Ithacating in Cornell Heights

So here’s something that one doesn’t see very often. Real estate information company RealtyTrac, in its recently-released study of rental affordability, is calling for the Ithaca metro (a.k.a. Tompkins County) to have one of the biggest rent year-to-year decreases in rent nationwide from 2015 to 2016.

Are the economic woes and job losses real? Has their been progress made by new units hitting the market? Are fewer people renting?

Maybe. But before jumping to any conclusions, let’s take a look at the way the numbers were created. According to RealtyTrac, the rent numbers were based off of 50th percentile rents (median) for Fiscal Year 2015 and Fiscal Year 2016 estimates on 3-bedroom properties.

That it’s limited to 3-bedroom units should probably be caution light number one. In most urban markets, 3-bedrooms make up 10-15% percent of the rental market. In Ithaca the number of all rental units with 3-bedrooms or more was 19.1% in 2011. In the Ithaca market especially, units with a higher number of bedrooms tend to be marketed to undergrads in neighborhoods like Collegetown. In other words, RealtyTrac’s numbers might not be getting a good reflection of the local market, and maybe a rough idea of the student market at best.

So that’s the initial impression. Now to go straight to the source. Here’s the Federal HUD rental data for 2015 and 2016 in Ithaca:

Ithaca 2015 Monthly Rent 50th Percentile

Studio $852

1 Bedroom $1044

2 Bedroom $1251

3 Bedroom $1733

4 bedroom+ $1739

Ithaca Anticipated 2016 Monthly Rent 50th Percentile

Studio $903 (+6.0%)

1 Bedroom $1035 (-0.9%)

2 Bedroom $1198(-4.2%)

3 Bedroom $1554 (-10.3%)

4 bedroom+ $1776 (+2.1%)

For the sake of acknowledgement, according to the HUD Docs, when determining rents for units above 4 bedrooms, the agency adds 15% to the 4-bedroom rent for each additional bedroom, so a 5-bedroom rent is 115% of the 4-bedroom rent and a 6-bedroom unit is 130%. The 50th percentile rent for Single Room Occupancy is 75% of the 0-bedroom (studio) rent.

The gut feeling looking at this is that something really odd happened with those 2016 estimates. The calculated median rent for 3-bedroom dropped over 10%. Digging in a little further, let’s pull the 50th percentile (median) rent data for 2010 to 2016 and see how the bigger picture looks.

Looking at the past several years, there are a few cases of numbers dropping slightly. Studios from 2012-2013 and 4-bedrooms from 2011-2012 show bigger drops, but there’s also fewer units in those categories, they make up much smaller percentages of the Ithaca rental market. The 1 and 2 bedroom units, which make up the lion’s share of apartments on the market, show the occasional year-to-year drop, but the effect is slight and the overall trend is steadily upwards – from 2010-2015, the median rent on a 1-bedroom increased 20.8%, and a 2-bedroom increased 21.2%, well above wage gains.

As for 3-bedrooms, from 2010-2015 the median rent increased from $1,232 to $1,733, 24.4%. While not impossible, a 10% drop in the average rent for 3-bedroom units to $1,554 seems unlikely.

And that’s fine. The HUD released the 2016 numbers as estimates. They will be revised and finalized next spring.

But being estimates, they’re prone to error. One that RealtyTrac incorporated into their analysis, and leading to what’s likely an incorrect conclusion, though not any fault of their own.

So, not to be the bearer of bad news, but this housing crisis doesn’t look like it’s abating just yet. Though, there’s always the chance that the rents are actually dropping fast. We’ll just have to wait to see if the revised numbers back this conclusion up, or prove it wrong.