Rents rising as real estate market turns corner

2008…..$802…..$951

2009…..$773…..$925

2010…..$779…..$917

2011…..$770…..$918

2012…..$786…..$934

Source: Databank

Monique McKenzie didn’t like it when the landlord raised the rent $100 a month on her one-bedroom Midtown apartment.

“It was really a pretty substantial jump,” McKenzie, 28, said. And when she looked around the neighborhood, she discovered that all the rents seemed to be rising.

But the market isn’t so strong that landlords can do whatever they want. So McKenzie, who works in public relations, negotiated and the increase was trimmed to $70. Still, she’s now paying $920 a month, up from the $800 she paid when she moved in two years ago.

But what can a renter do? The tide is again starting to rise.

Five years after the housing bubble burst and prices started falling, home values in some areas are increasing and many rents are doing the same.

The average rent for an apartment in metro Atlanta has risen to $766.27 a month – up $14.40 in the past year, said Alan Wexler, president of Databank, an Atlanta-based real estate research firm.

“All the signs are that rents are continuing to move upward for the next year and then some more,” he said.

According to Apartment List, a San Francisco-based collector of data and renters’ web site, October was the first month since before the recession that median rents in Atlanta were higher than the same month a year earlier. The increase was small – less than 1 percent.

“We are just starting to see the turn,” said John Kobs, co-founder and CEO of Apartment List.

No one predicts a rapid return to real estate boom times. But the data show that things were bad and now they’re getting better.

As with most everything in real estate, rents ride on location.

For instance, rents in Marietta have risen 6.5 percent and those in Alpharetta are up 3.94 percent over the past year, according to Apartment List.

Taking a snapshot this fall, Databank pegs north Fulton County as having the highest average rents: $915 a month for a two-bedroom apartment, compared with Clayton County’s $620 and South Fulton’s $621 a month.

Even in smaller areas, there is the same uneven pattern of places where values are rising – and where they are not.

For example, some parts of Decatur – particularly in certain school districts – are popular with renters, who pay more per month than to the south of town, said Mindy Georges, owner of Roost Realty, an 8-year-old firm that manages nearly 100 properties.

“In the ‘hotter’ areas, I have seen rents go up – no spikes, but just a nice, steady increase,” she said.

But, Georges added, areas hit hardest by foreclosures have lower property values – and lower rents, as well.

Rents don’t move in lockstep with home prices, but there is a constant dance between the two – a complex tango that starts with basic economics of supply and demand.

The housing market affects both, so to understand rents you need to watch housing’s steps, Kobs said.

On the supply side, the constant rise in home prices during the housing bubble – along with the ease of getting financing – convinced many potential renters to look for a home to buy.

But when the bubble burst, thousands of investors who had hoped to quickly resell homes at a healthy profit suddenly found no buyers – except perhaps at a loss.

Some decided to rent out their units, hoping to wait out the market. Many others defaulted and those foreclosures were often scooped up by other investors – at much lower prices — and then also rented out.

Rents would have fallen a lot further, but for the demand side. Suddenly the ranks of renters were swollen with people who could no longer own a home. Some had themselves defaulted and were switching from ownership to renting. Others had trouble finding work and needed to share housing costs with roommates.

Moreover, what had been a steady and strong flow of new residents to Atlanta from around the country wa virtually choked off during the recession. Growth – the biggest driver of demand for housing – continued, but at a much slower pace than before.

Some demand was delayed. With the job market weak, many young adults moved back in with their parents after school. Or simply never left home.

Now, with the economy slowly improving and creating more jobs, both supply and demand are changing again.

For example, as the real estate market shows signs of improvement, people who felt forced to rent their homes are more inclined to put out a “for sale” sign. That shifts properties out of the rental market.

And as job growth continues, so too will the ability of people to rent or buy homes. One of the first signs of that will be a growing move by many young adults out of their parents’ homes and into apartments, said David Stockert, president and CEO of Post Properties.

“We think there is a wave of that yet to come,” Stockert said. “Those people will come into the market as there are more jobs.”

Post Properties, which rents about 22,000 units nationwide – about 6,000 of them in metro Atlanta – has raised rents about 5 percent in the past year because demand has picked up, Stockert said. “Being in the apartment business is a good place to be.”

Post is not the only one to notice. Construction of new apartments has picked up. Plans call for 11,251 units to hit the metro area next year, with the largest splash – 4,577 units – in the city of Atlanta, according to Databank. In 2014, roughly 7,600 new units are expected in metro Atlanta, almost half in Atlanta.

That might slow future increases in rents. But, experts said, it’s hard to predict what will happen, given the uncertainty over the economy, job growth and migration to the metro area.

Apartment owners like Post also may benefit if there’s a growing reluctance to take the leap into homeownership, given the meltdown of the past several years.

Maria Stephens, 24, says she prefers renting – at least for now.

“I don’t know if it’s a generational thing, but I am kind of turned off by ownership – being tied down to something so expensive with the economy being the way it is.”

But she, too has noticed the rising current. Three years ago, she rented a place in Vinings and it seemed like a steal: A beautiful, 900 square-foot apartment for $595 month.

But the rent rose each year and she started looking around, landing in Buckhead. Now, she lives in an 850 square-foot, one-bedroom apartment on the second floor renting for $950 a month.

Post CEO Stockert said he’s not sure the shift toward renting is permanent.

Attitudes are directly linked to the market – and they can change, he said.

“It has been lousy to be a homeowner the last few years,” Stockert said. “But housing prices are starting to rise and if rents continue to rise too, some people will get tired of that and they’ll start thinking, ‘Maybe I should stop this pain.’ And they’ll want to buy a house.”

But the crash of housing values rattled many assumptions about homebuying. Not just the idea of continuously rising values – the collapse froze some homeowners in place when they could not sell.

Renting means greater mobility than owning a home you must sell. And younger consumers – the ones most likely to add to housing demand – seem more inclined to live in urban areas, where most apartments and condos are concentrated.

Lisa Gausney, 38, self-employed in marketing and public relations, has rented an apartment at Atlantic Station for several years. The rent has gone from $850 a month to $968, she said.

Higher rents are not chasing her into a home purchase or a move out of the city.

“I know I can’t find anything else that’s super convenient for less than $1,100 a month,” she said.