Apartment Ownership During a Recession?

Question

These questions are aimed at members here who survived as landlords during the most recent Meltdown post-2008. I'm primarily interested in SoCal anecdotes as mine is in San Diego, but would be grateful for ANY shared experience, regardless of location.

What happened to your occupancy rate?

Did your rent rates increase due to higher demand or did they decrease along with all other prices at the time?

Did you have to make any concessions?

Thanks in advance.

Dan H. · Answer

Like @Justin R. I had less units in 2008 (I think I had 3: One in Claremont (San Diego) and 2 in Escondido).   I had 0 vacancies and no rent decrease.  So I had 0 consequences of the recession in my rentals.

The chart Justin provided does not show the last couple of years (2014/2015) but I have seen significant rent increases (>10%) in the last couple of years.  So if San Diego median in 2013 was $1289 (which seems low to me for 2013) it is at least $1400 now.

My last 2 units vacancies were both in working class Escondio in the last couple of months:

- 2/2 ~1300' (December): $1750 paying full utilities including water.  I am ashamed to say this but previous tenant was paying less than $1200 and I was paying the water but tenant was there ~10 years.

- 2/1 ~700' (January: Moves-in in the middle of January, real nice unit): $1500 paying full utilities.

Both units rented at initial open house (i.e. they were easy to rent).  These are not central San Diego location or great neighborhoods.  They are both nice units in working class neighborhoods.

My point is the median has to be quite a bit above $1289 (my guess is median is above $1500 for San Diego).

Ed Matson · Answer

In our 46 units in Beaverton OR, we saw vacancies increase a bit (up to about 5%),  Concessions were given during this period, normally first month's rent free.  Rents were not reduced.  We consciously price our rents slightly below market, and thus normally have very high occupancy and lower turnover. Overall, this strategy has served us well, especially in 2008-2010.

Justin R. · Answer

In the 2008-2010 time I only had two rental units here locally, but did end up with lower lease rates by about 4% compared to pre-2008.  Vacancy times didn't change.  I would NOT extrapolate that out to the market, though - hardly a large enough sample size.

I have a feeling this is fairly neighborhood specific - some areas certainly behaved differently than others during and after the recession.  I saw rent rates rebound (and go far higher much quicker) than the data below shows, so I don't know what to believe here in general:

Real Gross Rent History for San Diego

Date

USMedian

CaliforniaMedian

San Diego, CAMedian

San Diego, CAAverage

2013

$905

$1,224

$1,289

$1,368

2012

$897

$1,218

$1,272

$1,351

2011

$900

$1,213

$1,278

$1,337

2010

$910

$1,238

$1,329

$1,395

2009

$909

$1,247

$1,321

$1,391

2008

$914

$1,260

$1,339

$1,403

2007

$875

$1,196

$1,296

$1,354

2006

$881

$1,189

$1,306

$1,360

2005

$862

$1,152

$1,269

$1,328

(http://www.deptofnumbers.com/rent/california/san-d...)

Maurice Graham · Answer

Thank you for asking this question.I am in a different market but I believe the same applied here(Atlanta).

Rob Cee · Answer

I think rent rates and vacancies were very different in different areas during the downturn.  I think outlying areas got hit much harder with rents falling and vacancies then closer in places.  Places in CA like Riverside County, Victorville, etc...  And I know further out suburban areas of Phoenix and Vegas must have taken a hit in rents, vacancies and being forced to rent to crappier tenants.

Also the next downturn could be different as there was not a ton of building of apartment units leading up to the 2008 downturn (there was a lot of SFR building, but not as much multifamily).  But this time there has been a lot of apartment unit supply added in certain areas in the last few years (Austin, Denver, Seattle, Houston come to mind).  Seattle metro area where I live is seeing the biggest building boom in apartments since the mid to late 1980's.  So if there were a tech crash in these tech heavy markets, you could see some rents falling.  If you look at the rent charts from the tech crash 2001-2003, rents were flat or fell for years in tech heavy markets.  But of course recovered quite well in a few years.

Larswin Mendoza · Answer

Great data, thanks for posting this! Please keep the replies coming.

Jeff B. · Answer

Rents were down and vacancies up in San Bernardino County.  We were treading water for the jobs market to correct.

Apartment Ownership During a Recession?

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Real Gross Rent History for San Diego