How are Oil Prices Affecting Apartment Rents?

An Update on Three Oil Towns

In January of this year, we at RentHub wanted to see how apartment rents were trending in three distinct rental markets where the local economy is driven by the oil industry. At the time, median rents in each case were declining substantially. The median rents in these three markets have continued to decline, while oil prices have somewhat stabilized. Crude oil prices are still nowhere near the $100+ per barrel during the peak, but the floor is not falling out from under the industry as it seemed to be doing when we last addressed this topic in January.

The Current Situation

As you can see by the chart, oil prices have rebounded from January when they were below $30 a barrel. As of October 25, U.S. crude oil futures were trading at $49.35. This is roughly a $20 increase since that time, but nowhere near the days where the price per barrel was over $100.

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source: WSJ.com

The U.S. oil industry is proceeding on a more careful footing after the price collapse that occurred. Global production levels are in flux, along with demand for the type of crude oil the U.S. produces being in low demand.

Current Rental Trends

As stated, apartment rental trends for these three markets have continued to decline. There are a few factors that this may be attributed to this decline. Below are the housing rental trends for each:

Odessa, TX

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Midland, TX

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Williston, ND

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Going Forward

Uncertainty in the oil business will continue to translate to uncertainty in the housing sector in each of these oil towns. Williston, ND has seen greater declines in rents due to the dominance the oil boom had on that local market. Odessa and Midland, both have had a longer history of oil development. The oil boom that occurred in Williston brought on temporary housing. Because of the rapid nature of apartment development that was needed to meet the demand during that boom, more apartment rentals have come online while the local government works to remove the temporary housing.

New Development Continues

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Housing development continues to take place in Williston, ND.                 photo source: eenews.net

These boom markets are still working towards stabilizing. Though the local economies are now constricting, to an extent, since the days of $100+ per barrel, development, and specifically housing development continues to take place. Instead of only reacting to the rapid influx of workers, each market is preparing for longer term solutions to housing oil workers and the job sectors that help to serve those people.

In April of 2016, The Odessa Housing Finance Corp. was working to develop 181 units of rental housing.

Tax credits units in the apartment buildings would serve people who make $23,000 to $36,540 a year… About 63% of the renter population earns less than $40,000 per year in a rental market where less than 10% of rental housing is affordably priced according to the (Odessa Housing Finance Corp.)

In Midland it is reported that development of new commercial and residential uses is still set to take place, despite the drop in oil prices.

Several oil companies have recently built office complexes in the area, and drilling continues, albeit at a more sluggish pace. The city plans to build a new convention center, and construction of a municipal courthouse is underway. Several more hotels, apartment complexes and eateries are expected to open this year

In that same report, the driving force behind this development in Midland, and it can be applied to both Odessa and Williston, is because:

The prolonged bustle is partly because the city is playing catch-up, recovering from a period of frenetic growth during the recent boom, when housing was impossible to find…

 

Comparing Rents in the 10 Best Places to Raise a Family

It is quite an accomplishment to be featured on a livability list at Livability.com and something that apartment owners should make note of when gauging rental prices and rental housing demand. In the case of the list we are featuring, the 10 best places to raise a family are featured. Assuming most families seek out homes with two to three bedrooms, those will be the focus for each of these ten rental markets. Using the RentHub data for average rental prices and average square feet for apartments, the vast differences of each apartment market can be seen.

The following is a brief description of how Livability.com ranks their cities:

We crunched the data. We looked at the quality of the schools, the crime rate, and measures of the quality of healthcare and economy. We gave points to communities that are walkable, diverse, have lots of parks and active children’s sections in their libraries. We favored communities with shorter commute times (so working parents can be home more and on the road less) and larger populations of other kids to play with.

We will highlight some of these community characteristics that will hopefully help you understand the livable fabric of each.

