Rents are going up and competition is becoming fierce. According to the Wall Street Journal, rents went up around 7 ½ percent in the United States, with some cities as high as 10 percent. Not only that, they’re expected to continue upward as we near the end of 2017, reports Michael Steinburg, Reis Inc. analyst.
Since more people are in the market for rentals, builders are having trouble keeping up with the demand of future renters looking for housing via the web. Since buying a home was always more important until recently, the construction of large apartment buildings haven’t been as plentiful as they need to be.
Right now, there are a few reasons why more Americans are on the lookout for rentals. Due to foreclosures from the economic downturn in 2006, people have needed to move toward short-term housing leases. As the country recovers, more young adults who were recently living with family members will be moving out to find spaces of their own. After the housing crash, lenders have become more strict on who they give mortgages to. In addition, the price of buying a home became more expensive just when it was starting to go down.
Right now, rents are rounding out around $1,073 per month according to Reis. The highest rents are paid by New Yorkers with a whopping $3,049 on average per month and the lowest rentals in Wichita, Kansas at $529 per month.
More renters in the market
Here’s why the population of renters is growing:
Foreclosures. The share of Americans who rent a home is at a record high, in large part because of the millions of foreclosures that followed the real estate crash. Since 2006, the first year the U.S. saw more than a million foreclosures, an estimated 21.57 million homes have been foreclosed on, according to this chart at StatisticBrain.
Recovery. By 2012, 45 percent of 18- to 30-year-olds were living with older family members, says the Atlanta Federal Reserve. Compare that with 39 percent in 1990 and 35 percent in 1980. As the economy recovers, economists expect more workers to find jobs and start entering the competition for rentals.
Tighter lending standards. Homeownership has dropped to an all-time low after the crash as lenders grew very fussy about whom they’d offer a mortgage. Homeownership rates in the U.S. fell to 65 percent in June, after climbing to a record high of 69 percent in 2005, according to the Census Bureau (see Table 14).
Rising home prices. Lenders are loosening up their standards a little (but not a lot). But just as it started getting easier to finance a home, prices began rising – skyrocketing in some areas. That’s also pushing more people to rent, The Wall Street Journal says.
Busted boomers. A growing population of downsizing retirees and empty nesters who’ve lost retirement savings and need to rent is contributing to the demand.
It’s not easy to tell the forecast for renters right now. Rents are indeed rising and will keep doing so. However, there’s but so much higher they can go. The process of breaking ground and erecting apartment structures amid a heap of legal paperwork will take a good deal of time. At some point, new apartment buildings will reach the demand that renters need in the city.
“Landlords would like to raise rents faster, but most tenants simply can’t afford to pay more right now,” Reis senior economist Ryan Severino told CNBC.”
“The country has been on a decades-long drought of large-apartment-building construction” because, until recent years, homeownership was growing, writes Slate economic writer Matthew Yglesias.
In any case, don’t hold your breath on rents lowering anytime soon. A steady rise will more than likely occur in the next few years.