ARA’s Seattle report emailed out today confirms a trend we’re seeing in markets all around the country – multifamily rental demand is up, in some markets impressively. 

Here’s what ARA Seattle’s Lynn Porter reports this morning about the Seattle market -

In 2003 and 2004, only 12 percent of new households in King and Snohomish counties chose to rent apartments rather than buy homes, according to O’Connor Consulting’s recent Puget Sound Apartment Market report. By 2007, that percentage had climbed to 25, said Brian O’Connor, principal with the Seattle-based firm that does appraisals and market studies for commercial properties. By the end of this year, he expects 35 percent of new households in the two counties will be renters, and next year 40 percent or more will be.

More people are renting because they can’t qualify for home loans given the now-stringent underwriting standards, O’Connor said. “Now that the era of cheap money is over we’re going back to the old way of doing things,” he said. Buyers now need things like a down payment, a credit score higher than 700 and income they can document, he said. “We’re going back to the quote ‘normal behavior,’” he said. “What we’ve experienced over the past five years has been the anomaly. The cheap money has been an anomaly.” This is a huge shift in the ownership/renting pattern, O’Connor said, and is something King and Snohomish counties haven’t seen for 12 or 13 years. But over the long-term, on average, 35 percent of people rent and the others own, he said.

Rents in King and Snohomish counties continue to climb, partly because apartment supply is constrained by the credit turmoil, he said. His firm predicts apartment vacancy in the two counties will be 3 percent at the end of 2008 and rents will have increased 7 percent. In 2009 he expects rents to rise by 7 percent and in 2010 by 6.5 percent. Vacancy should be 2.8 percent in 2009 and 3 percent in 2010, he said.

For obvious reason multifamily continues to be one of the few bright spots in real estate these days, and will continue to be for some time to come. 

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