ALBUQUERQUE, NM (KRQE) – Would-be renters know: Albuquerque’s apartment market has been hot. But what does the future hold? Will it get harder and more expensive to find a place to live like in neighboring Las Vegas, NV and Lubbock, TX? Or could relief be on the way soon, as some other southwestern cities like Denver are reporting?
In an effort to find out what’s in store, KRQE News 13 looked at the data and spoke with experts to get insight into the state’s various rental markets.
Last year, many renters experienced sticker-shock, waiting lists, and crowded apartment viewings just to secure a place to live. And that’s not just in Albuquerque. It’s nationwide and it’s a trend decades in the making.
Over the last 20 years, the average rent in US cities has gone up 91%, according to data from the St. Louis Federal Reserve (FRED). In the western portion of the US, average rent has more than doubled since 2001.
Average income, of course, hasn’t doubled over the last 20 years. In fact, the real median US household income only increased by less than 15% in that time, according to FRED data.
And renters have been feeling the sting. “It was definitely stressful!” explains Marsaili Lowry, who recalls looking for an Albuquerque apartment to rent with her friend in the spring of 2021. “Postings would turn over in a day or two.”
“When we finally found a place, we contacted the owner within a few hours of the posting and signed the lease the same day we saw the apartment,” Lowry says. “Even then, the owners told us that there were several other people who had applied around the same time and a bunch more who applied after us.”
Lowry and her roommate got the apartment. But she says she probably would have missed it if they hadn’t applied within the first few hours it went on the market. And, still, the price was a bit higher than they had originally been hoping for.
But, the market may be cooling in some parts of New Mexico. A KRQE News 13 analysis of US Department of Housing and Urban Development (HUD) data shows that rent has fallen over the past year in some counties.
Each year, HUD publishes “Fair Market Rents” for regions across the country. These are surveys of rent and utility prices for typical rental units. The commonly-cited rent is at the 40th percentile of the market. This means that it’s the cost of rent plus utilities for an apartment that’s more expensive than 40% of all the available units, but cheaper than the majority. In other words, an apartment at “Fair Market Rent” is not the cheapest — but not the most expensive — unit.
Most counties in New Mexico saw at least a slight decrease in Fair Market Rents for two bedroom units from fiscal year 2021 to fiscal year 2022, the data shows. A handful of counties saw a decrease in rents of around 10%.
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While some counties saw a decrease in rent prices, rent rose over the last year in a large number of US counties. Data: HUD
Bernalillo County, Santa Fe County, and a few others, however, saw a slight increase. The Fair Market Rent for a two bedroom in Bernalillo county increased by about 6%. In fiscal year 2022, the Fair Market Rent for a Bernalillo County apartment is now $940 a month — up about $56 from last year.
Chuck Sheldon, a long-time investor and manager in the Albuquerque real estate market breaks it down into supply and demand.
“We’re about 17,000 [housing] units short in Albuquerque,” Sheldon says. So the supply is short. “But rents and demand are going up.”
And they’re likely to continue to rise, at least in the city, Sheldon says. He expects rent for a two-bedroom to increase by a few hundred dollars in the near future.
“We have about 2000 units we manage,” Sheldon explains. “We try to stay competitive with everybody else to but within that framework, you’re looking at a two bedroom unit somewhere between $850 and $1000.”
That’s the current price. But, he says the market might not hit “equilibrium” until rent for two bedroom units hit about $1,200 to $1,400 a month.”
But there’s a reason for the rise, he says. Construction and maintenance prices have risen with inflation, so landlords need to raise prices or pay out of pocket.
“Prices to create housing were, about three years ago, $80 [per square foot of construction]. We’re at $150 a foot today,” he says.
And maintenance costs for existing buildings are also way up: “We use evaporative coolers here in New Mexico. The little pump motor on an evaporative cooler went from, last year, $20 [to replace] to $42. So we’re doubling in our cost.”
The other factor is population growth. The 2020 census shows Albuquerque’s population grew by a little over 3% in the last decade. More people moving into Albuquerque generally means higher rent.
“We do have people moving into Albuquerque. We’re seeing an upshift in jobs, which is all positive, but that’s also causing the demand,” Sheldon explains. “With more demand and less supply, you’re looking at prices going up.”
When asked what all of this means for rent prices in the coming months, Sheldon provided a clear outlook. “I think it’ll get worse,” he says.
Reilly White, a finance professor at the University of New Mexico, thinks rent will rise, but perhaps not so drastically. He explains that increased house prices and mortgage rates have pushed some additional people away from buying and into the rental market.
“The rental market is likely to be robust over the next year, and while we shouldn’t expect double digit increases in rent, some additional rental increases are likely,” he told KRQE News 13. “However, an unexpected downturn or a drop in real estate prices can change dynamics fairly quickly,” he adds.
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Still, some people think prices have more or less peaked. And declining rents could be on the way. Alan LaSeck, the executive director of the Apartment Association of New Mexico, says we might have already hit a rent price equilibrium.
“I think that we are seeing a stabilization in the market,” LaSeck says. “Currently, there’s 1,700 apartment units being constructed in Albuquerque and another 4,000 units in the pipeline.”
He expects some, but not all, of the units to be ready later this year. And “with that many units being built, we’ll definitely see occupancy levels start to drop, and that will ease the demand that we’ve been seeing in Albuquerque,” he says.
Renters know better than to get their hopes up. Marsaili Lowry isn’t sure the market will ease in the coming months. “I’m not looking for a place any time soon, but I’m worried that options will continue to be limited and rent will continue to rise even in a year or so when I start looking again,” she says.