10. Palo Alto, CA

2 Bedroom – $3,500 per month / 1,100 sf
3 Bedroom – $8,750 per month / 2,324 sf

Palo Alto, CA is home to Stanford University. Located in the San Francisco Bay Area, the city is a center for Silicon Valley and the highly regarded technology companies that are found there.
Based on the US Census, over 80% of the residents have a bachelor’s degree or higher. Just over 45% of the households are renter occupied. There are over 66,000 residents, to which +23% are under the age of 18. The median household income is $126,771 (in 2014 dollars). Housing demand in Palo Alto, being driven by university employees and technology sector, along with higher household incomes, are heavy drivers of the apartment market rents here.

9. Bowling Green, OH

2 Bedroom – $665 / 774 sf
3 Bedroom – $782 / 882 sf

The City of Bowling Green, OH is home to Bowling Green State University and the 18,856 students who attend school there. The median age of the city is 23.2 years, with 43.2% of residents being between the ages of 18 to 24. It can be surmised that the student population is the largest driver of demand for apartment rentals and the local economy. A small population found in a central location has presented the city the opportunity to have a walkable downtown with regular customers for the businesses found there. The lower rental rates are better understood when fully realizing the proportion of students that make up the total housing rental market.

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8. Homewood, AL

2 Bedroom – $1,045 / 1,093 sf
3 Bedroom – $1,425 / 1,400 sf

A suburb of Birmingham, home to Samford University, Homewood, AL has a total population of 25,708. For a smaller city from this top ten list, Homewood has several parks that helped increase the livability factor. You can also find the Hollywood Historic District, which is on the National Register of Historic Places.

homewood-al-rent-drivers Continue reading

Austin Apartment Deals: A Renter’s Cheatsheet

Kwelia provides price-transparency for the apartment-rental industry. By analyzing millions of data-points, Kwelia can uncover the best deals available for renters, intelligently price apartments for property owners, and predict upcoming real-estate trends for investors.

 

In our last posting, we reviewed Austin’s top apartment deals. Unfortunately (for renters) many of last week’s deals are no longer available, giving testament to Austin’s highly desired real estate market; In 2013, Austin showed above a 95% occupancy rate for apartments,  leaving little room for future renters. Fortunately, Kwelia is here to save the day with yet another iteration on this week’s top  apartment deals in the Austin area.

Sabina

If you’re a renter who prefers a quieter, more homely (the “cozy” definition, not the “unattractive” one) neighborhood, check out Sabina properties, located in North Austin’s Hancock area. Sabina offers a 2-bedroom, 2-bath, 1,080 square foot apartment with monthly payments of $1,950; Sabina throws in a free month’s rent, reducing the renters’ overall monthly payments to $1,787/month. As a result, Kwelia ranks the Sabina a cool 85/100.

Why this deal wins

Not only does Sabina offer a quiet, safe neighborhood but the apartment comes furnished with luxury granite countertops, stainless-steel appliances and in-unit washer & dryer. Access to an elevator makes moving-in easy to the newly renovated apartments. Additional value is derived from Sabina’s 1-month free promotion when you sign the lease.

 

Berkshire SoCo

If you’re not a fan of the north, head south and check out Berkshire SoCo. Berkshire is currently offering a 1,221 square foot, 2-bedroom, 2-bath luxury apartment for $1,694/month. Berkshire’s offering has been rated a 65/100 by Kwelia’s algorithms.

Why this deal wins

While Berkshire SoCo is not as highly ranked as Sabina, the property offers a huge advantage – a garage. With a car, a renter will still need to drive 16 minutes into town but will have the flexibility for weekend getaways and explore the beautiful, more rural parts of Texas.

 

Falcon Ridge

If you enjoy Berkshire SoCo’s location, you might want to also check out Falcon Ridge – a 2 minute drive further south. The additional 2-minute drive will yield a 1,120 square foot apartments with 2-bedroom and 2 bathrooms priced at $1,266 (after 1-free month lease signing). The deal offered at Falcon Ridge is almost too good to pass up, scoring a Kwelia rating of 74/100.

Why this deal wins

Not only does Falcon Ridge offer luxury apartments with elevators for easy move-in, but Falcon Ridge offers many outdoor activities including, but not limited to, access to Williamson Creek, a volleyball court, two swimming pools, jogging trains, and public BBQ grills – perfect for some fun in the sun!

