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Pop Goes the Hub's Apartment Market as Vacancies Inch Up

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Here's the latest installment of Bates By the Numbers, a weekly feature by Boston real estate agent David Bates that drills down into the Hub's housing market to uncover those trends you would not otherwise see. Follow him on Twitter and check out his ebook, Context: Nine Key Condo Markets, 2.0.

Did you hear that pop? Seriously, did you hear it? Listen closely, there it goes again. I think I know what it is. Unless somebody just fired up the microwave, that pop was the Hub's rental inventory.

According to my analysis of MLS data, Boston's rental inventory last July 15 was 843 units. This July 15, 1,349 apartments are available for rent, up 60 percent. Pop. The Brookline rental inventory last July 15 was 126 units. Yesterday, 168 units. Pop. The South End rental inventory one year ago was 67 units. Now, 118. Pop, pop, pop.

Hey, Orville Rental-Bargain, have Hub rents topped out? Cambridge's current inventory is up 66 percent versus the same time a year ago; Somerville, +45 percent; Brighton, +50 percent. Then there's the shadow inventory, the hundreds of units we know are available but just aren't in MLS, like newly constructed luxury apartment buildings.

What happened? Is it the rental bubble? Is it rental Armageddon? Er, I hope not. In March, I interviewed Mark Pearlstein, a long-time Hub rental insider who recounted that during the last two rental seasons rental applications came in like lions in March, but left like lambs in July.

Has the pattern repeated itself? It certainly looks that way. MLS statistics showed a 25 percent increase in Boston rental transactions in the first half of the year. Incredible! In regard to the shadow luxury inventory, I recently spoke with four different people responsible for leasing up these new buildings in the city (315 on A, Avalon Exeter, the Arlington, and Waterside Place) and all were extremely happy with the spring rent-up. All four communicated that rent-up in these buildings was going faster than planned. I believe it. I'll write more about those buildings next week.

To gain further insight into this year's market, I spoke with Demetrios Salpoglou, CEO of a network of rental companies that includes Nextgen, Jacob and Boardwalk. Salpoglou told me that his companies set records for volume in many of the months in the first half of the year, but that more recently he has found the market soft. Salpoglou, whose firm regularly determines the Hub's real-time rental vacancy rate by tracking the apartment availability of more than 14,000 landlords, says the rate is currently 6.6 percent. A little less than a year ago, it was just 4.4 percent.

According to Salpoglou, landlords concerned about having tenants for the upcoming rental D-Day, Sept. 1, have started to phone him, offering to pay the apartment-finder's fee. The landlord paying the fee is a significant shift from the traditional way of doing rental business in Boston, but it may be just the beginning. Adam Mundt, lasing manager at Metro Realty in Brookline, told me, "It's gonna be interesting come August to see what's left and what desperate landlords start doing to move their inventory."

Pop, pop, pop, pop, pop...
· Our Bates By the Numbers archive [Curbed Boston]