By Christina B. Farnsworth. What do Washington, Miami-Dade County, Fla., Vail, Colo., Tucson, Ariz., and New York City share? All these markets, and many more, now face a rental glut, especially among luxury apartment units.
Every market is at least a little bit soft, says Greg Willett, director of research products at M/PF Research, in Dallas, but the problem is more prevalent in select places: Chicago, Boston, Seattle, and Washington. Late 2000 to early 2001 saw the tightest markets the company had ever seen, with total U.S. occupancy rate at 97 percent. Now, nationally, it is at 92.5 percent. Willett says 95 percent occupancy is essentially full. What is happening is that it costs roughly the same per month for an occupant to live in an owned low-end condo as it does to rent a luxury unit--the rent is the same as the mortgage payment.
Notoriously stingy New York landlords now compete for renters with free rent, moving expenses, and even health club memberships. Washington developers are switching mid-town luxury projects under construction from rentals to condos. Case in point: the 192-unit Gallery Place Residences under construction atop the Gallery Place/Chinatown Metro stop.
Right now, low interest rates are luring ever more renters into ownership. Why rent when you can own for the same money?