Coming up next week…

Grab these apartments while you still can because, like our last posting, most apartments are only on the market for a week! None the less, the team at Kwelia will be your eyes-and-ears keeping you up-to-date on the best apartment deals within the area.


If you’d like to learn more about Kwelia, sign up for our mailing list or login to find other apartment deals throughout the area.

Does “Apartment Chopping” Make Sense?

I just read a thought-provoking article over at The Brooklyn Reader reporting that across Brooklyn property managers are chopping up existing apartments to add additional bedrooms. The basic logic of this makes sense–the more renters an apartment can support, the more potential income to be spent on increasing rents. However, the apartment will also become more cramped and less valuable on a “per renter” basis.

Naturally, I wanted to take a more data-driven look at this. I decided to use Bed Stuy as a case study, since it was one of the neighborhoods mentioned in The Brooklyn Reader’s article. Here are some median rent statistics for Bed Stuy in the last 60 days taken from our Competitive Intelligence product (click to enlarge):

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The spread in rent between one and two bedroom apartments in Bed Stuy is currently at $305 dollars. So, it seems at first glance that if you can inexpensively add a bedroom to an existing one bedroom, you should definitely do so. But, number of bedrooms is not the entire story in terms of apartment value. One bedroom apartments are more attractive to renters, at least in terms of what the market signals in terms of rent per square foot: $2.12 for one bedrooms vs. $2.00 for two bedrooms. So, you can expect to lose around 5.6% in per square foot value after converting a one bedroom to a two bedroom apartment in Bed Stuy, since the total number of square feet is not going to change.

Furthermore, the converted two bedroom is likely to have to closer to 800 sqft (the one bedroom median) than 1,000 sqft (the two bedroom median) since, after all, it used to be a one bedroom. Let’s split the difference and assume it’s a bigger one bedroom at 900 sqft.: that’s still 10% less than the median two bedroom, so we’re not going to end up with a full-sized two bedroom apartment.

Taking those adjustments into consideration, we can expect the actual increase in value to be much lower: $1,924 – (5.6% of $1,924) – (10% of the previous result) = ~$1,645. That’s only $26 more than the one bedroom average, and almost certainly not worth the cost of the conversion.

This is obviously a simplistic analysis, but I was skeptical that you could take an existing apartment that’s presumably been designed for a certain number of occupants, shoe-horn in an extra bedroom and get something substantially more valuable. The basic reason for this is that it does not take into account the fact that you’re not really adding value from the renter’s perspective, and what the renter is willing to pay for an apartment is all that really matters. You’d be better off adding nicer finishes, which do add a lot of incremental value (but that’s another post.)

This analysis is also specific to Bed Stuy, and it may actually make sense in other areas where the numbers look different–say where two bedroom apartments have a higher or similar per square foot value than one bedroom apartments, or where the difference in size between typical one and two bedrooms isn’t so pronounced.

If you want to dig deeper into this kind of data & analysis, check out the free trial of our Competitive Intelligence product!

 

Philly’s Best Neighborhoods for Deals: An Analysis of Amenities and Price

If you’ve been following our coverage of the Philadelphia rental market, you already know which of Philadelphia’s rental neighborhoods are the hottest in May and in the summer. However, there’s more to consider when looking for an apartment than just the price and the location; amenities are important too. To shine some light on this aspect of the rental market, we first asked: which amenities are available, and what fraction of apartments feature them? After selecting a number of luxury amenities to investigate, we looked to the data as usual for some insights into the distribution of rental amenities throughout Philadelphia.

Is “luxury” actually rare?

Overall, the single most frequently listed amenity throughout the rentals was “stainless”, as that amenity was present in nearly 11% of the listing observations (“stainless” likely refers to stainless steel kitchens).  Listings for rentals with doormen were the least common, comprising roughly 1% of the listing observations. Nevertheless, between one-fifth to one-quarter of all rental listings had at least one luxury amenity.

