Amy Hunter, wtop.com
WASHINGTON -- Kerry Walter is looking for an apartment. Ideally, she'd like a one-bedroom with a great kitchen, street parking and walking distance to a Metro. Also, no parquet floors.
Her budget: $1,500.
The 27-year-old D.C. resident has looked at a few places, and while she hasn't made a decision yet, she has come to one conclusion.
"I realized I'm gonna have to go above $1,500," she says. "I think I'm gonna have to forgo things. Unless the stars are aligned, I'm gonna have to forgo."
Housing experts would likely agree.
Rental rates in the D.C. region are the highest they've been in years, experts say. In fact, Bloomberg Businessweek recently ranked the District and parts of Northern Virginia as having the ninth-biggest rent hike in the country over the past year. Nearby Bethesda, Md. ranked 25th.
"It's a trend that's resulted from the recession," says Stephen Fuller, director of the Center for Regional Analysis at George Mason University. "The rental market has been so hot in Washington because we did generate jobs during the downturn and we attracted young people who came as renters. Many of them don't qualify for purchase of houses, or they want to live in an urban area closer to downtown."
According to Bloomberg, rent prices in the No. 9 area have seen a 7.4 percent annual increase, with a 4.6 percent vacancy rate. Added to that, unemployment rates have remained low, hovering around 6 percent.
While the recession ravaged other locales nationwide, Washington actually saw stability and some job growth. Because of that, folks who'd lost their homes or jobs in other areas came to D.C., filling up the city's apartments and ultimately, tightening the market enough to enable landlords to hike the rents, Fuller says.
"These are people who don't want to spend $500,000 on a house," he says. "They want to spend $2,000 a month on a rental. They're making a choice between owner and renting and where they want to rent. They want to live inside the Beltway, usually on public transportation, closer to where the nightlife is."
The trend is occurring nationwide, but at a slower rate, says Barbara Van Poole, a local realtor. She says nationally, the increase in people wanting to rent is driving rental rates higher, but that more people are renting because of the instability in the market.
"I think any time that there is an instability in the economy, people are more reticent to make a decision, and when that happens they put off buying. They're waiting for the economy to start showing signs of improvement before making a commitment," she says.
Poole says the steady increase in rental prices is actually a delayed reaction in the market. When the economy changes, it isn't immediately apparent in real estate. It takes a while for rates to start going up because units are occupied and under annual leases. As those leases come up, landlords are able to raise rents.
Walter, a WTOP employee who is just beginning her apartment search, isn't new to D.C. And she's not moving entirely by choice. Last March, she was notified that the owner of her 96-unit apartment complex was selling the building and the new owner would be doing major renovations. She could stay in her 500-square-foot studio apartment, which was rent-controlled at just under $1,000, but her rent would eventually go up by about $300.
The new owner offered occupants a buyout, and at $15,000, Walter decided to take hers and pay off some of her student loan.
"Once they've renovated my place, they'll be able to rent it for up to 97 percent more than I pay now," Walter says.
Walter's story is not unique.
"Now, there's a lot of rental construction," says Fuller. "That's the first part of the new housing boom. We have multi-family projects, several in Arlington, several in D.C., a new one has just started in Bethesda, and some condos as well."
The market, he explained, is responding to the demand for more rentals by creating them, which is what is happening at Walter's Connecticut Avenue home.
"These units won't be ready for 18 months, and by that point I suspect the rental market will have peaked. And new home construction, ownership units, will become desirable again," Fuller says.
For now, Fuller has some advice for people looking to rent in the current market. He advises folks not to look at places that are bigger than they need. Also, be flexible on amenities, such as complexes with swimming pools and gyms, which are going to cost more.