There are currently hundreds of rental apartments looking for tenants in Lakewood. Basement rental apartments have been particularly hard hit. There are dozens of units that have been vacant for more than six months, and some that haven't had a tenant in close to a year. Some homeowners have given up and have stopped advertising their vacant units. Consequently, rental prices have crashed to levels not seen since the 1990's. Three bedroom apartments with central air, high end kitchens etc. can be had for under $700 a month in some developements. The crash is filtering down to townhouses as well, where prices have dropped substantially.
For several years the demand for rentals outpaced supply, and rental prices rose to the point where the rental of a townhouse and basement apartment would fully cover the mortgage and taxes plus a hefty profit. Many homes were built with two rental apartments and investors bought homes by the dozen to turn into rentals. Low interest rates help fuel the building boom.
The supply of rentals began to outpace demand, yet hundreds of homes were in the approval/ construction phase and were completed adding to the oversupplied market. At this point, despite the massive oversupply of rental units, there are still hundreds of additional units being built including large scale apartment buildings, and even more in the pipeline in various stages of the approval process. It isn't always feasible to pull the plug on a project that is underway, even though the fundamentals have changed. Eventually the market will balance itself out as the natural population growth helps absorb the excess supply, but judging by the units in the pipeline, things are likely to get much worse before they get better..
What are the implications of the rental implosion?
The most obvious will be the impact on the home construction/ real estate market. With the rental income potential drastically lower and the financial incentive in place to rent there will obviously be an impact on demand and consequently prices. The Toms River and Jackson markets stand to gain in the short term since most homes there do not have a rental basement making their lower price point more attractive than a higher priced home in Lakewood with a rental.
Will there be even more young couples moving to Lakewood to take advantage of rental prices that are a fraction of what they will find in almost any other market?
Will it be easier for parent to promise support for young couples since they will be spending thousands less on rent each year?
What are some of the other potential implications? Thoughts?