Next, we looked at how the term “luxury” is used compared with more specific feature descriptors–while the presence of granite, stainless, or a doorman are all objective and verifiable, the scope of what is considered “luxurious” could prove a bit more subjective. Did the use of the term “luxury” line up with how often we would expect to see it, given what we’ve observed about the frequency of luxury features? It would appear that, yes, there is some truth in advertising–only about 4% of apartment listings indicated that the unit had “luxury” features, suggesting the term is used judiciously.

Is there a better time to look for a luxury apartment? From the chart above, we can see that the proportion of listings with any luxury amenities stayed between one-fifth and one-quarter for the past ten months. Although the winter months saw a slight decline in the frequency of luxury apartments, the impact of seasonality appears to be relatively low, at least in this year.

Let’s talk cost/benefit

Ritzier amenities tend to come with ritzier price tags, however. Lest we forget, apartment rentals, like anything in life, demand tradeoffs. With that in mind, which neighborhoods have listings with the most “bang for the buck?” Given the information on neighborhood amenities newly in hand, as well as our previous coverage of Philadelphia rental neighborhood prices, we only had to combine the two to produce a ranking of the “best deal” neighborhoods in Philadelphia:

Best Deal: Mill Creek

A quick note on methodology: the “best deal” ranking above is derived by taking the price per square foot in the neighborhood and dividing by the median frequency of having any luxury amenity (lower ratios are better). This metric provides insight into the most affordable places to find apartments that also have luxury features. Lastly, to keep the rankings relevant to current market conditions, the prices and amenity frequencies used are the three-month moving average of their respective monthly median values.

The top-five “best deal” neighborhoods overlaid on our rental price heat map

The map and the rankings show that there are a number of neighborhoods with affordable but well-equipped rentals, especially West and North of Center City. In fact, the majority of apartments listed in Mill Creek and Haverford North (numbers one and two, respectively, on our list) have at least one luxury amenity. While Mill Creek has consistently posted high figures for the proportion of its rental stock with a featured amenity over the past ten months, the fraction of such listings in Haverford North has increased dramatically since the fall of 2012, especially since this April:

There’s no such thing as a free lunch

The impressive increase in the median frequency of luxury listings in Haverford North over the past five months has not come without a catch. As this screenshot from our Competitive Intelligence product shows, the rise in the proportion of luxury listings has been mirrored by a dramatic increase in median rental rates. From April to June (and persisting into August), the median rent per square foot in Haverford North roughly tripled.

Wrap-up

There’s definitely more than one angle to look at all of this data, and plenty more data to analyze, so check back for more on rental markets around the country.

Philadelphia’s Hottest Rental Neighborhoods: The Summer Update

Back in June, we wrote about the beginning of the summer “leasing season” with our report on “Philly’s Hottest Rental Neighborhoods in May”. With Labor Day rapidly approaching, let’s take a look at the rental market action so far.

While prices cooled off a bit from June to early July, the prognosis for the rental market in 2013 continues to be positive, with growth in apartment rental demand outstripping available stock, as noted in this Philly.com article. Furthermore, vacancy rates appear to be retreating after a jump earlier this summer. To meet the growth in rental demand, 2013 expects to see the addition of more rental units than last year, such as the newly opened 2116 Chestnut property that we will touch on again below. Overall, the rental market heated up through July–but which areas saw the greatest demand? Without further ado, here are the hottest Philadelphia rental neighborhoods for July:

Who’s at the top?

Rittenhouse tops the list of the most expensive rental neighborhoods in Philadelphia this time around, with a median rental price of $2.44 per square foot. Nine of the top ten priciest neighborhoods from May made it to the July list, with the sole newcomer this time being University City, which nabbed a close second place to Rittenhouse with an impressive rental rate of $2.41 per square foot. Rittenhouse saw prices rise 17.9% as vacancies decreased through the month, in part due to fewer available units in the new 2116 Chestnut building by The John Buck Company that opened earlier this summer. Previous number one Fitler Square remained in the top four, with Callowhill staying put in third place. Perennial contender Old City rounded out the top five, with prices in the top ten up overall month-to-month.

