By Bess Hochman
The occupancy rate of rental apartments nationwide rose to an historic high of 95.3 percent in May. This is a rise of 5 percent on a year over year basis as compared with the 3.5 percent rise for the prior 12-month period.
Higher occupancy and scarcity of rental units is driving the rise in rental rates. The rental prices reported for May reflect the fourth straight month of higher average rents.
With a higher rental rate, comes an all time low home-ownership rate. It is now at 63.7 percent, which is the lowest in 25 years. Laurie Goodman, the director of the housing finance policy center at the Urban Institute predicts that of the 22 million households formed, 13 million will be renters.
As we see the economy starting to come back after the last housing bubble burst, we are seeing the most hold back in the housing market. The amount of building activity is down, as is the renovation and selling of homes. Except for a few markets, housing is nowhere close to pulling its economic weight.
Because of high rents, many millennials have been forced to move in with roommates, or live at home with their parents. Millennials who are able to afford rent are having trouble balancing saving enough to be able to afford a down payment on a property with the rents that are being charged. This means they are staying in the renters market for a longer time.
Many baby boomers have now become soured on the housing market and home-ownership. As a result they are deciding to sell their homes and move into rental apartments instead.
According to Zillow.com, rents are spiking in many U.S. cities, even where the housing market has struggled. Metropolitan areas with more job growth are experiencing higher than average rent increases.
Building owners and investors are seeing great profits in this “landlords market.”
With rent growth expected to keep rising, more multi-family construction is anticipated to materialize in many markets across the U.S. Low vacancy rates evidence the need for more multi-family construction.
Until recently, renters spent about a quarter of their income on housing. Researchers are now predicting that renters should expect to spend 30 percent of their income on rent. Some are saying the rise in rental affordability will become a barrier to buying, unlike the stepping-stone it once was.
For some, higher rents can mean many look to home-ownership. With mortgage rates still low, this may be a great time to buy. Even combined with the interest payment, your mortgage payment could be lower than the rent amount you will be asked to pay.
For the five-year period commencing 2010, it is reported the average U.S. rent rose more than 4 percentage points above the rate of inflation for the same period.
With very little new supply of rental units being added anywhere, look for rental prices to continue their upward trend.
For a free courtesy consultation, or information regarding mortgage brokers, contact Bess Hochman, a top Westside Real Estate Broker for more than 20 years. Bess is also distinguished by holding a law degree. This article expresses the opinion of the author. You are advised to consult attorneys and others experts specializing in the issues referenced in this article. Contact Bess by phone at 310.291.4111 or email Bess.CenturyCityNews@yahoo.com.
“Bess is a master negotiator!” says Michael Donaldson, attorney and author of Negotiating For Dummies.”
