RAYMAX REAL ESTATE
Reston Town Center Housing: A Rental Glut?
This is a seller’s market, not a landlord’s market
*** This is an update of an article written one year ago. It was true then; it is more appropriate today.
Background – We have been in a strong seller’s market in most of the Reston Town Center for 2 – 3 years now. Supply of homes for sales has been tight, demand high, and listings generally get absorbed quickly. Unfortunately, in many cases, one must question whether the listing prices were too low.
For many years, many homeowners have chosen to rent their homes rather than sell. The sound logic behind this was that rentals were relatively scarce in the Reston Town Center area, and supply was easily absorbed. So it made sense to ride out a period of low prices by renting one’s residence.
The Dynamics of Rent Vs. Sell are shifting for many people – There was a rapid rise in rent in 2011 and 2012 which generated the expected market response: more people trying to rent their homes; new construction funded in large part by REIT and Wall Street money, and resistance to higher prices from potential renters.
Today’ Low Inventory – In a rising market marked by increasing interest rates, one would expect more homes to become available for sale and a movement away from rental inventory. The opposite has been occurring for several years now, and the imbalance in inventory is reaching chronic levels. Potential landlords scramble to find new renters to generate cash flow, often on vacant homes and often with the added burden of high condo fees, while potential buyers are scrambling to find homes to own and willing to pay premium prices. Construction is complete in one new major rental building, and will be complete later this year on another. Listings for rentals in the Reston Town Center no longer get absorbed quickly, unless “priced well.” Future vacancy rates are likely to rise, which inevitably will lead to “rental specials” in upscale buildings which will pressure the individual, “one-off”, condo owner to reduce his/her unit’s rent to keep it generating a steady cash flow.
Conclusion – We are likely to have a dynamic spring sale market in 2014. Potential sellers who have been reluctant to sell are realizing that sale prices are increasing, and that they may be able to sell at higher price points than previously anticipated. Interest rates are likely to stay manageable, but still a longer term fear which keeps many buyers in a mind set of wanting to buy now. The strategy of renting one’s home until the market comes your way was yesterday’s sound strategy in the Reston Town Center. The market already has come your way. With rents likely to spiral in the opposite direction, it may be a good time for many to pull the trigger and sell.
I welcome any calls or comments from residents. I look forward to meeting and discussing the market in any level of detail you desire.
Ray Wedell, Realtor
Chartered Financial Analyst, CFA