University City and Rittenhouse Rates Grew Significantly from June to July

Movers and Shakers

While rental rates rose overall across the board, the rental market in University City experienced the greatest price growth of any Philadelphia neighborhood from June to July, with median rates increasing an amazing 78.5%. Neighboring Woodland Terrace prices also grew impressively, at a 37.4% rate from June to July. Why the large change in both of these neighborhoods? As discussed previously, the seasonality of the academic year likely plays a significant role in prices in the University City area, with nearby Woodland Terrace absorbing some of the demand. The demand from the influx of students and faculty preparing for a new academic year has driven up rates as the summer leasing cycle concludes.

The impact on Woodland Terrace (unpublished June rank: 61) is particularly striking, as it vaulted 41 spots up the list to number 20. Rents in Woodland Terrace increased 37.4% from June to July on the strength of seasonal demand and dwindling vacancies.

Summer Trends in the “Top 10”

Having highlighted the recent price growth in several rental neighborhoods through July, let’s take a look at how the market has shaped up for the top ten hottest rental neighborhoods in Philly so far this summer.

Prices adjust to decreased listings, but lag supply changes

We can see that prices climbed into May, fueled by increased demand as “leasing season” began. The stock of listings increased markedly in May, likely driven by the addition of new units as well as seasonal leasing cycles bringing more apartments onto the market. This surge in rental listings is reflected in swooning prices through June into July, despite reduced availability of units. However, prices rallied from July, adjusting to the decreased number of units on the market. Nevertheless, there is a perceptible time-lag between changes in listing supply and price adjustment (a good reason to adopt Competitive Intelligence!).

Methodology Note: The constituents of the “ten hottest” rental neighborhoods in Philadelphia change somewhat from month to month. To track how the rental market for the top ten most expensive neighborhoods evolves from month to month, the prices given in the chart above are the weighted average of the median rental rates of the members of the top ten priciest neighborhoods for each month.  This provides an approximation for a “characteristic” price for the ten most expensive neighborhoods in Philadelphia in a given month.

Closing Remarks

Check back for future updates as we continue to follow the hottest rental neighborhoods; we’re constantly keeping an ear to the ground to track neighborhood pricing movements.

Heatmapping Philadelphia Rents by Bed and Bath

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Our last post which cataloged Philly’s most expensive places to rent in May got a lot of attention around the local real estate blogosphere (see here and here for examples). Our approach was to use rent price per square foot to rank neighborhoods’ relative rental costs.

While this approach is great for comparing neighborhoods to one another (look out for another post for June’s top 10 coming soon), it’s not as useful to individuals who are interested in understanding how much they can expect to pay for a particular unit in a particular neighborhood.

With that problem in mind, we created a new heatmap (shown above) where you can visualize the median rent price for a certain type of unit across neighborhoods (using bedroom and bathroom sliders to adjust the map values.) This map is updated daily to reflect the newest listings coming on to the market. Blank areas on the map reflect areas where we don’t have a enough data in the last 90 days to give a value.

We’d love to hear your feedback here, and as always you can check out our apartment deal ratings using our free service, RentMarket.

Philly’s Hottest Rental Neighborhoods in May

Lately, it seems as if neighborhoods have been all the rage here in Philly. Recent blog posts have been indicators of this trend.  There was this one in Philly Mag that identified the hottest neighborhoods in Philadelphia based on home sale velocity. Then there was this one in Curbed Philly that highlighted up-and-coming neighborhoods according to the sentiments of RedFin agents. What was most interesting about these posts, was that the top neighborhoods were ones that we would least expect. So, although some of these lists included the “usual suspect” neighborhoods, there were several sleepers. For example, Phoenixville, Brewerytown, and West Germantown were the top three up-and-comers according to agent sentiment at RedFin. In the Philly Mag piece, Graduate Hospital (of all places) was dubbed the hottest.  

