The Luck of the Landlords

Supply of Available Rental Homes Is Rising, but So Are the Prices

The slumping housing market hit Teresa Walsh hard.

Seeking a better life for her two daughters, Walsh put her house in Menlo Park, Calif., on the market and moved to Bethesda. She found a five-bedroom, three-bath house on Christy Drive for rent and expected that her home in California would sell.

When it didn't after two months, Walsh was in a tough situation. Due to surgery in June, she was out of work. She was paying the mortgage in California and the rent in Bethesda. To make ends meet, she did what a growing number of people have done the past two years: She became a landlord.

The house in Menlo Park was rented out within 24 hours of posting. So were the spare rooms in Bethesda.

"I can not tell you how many people were calling me about the property. . . . The immediacy of the need is what really impressed me," Walsh said.

Walsh's situation underlines two of the main trends in the local rental market these days: There's an increase in the supply of places for rent, but there's still plenty of demand.

As the credit crisis and rising foreclosure rates continue to batter the housing market, more people who were hoping to sell a home have instead been informally renting or subleasing rooms, houses, townhouses or condominium units -- typically for less than renters would pay at traditional rental complexes. This "shadow market," as it has been called, has moved some renters away from those complexes and toward the accidental landlords such as Walsh. Additionally, around the area, in recent years buildings that were planned as condos have become rentals instead.

Nonetheless, vacancy rates remain relatively low and rents continue to rise.

Nationwide, the number of vacant homes for sale reached a record 2.277 million in the second quarter, according to a report by Richard F. Moody, director of research at Mission Residential, an apartment company with offices in Virginia and Texas. The number of vacant for-rent housing units also hit a record, ballooning to 2.063 million units, as owners who were unable to sell put places up for rent.

"Such shifts from the for-sale to the for-rent segments of the housing market were in full swing, which is likely to continue over the next few quarters," Moody wrote.

This influx of alternative rental units, whether townhouses, single-family houses or high-rise condos, is hard to quantify, although it has had several effects. More rooms to rent means more competition for landlords, more choices for renters.

Vacancy rates for all classes of apartments in the Washington area have increased, to 3.6 percent in the second quarter from 2.9 percent a year earlier, according to a mid-year 2008 report by Delta Associates, a research firm in Alexandria. Even so, the rate remains among the lowest in the country, Delta said.