Massive rent increases to continue
The average annual increase of 3.9% is outpacing inflation and income growth. Will renters be priced out of many cities?
© Dana Hoff/Getty Images
It's no secret renters have been feeling the crunch of a competitive rental market for a few years now. If it seems like rent increases have been unusually high this year, though, that's because they have been.
In June, the real-estate data firm Trulia analyzed the rent prices in 25 of the largest rental markets in the United States. What Trulia found is an average annual increase of 3.9%. This is a huge increase when compared with inflation. And, generally speaking, incomes are not keeping pace with rent increases, putting renters in an even tighter position. (Bing: What's the average income in your area?)
According to Trulia, the five least-affordable rental markets in the country are New York City, Miami, Los Angeles, San Francisco and Boston. In these cities, rents often make up half or more of a renter's average monthly wage.
The cities that experienced the highest rent hikes for 2012-13 were Houston, Miami, Boston, Tampa-St. Petersburg, Fla., and San Diego. Some cities, such as Houston, already had lower rents than the national average for major cities, whereas in others the increases came on top of already higher-than-average rates. For instance, Boston — already one of the most expensive cities in the country — saw a 5.5% increase in rents this year.
It would seem the recent rent increases are an enduring ripple effect of the foreclosure epidemic that catalyzed the Great Recession, flooding the market with prospective renters. At the same time, the gradual economic recovery has resulted in rising employment rates. With a shortage of available rentals, landlords are in the enviable position of being able to name their price and have their pick among tenants willing to pay it.
- On our blog, 'Listed': Best cities for renters and new grads
In their most recent survey, the apartment-research firm RealFacts found not only that rents are up nationwide in 39 of the 41 markets analyzed but that these increases also occurred even in cities that are building rental units at a precipitous pace.
Article continues below
In particular, Seattle experienced a large rent increase this past year despite a projection that 12,000 rental units will be added to the market by the end of the year. Portland, which also experienced an impressive increase in average annual rents, did so even as 4,000 units were added in the city. In fact, Portland saw its occupancy rate jump a full percent this past year. San Francisco, which has also added thousands of units recently, saw an occupancy rate increase of 1.2%.
"So far, it appears aggressive rent hikes and new construction hasn't had a negative impact on occupancy rates," according to the RealFacts report.
Though there seem to be no signs of rent increases slowing down, the report warned that the market will soon become oversupplied: The increased availability of new rentals, coupled with the rise in interest rates, will eventually lead to a downturn in the rental market.
- MSN Money: Why some families prefer to rent, not own
Additionally, more people will turn to buying as an affordable alternative. That's because even though home prices rose 7% in the past year, outpacing rent increases, the gap between buying and renting is still quite large.
Forbes reported this year that buying is much more affordable than renting in all of the 100 largest metro areas in the nation. According to mortgage lender Freddie Mac, buying is an average of 41% cheaper than renting nationwide.
But buying is only slightly cheaper in some cities and drastically cheaper in others. For example, buying is 19% cheaper than renting in San Francisco but 70% cheaper in Detroit. In New York, buying has remained 26% cheaper for the past couple of years.
Despite the regional fluctuations in price, though, it looks as though buying will be the cheaper option for some time to come no matter where you live. That is because 30-year fixed rates on home purchases would need to reach 10.5% to become the more expensive option. The rate is at 4.4%, as of the week of Aug. 14.
RealFacts predicts that in 2014 or 2015, rent rates will begin to stall as the rate of homeowners rise and renters decline.
Until then, renters will have to grit their teeth and wait it out — or start shopping around for their own home.
owning is good if you has 20% down payment for the property(In case of emergency ,you can sell and walk out with some money or less debt) and the mortage payment should about 1/2 of your monthly paid check and owed none( utilities, internet ,car insurance, cell phone will cost extra at least $300.00 a month) It is good for a married couple with kids, beside repaires are owner responsibility(air conditioning,water heater,refrigerator,roof...).Renting is good for a single or a family often moving stayed less than 05 years( since the cost of refinancing and realtor selling fee)You are the judge, decide when time is right.