As data geeks, these articles got us thinking. If Phoenixville is hot according to agent sentiment and Graduate Hospital is hot according to home sales, where is hot according to apartment rental pricing? Considering that we track this kind of stuff, we figured we would find out by ranking Philly neighborhoods according to apartment rental pricing. Some past experiences have indicated that heat maps are a great way to visualize pricing trends of different geographic areas. With that in mind, here are the results for the month of May (click image to get to interactive version of it):

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Who’s Number One?

At a whopping $2.41 per ft2, Fitler Square was the priciest rental neighborhood in Philly for the month of May. While the neighborhoods of the top 10 are mostly the “usual suspects” as referred to above (Rittenhouse Square, Old City, etc.), this was a mild surprise. As for what could be behind this, we have a couple of theories. The first is what we’ll call the “Naval Square effect”. For those not aware, Naval Square is an upscale megaproject by Toll Brothers. Despite being a condo project, owners there list their units for rent from time to time. Now although Naval Square is technically a part of the Graduate Hospital neighborhood (according to our neighborhood shapes), it does border Fitler. This could mean that some Naval Square price observations are getting included in Fitler, which would give it a nice price boost. The other theory is that since Fitler has a high ownership rate, the quality of units there may be higher than other parts of town. We’ll continue to monitor Fitler and tweak things like the minimum number of units per neighborhood. Stay tuned for updates in a future post.

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Our Up & Coming Neighborhoods

Although outside of the top 10, we thought it was worth noting that a couple of the Germantown neighborhoods are fairly highly ranked on the list. For example, Germantown – Westside came in at number 14 and West Central Germantown came in at number 18 for the month of May.  

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Though surprising to some non-Philly/Germantown folks, this may not even be a fresh trend based on other charts we have. Both of these neighborhoods have more or less held steady near $1.50 per ftfor the past several months. One does wonder whether these neighborhoods are uniformly hot or whether certain complexes are single-handedly propping up rates? In otherwords, are a few upscale complexes responsible for a higher-than-normal median rent? A closer look at complexes like Rittenhouse Hill, or Delmar Morris, or Cloverly Park shows that median rents there are all well north of $1.50 per ft2. We’ll take a deeper dive into these neighborhoods and report back accordingly.  

Leasing Season Is upon Us

As most real estate pros will acknowledge, May is actually the beginning of “leasing season”. From now until September, listing volumes and rental prices will be at their highest points for the calendar year. When considering academic calendars and weather patterns, this rhymes with common logic.  

There are a couple of neighborhoods affected by leasing season that we thought it noteworthy to mention. 

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The first is University City, which went from number 5 in the (unpublished) April rankings ($1.86 per ft2) to number 12 in May’s rankings ($1.62 per ft2). Students typically sign and make new leases around this time of year, so it follows logically that apartments marketed towards students might be higher in April than May. We will keep you posted in how this neighborhood continues to trend. 

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The second one is Society Hill, which went from number 19 in April to number 9 in May. Like University City, seasonality may be a culprit here.  In addition to a strong rise in median rental price, we saw more than double the number of listings in Society Hill from April to May. This is perhaps an indicator that a glut of leases in this neighborhood reset during this leasing season. We shall see. 

Methodology Notes 

Neighborhood Shapes – We were able to cluster our data in neighborhood shapes thanks to our friends at Azavea. We were certain to only include neighborhoods that had a minimum number of price observations, which might explain some holes in the map.

Unit of Measure – The unit of measure here is the median rental price per square foot per neighborhood. Although imperfect, we felt that the price per square foot was the best way to capture price levels across all unit mixes.  In other words, it was the best way to do an apples-to-apples comparison across all neighborhoods because one may have a lot of one bedrooms or studios, etc.

Bias – Lastly, note that we were careful to minimize any bias that outliers would cause by using medians and not averages of pricing data.

Parting Shots

In true startup fashion, we will continue to iterate our methodology to produce the best results for this. Stay tuned for future posts, as we will be reporting on neighborhood pricing movements on a monthly basis.  This should get interesting!