! Beach Prices right there... La Jolla, Pacific Beach, Huntington.. same prices.

The difference is that there are 1/1s in 4x4s, maybe 10 mins away from DT, going for $400/a month. (pleasant valley and riverside). Can't find that anywhere in Socal!

[ravenshroud]

Originally Posted by Trainwreck20

Well, we are about done with our mortgage (15 yr refi in 2002) and are paying just a couple hundred more than your apts are proposing (prior to our taxes). Our taxes are just under $500/month. Our elec and water bills are very reasonable, not sure what your issues on those are -you are paying them now, via rent. True, apts have been a deal for years, but they are more in balance now, or heading that way.

Anyway, in 5 years, we will be paying probably $600 a month for our house, wonder where your rent will be?

Ofc, if you are intending on moving around frequently, the closing costs, etc. will play a significant part.

What you are paying to buy the house does not include what it costs you to own it however. Owning a house is expensive as hell. Buying them is the easy part.

[ravenshroud]

Originally Posted by Shredding_Gnar78

WOW! Beach Prices right there... La Jolla, Pacific Beach, Huntington.. same prices.

The difference is that there are 1/1s in 4x4s, maybe 10 mins away from DT, going for $400/a month. (pleasant valley and riverside). Can't find that anywhere in Socal!

East Austin is a bargain. It will be coopted by the wealthy eventually. It is just to valuable and close to downtown to leave it in the hands it's in.

[Trainwreck20]

What you are paying to buy the house does not include what it costs you to own it however.

Yes, there are some expenses in owning a house as opposed to renting a house or apartment. They are really not that much amortized over time. Assuming the following for a 'typical' (200-300k) house:
- a new AC and a new roof every 12-15 years ($100-$150 per month equivalent),
- Insurance ($75-$125 month equivalent)
- Misc. non discretionary expenses (new appliances, painting, fence maintenance, etc.) ($50 month equivalent)

We live in a 13 year old house and have yet to need to replace roof or AC unit, but will likely have to in next five years or so, I am guessing. Our non discretionary expenses have actually been very low, but I am assuming there will be some eventually (we did replace the microwave, but that was $300 or so after 10 years - $2.5/month). We have done painting and fence repair ourselves so far, so not that expensive yet, either, but could be if you contracted it out - say, $1,200 to paint your house every 7 years - still less than $15/month.

There is the additional time, and I think that is a deciding factor for a lot of people, and a valid reason not to own. We probably spend 50 hours a year on the yard and maybe half that again on general maintenance - painting, repairs, etc. - that you would not do as a renter (well, rental homes may need yard care to be done).

I have found that (esp. with newer homes) my utility bills are lower (much lower if you consider the space we have). For the first 10 years of our mortgage, we saved about $100/month in tax deductions due to property tax and interest (that is comparing to the standard deduction, btw, not counting all the savings). That is slowly shrinking and may eventually go away or become smaller as we approach the standard deduction.

Anyway, a typical homeowner may have 200-300+ in additional expenses that do not show up in the payment/taxes. Some of this may be returned in taxes. You will spend more time on the property doing work.

If (and this is a big if) you have a good reason to believe you will be in the same place for an extended period of time, then the home can come out ahead. Even if the rental rate increases at a nominal rate of 3%, a 1,000 payment becomes a $1,350 payment after 10 years. If a house was to appreciate at that same rate, your taxes would go up by about $180 a month and our assumed expenses would inflate by $70 - $100 per month, for a total increase of $250-$280 per month as compared to $350 for the rental. That is relatively minor (but gets larger over time) and this tax assumption assumes an annual increase in value of 3%, so if there was no appreciation, you would save up to $250/month instead of $70/month. If there was appreciation, you would end up with $86,000 more in value, or the equivalent of $700+ per month over those 10 years.

Short answer - it is a complex question. If you only look at one thing, positive or negative, then you do not have an accurate picture.

[verybadgnome]

A local apartment market report:

http://www.cmraustin.com/aptsum_dec_2011.pdf

"Rents should continue to rise during 2012,
but at a slower pace than the 7.1% annual rate achieved in
2011. Occupancy should remain stable in the 96% to 97%
range and absorption should increase again as new units are
brought to market."

"The average rental rate for new units completed in 2010 and
2011 is $1.31 per sq., approximately 24.8% higher than the
market average."

It does seem that most of the new apartments coming online are high end.