Reading the Tea Leaves on Rent Increase Rates

No, I’m not an official analyst, of course—just someone who’s been in the business for a while and tries to stay in tune with trends and understand them as much as possible. I was intrigued by news in my local paper (Orange County Register), I’ve now seen for a couple weeks running, about how much apartment rents have been increasing, and for what types of units.

The data I saw showed that two bedroom apartments were increasing at the fastest pace, followed by studio units at a close second. Lagging the pack by a 2 percent delta were one-bedroom dwellings. (Three bedrooms were tucked in there behind studios, but there are really so few of them that I consider them to be an outlier and not really part of this argument. Besides, it’s a data point that messes with my theory!) All this is good news for landlords, of course, but what might it tell us culturally?

Here’s my spin: As the economy has managed to hang on through our last summer of discontent and a reasonable year-end, the general confidence level has begun to creep up, especially as unemployment has begun to inch downward. With more folks feeling better about the reliability of their jobs, they have mustered the will to “un-couple” from whomever they teamed up with to distribute living expenses. In short, of those who can now dump their roommate, many are choosing to do so. Seeing the early manifestation of this trend, landlords have encouraged the move by gently boosting the rents on the two-bedroom units first, encouraging the early un-couplers to get over the hump and move out already—preferably to another apartment in the same community. What’s it worth to lose a roommate after two or three years? Fifty bucks? A hundred? Anyway, I believe this is why two-bedroom rents have been rising the fastest.

To where do these newly independent souls move? Well, to studios in many cases, because the rent there is still less than a one-bedroom. Consequently, the rents on studios have been notched up in response to this increased demand. The one bedroom rents have increased as their boat is lifted by the rising tide.

So there you have it—my two cents’ worth on what I see happening in local apartment communities. All of this is very, very good for the multi-family rental business, for which I am very grateful.