" According to mortgage lender Freddie Mac, buying is an average of 41% cheaper than renting nationwide."
So, buying is cheaper than renting, and significantly so. SO .. why is rental demand so high right now? With around 63% of people "owning" a home (buying), the other 37% must be renters. I know there are a lot of people in lower income jobs or struggling with poverty level incomes. Those people may be getting rent support from government agencies .. which in covering some of the rent eliminates that big advantage, so renting is their best option. There are also those who are moving, changing jobs, having new homes built and living in rentals temporarily, etcetera... a whole set of temporary conditions. And I can even understand some people, due to the horrors of the great recession, may not look good on loan applications right now so they can't buy even if they wanted. But still, something seems out of whack here.
For example, I watch a show called Income Property. On the show the host helps renovate part of a place they just bought, turning part of the home into a rental unit (the rest for them). What surprises me is how often the rent for the newly renovated space often is enough to cover most if not all off the mortgage on the house. IE, the buy a house, llve in part of it themselves, rent out the renovated section .. and the renter effectively ends up paying for their house. It boggles the mind.
Some people on welfare & food stamps throw eggs at neighbors homes who work. Damage their cars & trucks that don't fit in the garage by letting their anti freeze out. Throw garbage on their lawns and in the streets. Shoot across their backyard & take out lights. Attack seniors. Keep the neighborhood a slum to keep rents low. They came to us after we bought a home and told us they run the block. We had better do what were told or else. We fought back and I spent more times in ambulances & emergency than I care to remember. Got our price after 4 years of clean up & hell. We now live in an area in another state that has 98% owners. What a huge difference.
Despite the "7%" market increase in property values they are quoting for this last year...(GREAT!)...many of us look at that 7% and just laugh. Have been in my house for almost 7 yrs...re-fied last summer and it was valued at $1,000 less than what I paid for it, despite the $20,000 I've paid in materials only (sweat equity is free) to bring it up to date. This is positive? That's an increase in my "monthly payout of over $230" over 7 yrs, just for the material costs. Not to mention that 7 years of mortgage paydown that doesn't mean a thing. Renting an apartment in my same area, same square footage as my house, without having to pay or do maintenance? $500 less than my mortgage payment...and that's at just over 3% interest rate, and we wouldn't have to mow the lawn. Yep, you betch-ya, it's smarter to buy a house. And I live in an area that is sought out, known throughout the state as having the best school district, and the bubble here didn't collapse like most areas.
This article is bogus...an attempt to make all us home-owners think we actually have a chance to build something, and future (I hate to say this) "suckers" buy into the forced market to justify setting down roots in one spot so it appears the "market" is recovering.
The sad thing...I didn't even mention cost of living expenditures that average 2% per year in the last 7 years, the average pay cuts most faced (ours as a family of four was over 25% because of the economy in the last seven years), but most are facing at least a two to three percent salary deduction per year....or the way insurance costs (in anticipation of leverage in the market place) have increased. I'm not just talking about healthcare (although mine went up 80% for less coverage last year), I'm also talking about auto insurance (I've been with the same company 13 yrs), and homeowners insurance...jumped from $1,100 to almost $1,700. I'm laying it out there because I know I AM NOT THE ONLY ONE, I'm just the one saying enough is enough.
Yeah, go forth and purchase a mortgage, tie yourself down for years, and you will be better.
LIE CHEAT AND STEAL
ITS THE AMERICAN WAY!
I have several single family rental houses. I am adjusting the rents soon on all of them because all of my expenses on them have gone sky high - especially taxes. Also, the houses where the renters beat them, pay me late and generally refuse to even pick up a paper in the yard - those will get double the increases for me having to put up with their nonsense - I simply do not care if they leave - someone else will want it. So....be a good renter, help out, and your landlord might not raise it so high.
From what I have seen they would like to buy but can't because they are overextended, have bad credit and don't know how to manage money, no matter how much they make.
I have a hard time feeling sorry for renters - most of them are lazy.