Despite housing downturn, renters get no relief

Study shows costs are not going down, lowest-income tenants hurt worst

The Associated Press

updated 7:13 p.m. ET, Tues., April 14, 2009

NEW YORK - Jeffrey Myers can't make the rent — by himself. He works part-time at UPS and as a freelance photographer, but the $2,200 he pulls in a month isn't enough to afford an apartment in Orange County, Calif., without a roommate.

"It's hard to meet people who live by themselves. Most people have roommates," said Myers, 31.

For homebuyers, affordability is the best it's been for decades, but for millions of renters coast to coast affordability is still getting worse, according to a study released Tuesday.

As the recession forces more Americans out of work, working-class tenants are bearing the brunt of the cuts. Record foreclosures, at the same time, mean more people are competing for low-cost rentals. And rents in many expensive cities still haven't budged because so few apartments were built in recent years.

A renter earning the nation's minimum wage of $6.55 could not afford a one-bedroom apartment in any county in the nation.

"It's a very dire situation," said Dean Baker, co-director for the Center for Economic and Policy Research. "And it's likely to get worse in the two years ahead," as unemployment climbs and businesses cut worker hours and pay.

A renter needs to earn $17.84 an hour to cover the monthly rent on the average $928 two-bedroom apartment, if they don't want to spend more than 30 percent of their income on housing. But the median hourly wage for an American renter is $14.69, more than $3 short of what's needed, according to the study by the National Low Income Housing Coalition.

"So what's going to happen is a lot, unfortunately, will be out on the streets," said Edward Wolff, an economist at New York University.

The lowest-income renters stand to get hit hardest. The unemployment rate is at a 25-year high of 8.5 percent, but that percentage was even higher — 12.6 percent — for those without a high school degree. Some of the worst layoffs have come from industries that employ low-income workers like construction, retail and manufacturing.

Families displaced by foreclosures are also flooding the apartment market, increasing competition for affordable rentals.

"It's likely they're income-constrained or don't have credit or savings," for costlier apartments, said Rachel Drew, a research analyst at Harvard University's Joint Center for Housing Studies.

And while rents are falling in some individual markets, many cities are showing little signs of softness because demand for apartments remains high. Renters in Seattle, Los Angeles, San Francisco and Portland, Ore., all traditionally strong markets, won't see many rent cuts.

Even renters in beleaguered apartment markets like Phoenix, Atlanta, Las Vegas and Florida likely won't enjoy the deals in their areas because the local economies are reeling.

"Even when rents are dipping slightly, it's because more people are out of work," in that area, Baker said. "Affordability only improves when wages increase in proportion with rent."

The most expensive metropolitan area, according to the report, is Stamford, Conn. A renter must earn $32.75 an hour to afford a two-bedroom apartment there. San Francisco ranked second at $31.88 per hour, followed by Honolulu at $31.37, Westchester County, N.Y., at $30.96 and Santa Cruz, Calif., at $30.58 per hour.

Half of the 10 most costly metros are in California.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

URL: http://www.msnbc.msn.com/id/30216739/

Bring On the Bargains

March 2009

Bring on the bargains

In stalled market, brokers turn to price chops, auctions and low-end sales

By Candace Taylor @ The Real Deal

Six months ago, "luxury" was the all-encompassing buzzword of Manhattan real estate. Buyers happily paid astronomical sums, often sight (and even site) unseen, to live in buildings designed by world-famous architects, with private wine cellars and terrazzo marble as far as the eye could see. In an environment where financing was easy, bonuses were huge and real estate values rose at breathtaking speeds, home prices seemed almost beside the point. 

Now, Manhattan buyers are just as demanding, but their criteria have changed drastically. The new buzzword — and subject of buyers' singlemindedness — is "bargain." With real estate prices falling for the first time in a decade, home seekers are just as intent on price cuts as they once were on floor-to-ceiling windows and Sub-Zero refrigerators. 

"I tell all my sellers, 'You must give them a deal,'" said real estate doyenne Sharon Baum, a senior vice president at the Corcoran Group. "If you're not willing to do that, you shouldn't be in this market." 

The hard part is defining exactly what "a deal" is, at a time when the Standard & Poor's 500 Index has careened to its lowest close since 1997, the number of recipients of unemployment benefits has hit an all-time high of nearly 5 million and the economy seems to be in a general freefall. 

Still, Manhattan real estate agents aren't taking the slump lying down. A number of savvy high-profile brokers have begun fighting back with eyebrow-raising price cuts — in both the stratosphere of the market and the below-$1 million price range. Their new "bargain" listing prices are 20 or 30 percent lower than they would have been just months ago. 

"It's almost at the point where we're calling it Wal-Mart pricing," said Amelia Gewirtz, an executive vice president at Halstead Property. "Right now, closed comps don't even matter." 

In the face of such difficult market conditions, auctions of new condo units — a phenomenon virtually unheard of in New York City for nearly two decades — are likely to gain a toehold in the New York market in the coming months, experts say. 

Co-ops, long overshadowed by higher-priced condos, are also being viewed with increasing desirability. However, by responding to market instability with tougher restrictions, many well-intentioned co-op boards may ironically be harming the value of their own homes. 

The price cutting, meanwhile, has made its way to the rental market as well, and competition between Manhattan landlords is now so intense that for perhaps the first time, better bargains can be found in Manhattan than in many sought-after, outer-borough neighborhoods like Long Island City and Brooklyn Heights. 

Finally, bargain-hunting buyers may have more luck at the lower end of the market, as smaller one-bedrooms and studios outperform the luxury market.