Reporter's Notebook

Economic cup half empty or half full?

Marketplace Staff Apr 8, 2010

PORTLAND, Ore.–It’s 9 a.m., Wednesday and I get the call from my editor: my story is the rental market., a leading Web site for home buyers, is launching a search engine for rentals. Why now, I wonder? How’s the rental market doing?

I Google “Apartment Rents” and two stories come up:

The Wall Street Journal proclaims: “Apartment Rents Rise as Sector Stabilizes.” Bloomberg reports: “U.S. Apartment Rents Decline as Vacancies at Record, Reis Says”

wsj headline

bloomberg headline

Rents rise? Rents decline? Both stories are correct. They quote from the same quarterly report by New York-based real estate research firm Reis, Inc.

I can’t tell you why the Journal’s an inveterate optimist, and Bloomberg’s a big downer … but I can tell you how it’s done.

Journal reporter Nick Timiraos focused on the short-term, quarter-to-quarter time frame — Q4 2009 to Q1 2010. Effective rents — what people actually pay after accounting for incentives like a month’s free rent — were up 0.3 percent. That came after more than a year of rents going down. And that’s where the Journal got its “rents rise” and “sector stabilizes” headline.

Bloomberg’s Oshrat Carmiel buried that lead way down in his story. He focused on the longer-term, year-over year time frame — Q1 2009 to Q1 2010. Look that far back, and rents have fallen 1.5 percent. He chalked it up to the lousy economy and soaring unemployment.

And that’s correct. But is it the most correct story to tell right now? I asked Victor Calanog, Reis’s director of research. After all, he provided both those numbers — the quarterly increase, the yearly decline.

“If you’re looking at the devastation that was 2009, to include any time period from the past calendar year will necessarily drag your rent-growth down,” Calanog said. “It was a real record-breaking year: effective rents fell by 3 percent. That is the largest decline on record since Reis began tracking the apartment sector in 1980.

“But if you just focus on how rents changed from the end of 2009 to the end of March 2010, it does look like we’re seeing the proverbial light at the end of the tunnel,” he said. “Rents are growing. Our clients are saying that it seemed to have bottomed out in January, and they were able to raise both asking and effective rents for both existing and new tenants in February and March. Obviously that’s bad news if you’re a renter.”

Maybe Bloomberg likes tenants better than landlords?

But rising rents is clearly a good sign for the economy. It means demand for housing is picking up; half-finished apartment buildings might get finished; 20-somethings who moved back home might be ready to find a job and move out on their own again.

Time-frame matters. But not necessarily short-term over long-term.

I did a story last week on rising bankruptcy filings. One newspaper trumpeted that bankruptcies were up 35 percent from February to March. But it turns out, they usually go up from February to March. People don’t like to file for bankruptcy around the holidays. They wait until spring is in the air. And they often use a tax refund to pay their bankruptcy lawyer.

Bankruptcies were also up 20 percent year-over-year, however. A smaller number than month-over-month, but more significant. It tells us more people are in dire financial distress than one year ago.

Even though the economy’s slowly improving, the Great Recession’s taking its toll. Folks laid low by unemployment and the housing crisis are just now running out of financial rope. And that’s the real story.

Mitchell Hartman works the Entrepreneurship Desk in Portland, Oregon for Marketplace Radio.

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