Some of the biggest public apartment owners in the country saw increases in move outs for homeownership in the third quarter. Add in the extension of the homebuyer tax credit and home prices continuing to decline, and it might make sense that a flood of renters move out for homeownership into 2010.
But those same CEOs that saw an uptick in move outs for ownership don’t think we’ll see a return to the low interest levels of 2002 to 2004 and the promise of appreciation that pulled renters out of apartments in droves.
Chicago-based Equity Residential saw 14.2 percent of its renters move out. That was an increase over 2008, but well below its third quarter 2007 move outs. “But I would also caution you to not get too caught up in the percentages as well,” said CEO David Neithercut on a third-quarter conference call transcript. “As an example, Boston saw an increase to 15.8 percent of its renters moving out, but because the turnover is so low, that 15.8 percent amounted to only 89 move outs for the quarter to buy homes.”
Alexandria, Va.-based AvalonBay Communities saw 16 percent of its departing renters leave for homes. That’s an increase from the second quarter but well below its historical average in the low-20 percent range. Denver-based UDR saw 14 percent of its departing residents move out to purchase a home, which was slightly above the 13 percent posted in the second quarter this year and third quarter of last year.
After watching almost 11 percent of its departing residents go out for home purchases in the first quarter and 12.6 percent in the second, Camden saw the rate rise to 13.8 percent in the third quarter. That’s still below the long-term average of 17 percent and the peak of 24 percent, according to the company's third-quarter call on SeekingAlpha.com.
The statistics varied wildly by locations. UDR saw move outs for home ownership at 6 percent in Orange County, 6 percent to 8 percent in San Francisco, and about 10 percent in Washington, D.C.—markets that are more supply-constrained.
That doesn’t surprise Lesley Deutch, vice president of Irvine, Calif.-based John Burns Real Estate Consulting. “Most of the properties of the REITs are in infill locations,” she says. “They have the best locations. A lot of the housing that’s being bought right now is the first-time buyer. It’s not in the best locations. It’s one step out in a second-tier location.”
But in further out locations or areas with large supplies of new homes, the situation could be different. Home prices are falling dramatically. In Las Vegas, for instance, John Burns, CEO of John Burns Real Estate Consulting, said at the Big Builder 2009 Virtual Conference, that owning a home costs $171 less per month than renting.
If home prices continue to get more affordable in many of these areas, this could eventually spell trouble for apartment owners not situated in infill areas. “This is the best time since 1973 to be buying a house,” Burns said at Big Builder 2009.