The pendulum has swung.
When the Great Recession smacked the Rogue Valley in 2008, Lee Dunn and dozens of landlords lowered rents rather than deal with empty units.
Units Vacancies Rate
April 2013 5,347 158 2.95%
June 2013 4,550 131 2.28%
September 2013 3,628 93 2.56%
October 2013 3,691 90 2.44%
November 2013 3718 123 3.46%
January 2014 5,230 135 2.58%
February 2014 5,404 161 2.98%
March 2014 4,905 89 1.81%
— Source: Southern Oregon Rental Owners Association
Multi-family building permits issued in Jackson County
January/February 2014: 5
— Source: Housing and Urban Development
"Rents just hit the wall when the economy went south," said Dunn, president of the Southern Oregon Rental Owners Association. "People who needed a place moved in with relatives just to survive. We keep our rents slightly under the market value, but we ended up lowering rents just to keep full. If the rent had been $500, that meant 50 bucks a month."
It was a long road back, he said, before rents returned to pre-recession levels last fall. In the past six months, however, the market has shifted decidedly into landlords' favor, with vacancy levels dipping below 3 percent.
Before the recession, apartments and four-plexes regularly popped out of the soil, but there's been little in the way of rental housing built in recent months. With demand up and rents rising, it would be reasonable to see new multifamily housing construction. But that hasn't been the case.
For all of 2013, building permits were issued for just 89 multifamily units, including 50 for the Jackson County Housing Authority's 50-unit Cherry Creek project on Spring Street in east Medford. In the first two months of 2014, the latest available figures compiled by the federal Housing and Urban Development department, just five permits were issued.
"It is kind of perplexing, because we do have the demand," said David Wright, owner of CPM Real Estate Services, which oversees 2,083 residential units in the county. "There has been very little building the last six or seven years, so our area is ready for new rental construction. But it seems there are market forces holding it back."
Wright said in the preceding two years, CPM Real Estate unit rents rose on average 4.4 percent and 6 percent. So far this year the market rate has risen 7 percent.
Wright remembers landlords and managers offering all sorts of concessions to attract renters. Now even renters with good credit scores are having difficulty finding a suitable place.
"When all those apartment buildings were built four or five years ago, it put a glut of stuff on the market and people had to drop rents some just to keep them rented," said Dunn, who owns 18 housing units. "Now we're seeing more people moving into the valley and seeing a real shortage of quality apartments. There just aren't enough units to relieve the pressure."
Despite the seeming opportunities, however, local planning departments aren't being flooded with applications.
"I would say two factors," said Craig Horton of the Medford Better Housing Association, who manages 217 units. "The first is the increase in the regulatory requirements for building; the second is there is still some economic uncertainty nationwide, so there are a lot of builders who are just holding back."
Horton suggests it will take more confidence in the economy to ignite local building.
"When times were booming, you'd have 20 calls in three days when there was a vacant unit," he said. "We're still in recovery mode and builders, in particular, want to have some certainty. I think it will take two to four years before we see that happening."
Real estate agent Vic Nicolescu of the Alba Group said even with rentals generating a good return for investors, the cost of building new units remains a deterrent.
"You can't build 40 or 50 units at a time and then wait for them to fill and build some more," Nicolescu said. "When it comes to single-family residences, you can build one home at a time and your out-of-pocket-costs are very low. You can build a duplex or triplex like that, but you have to do 16- or 32-unit buildings all at once."
Land costs, entitlements, systems development charges and permitting expenses all remain barriers, he said.
"When prices and rents dropped a few years ago, the SDCs didn't drop," Nicolescu said. "Labor and materials are still high."
Laz Ayala, who built 60 apartment units a decade ago along West Eighth St., is presently building single-family residences in Ashland, some which will be rented by the new owners. He also plans to break ground on 12 townhouses on North Mountain Avenue this summer.
"It's a little surprising to see so few permits," Ayala said. "My suspicion is it has to do with the availability of credit for developers and speculative projects. Credit is very tight — you have to be an A-rated borrower to find that credit. That's the biggest hindrance for many of the players, who may have a tainted credit history."
If builders are slow to jump back into the game, buyers are ready and waiting, said Dunn, a retired Boise Cascade plywood press operator.
"Anybody that has any money is trying to acquire rentals," Dunn said. "The market is still good for a buyer, who can actually turn a profit every month if they don't pay too much. Rents have to support everything and that has kept somewhat of a lid on (sales) price increases. They've gone up some, but not as much as real estate agents would like; an investor is not going to buy and take a loss every month."
While vacancy is low for both multifamily complexes and single-family residences, Nicolescu suggests that could change once former homeowners, who lost their houses when the economy soured, rebuild their credit.
"I've read the new generation isn't as much into owning homes as prior generations," Nicolescu said. "It's easy not to be into owning when you can't own, but as these people eventually move out of their parents' households, they will inevitably prefer owning to renting."