Property Grunt

Monday, September 27, 2010

No one is in control

You can't control a sinking ship.

Recently the New York Times announced that the worm has turned for landlords.

Landlords Are Back in Control

TO the chagrin of many renters in New York City, the balance of power in the rental market has tipped back toward landlords — if not far enough for landlords to start celebrating quite yet.

At the beginning of the year, renters could demand and receive a month of free rent and maybe even get the landlord to pay their broker’s fees. Those concessions, now the exception rather than the rule, are mainly found in brand-new apartment towers whose owners are hoping to fill them quickly. Overall vacancy rates are again hovering around 1 percent, where they were during the boom. Some landlords have started to push for rent increases.

But it is not because of improvements in the rental market.

The true reason is that landlords are very aware of the current economic situation.

The New York City Independent Budget Office has projected slow employment growth in the city through 2011 and does not anticipate a return to pre-downturn levels until mid-2013.

The budget office’s data on the size of the city’s labor force, which includes everyone who is employed or looking for work, also mirror the strengthening rental market earlier in 2010 and the recent weakening. The size of the labor force had dropped through most of 2009 and had finally started to grow again in February 2010, approaching 4 million people. But the number fell by 14,000 in July, and in August grew by only about 2,000. (In August 2008, the last month before the economic meltdown, the city’s labor force grew by 7,500.)

Landlords who were emboldened to stop offering rental concessions earlier in the year “maybe were sensing the jobs picture improving and may have been reacting to that,” said Doug Turetsky, a spokesman for the budget office. The growing vacancy rate in August may also be a reaction to the falloff in the labor force in July, he said.

The reason why landlords were rolling out the red carpet and champagne for renters was that they needed to boost up their tenant base. The objective was to lock in as many people as possible and then pull the red carpet and end the party. And when renters realized that they can't go elsewhere because there are no deals out there and they were better off staying put.

What landlords are doing is textbook accounting. They are increasing their revenue, which is their rent and cutting back on their expenses which are all the concessions they presented in the past.

If you think they are being greedy or taking advantage of renters, they are not. They are actually scared out of their minds.

Job Loss Looms as Part of Stimulus Act Expires

Tens of thousands of people will lose their jobs within weeks unless Congress extends one of the more effective job-creating programs in the $787 billion stimulus act: a $1 billion New Deal-style program that directly paid the salaries of unemployed people so they could get jobs in government, at nonprofit organizations and at many small businesses.

Analyst: Wall St. layoff wave coming in '11

Pink slips will be coming back into fashion next year on Wall Street, one banking analyst is forecasting.

Meredith Whitney, whose reports trumpeting hard times for US banks were stunningly on target as early as 2007, said financial services firms could see as many as 80,000 job losses, or about 10 percent of current payrolls in the sector, between now and early 2012.

"Over the next 18 months, Wall Street will go through yet another iteration of resizing not seen since the post-dotcom era," Whitney recently told clients of her eponymous research firm, Meredith Whitney Advisory Group.

It is a simple equation. If you do not have a job, you are not going to be able to pay the rent let alone look for an apartment.

How New York City landlords are acting is a bell weather of the future of our economy and it should not be taken lightly.

All these developments probably explain my inbox getting carpet bombed with ads from Property Campaign.

Pendulum or noose?