Apartment living makes sense
Denver Business Journal - by Jeff Kimes
Since the end of World War II, home ownership has been the goal of most Americans, regarded as a symbol of having "made it." But in the past decade, there has been a quiet revolution going on in how and where we live.
As life gets more hectic, commutes get longer and the age and composition of our population changes, many households are deciding that apartment living can provide unmatched benefits and is a preferred lifestyle.
That decision is supported by leading economists, who say renting makes sense for lots of people, and the notion that renting is short-sighted and financially foolish is just plain wrong. While many Americans have taken advantage of low mortgage interest rates, experts say that homeownership may not be right for everyone.
For those who plan to move in three to five years, renting can be more cost-effective. And for families, singles, elderly and young professionals, apartment living offers a hassle-free experience that can make sense in terms of both lifestyle and finances.
So why is apartment living gaining in popularity among households of all incomes? In a recent survey by Fannie Mae, more than 40 percent of renters say they rent out of choice and not out necessity. This is a number that has risen every year. Today's apartment residents span the full spectrum of American society and represent all age groups, family types, incomes and ethnicities.
Renters are becoming older, more affluent and more educated. Since 2001, the fastest-growing segment of the apartment market is households making $50,000 or more a year. Thirty percent of all apartment households have incomes that put them in the top half of the national income distribution.
The Denver housing market is a good example of the how today's economy supports renting as a decision. The average home price so far in 2004 in metro Denver was $284,397 (Denver Board of Realtors, May 2004 report), which would likely result in a mortgage payment of $1,637. At the same time, the median apartment rent is $807. Renters find they can make good use of the extra $830 each month, and keeping the down payment invested in other assets makes good sense for many.
Leading large apartment owner/manager companies have developed a range of properties that cater to families, professionals, students and seniors in attractive communities ranging from urban high-rises to park-like suburban settings.
The pace of life has changed over the past 50 years. Time-pressed professionals and families looking to simplify their lives and shorten their commutes and empty nesters ready to shed their house-related chores are often deciding to move closer to entertainment, restaurants and shopping.
Some renters may not want to commit a hefty down payment or stretch their finances to buy a home in the neighborhood or school district of their choice. They are instead opting to rent an apartment in that same community for the location, convenience and amenities, rather than be saddled with expensive and long-term mortgage payments.
A growing number of apartment renters are families in housing transition or high-level executives who require multiple residences across the country in order to tend to their business. For many of these people, renting an apartment is just plain easier than having to deal with day-to-day home management.
For boomers and empty nesters, a rebound in the stock market and tax laws exempting up to $500,000 in capital gains from the sale of a primary residence makes it easier for them to rid themselves of homeowner hassles. Freed from the prospect of incurring a huge tax liability, many are now choosing to leave cutting the grass, repairing the roof and furnace and shoveling snow behind in favor of apartment living.
Today's apartments bear very little resemblance to those marketed in the 1970s and 1980s, which served as way stations on the road to something better. Apartment communities are successfully competing with single-family houses by offering better locations, more user-friendly floor plans, cutting-edge technologies and a package of amenities and services that cannot be easily or affordably replicated in a single-family home.
Many of today's apartments are larger and include attached garages, pre-wired entertainment centers, private alarm systems and the latest in countertops and appliances.
Planned social and community events, high-speed Internet access, on-site fitness centers, cyber cafes, business centers, movie screening rooms, billiards rooms and more make apartment living lots more fun than single-family living.
In some communities, a simple call to the on-site concierge can arrange babysitting, housekeeping, pet care, grocery shopping or a night on the town.
A few companies are pioneering other desirable extras, such as my company's "Good Neighbor Commitment," signed by both the community management and the resident, and designed to foster a congenial community environment built on the principles of respect and courtesy for others.
So don't assume that the BMW-driving, Blackberry-wired businesswoman in the car ahead of you is driving home to her spacious spread in suburbia. Or that your retiring colleague is looking forward to gardening and tending to their now mortgage-free home. Or that the young family in the apartment next door is counting the minutes until they can move into a single-family home.
It is increasingly likely that these folks are choosing apartment living instead. It's a lifestyle and financial decision that millions are opting for each year.
Jeff Kimes is regional vice president for the northwestern U.S. at Apartment Investment and Management Company (AIMCO), a real estate investment trust based in Denver, with properties in 47 states, the District of Columbia and Puerto Rico. He can be reached at
Jeff.Kimes@aimco.com.
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