Rents Are Rising, But Is It for the Long Term?
Rent in single family housing rose yet again during first quarter 2013. However cracks are beginning to appear suggesting that this spate of rising rents may be grinding to an untimely halt. There are several reasons for this but one of the primary ones is the increasing supply of rental units. In some regions of the country rents actually showed a first quarter decline.
In diverse areas like Washington DC, California and Ventura County rents remained stagnant or took a slight dip. The leading five growth markets - San Diego CA, Seattle WA, Richmond VA, Nashville TN and Palm Beach FL were up but less than 1%. Seattle indicated the highest rise of 1.5% at an average rental of $1,078. According to a recent report from a real-estate research company, the first quarter of 2013 witnessed the slowest growth rate since 2011 end. A report from industry watchers in the Wall Street Journal believes that rents in the multifamily apartment sector have peaked.
With an increasing number of renters switching to the homeowner market there's not much scope for rents to rise. The change has been fuelled by the surge of lenders riding on mortgage programs sponsored by government for first-time homebuyers and those victims of the 2007-2009 home market debacle. New York City continues as the most expensive market in the nation with rents averaging $2,989. In Wichita, Kansas the lowest market, rents were down to $520.
Overdevelopment is the prime concern across the nation. The Pacific Northwest is witness to a plethora of new apartment buildings exacerbated by hordes of investors grabbing whichever available low-priced houses available to convert them into rentals. A dearth of vacancies in Chicago in 2012 drove landlords and owners to increase rents by as much as 20% over the preceding year. That situation no longer exists with hundreds of new rentals becoming available every month. One industry watcher commented that he had not seen a rise in rent of even 5% during the current year.
Owners and property managers must keep their ears to the ground on changes in the local economy. An arbitrary rise in rent could prod a resident into making the decision to move or seriously contemplate investment in a starter home. A great number of property managers believe that it's preferable to be marginally below the market rent than way above it. If you want to charge a gradual increase in rent make sure you give enough notice to the tenant, and a sufficiently good reason why an increase is justified. But if your problem is vacancies you might have to revert to incentives like tossing in a month rent free when signing for a 13-month lease.
Meanwhile the housing industry continues to stage a spectacular comeback. After the disaster in residential construction in the Great Depression of 2007-2009 the recovery is led by new home construction. According to a March 2013 report of the Commerce Department February saw a rise in housing starts of 917,000 after seasonal adjustment. That makes it the second highest since June 2008 and up from 910,000 during January of 2013. During the same period building permits increase to 946,000 and increase of 4.6%. Building permits is one of the leading indicators of future construction. Construction of single-family homes rose the most it has in 4 years to 618,000 annualized. All bodes well for the housing industry.
In diverse areas like Washington DC, California and Ventura County rents remained stagnant or took a slight dip. The leading five growth markets - San Diego CA, Seattle WA, Richmond VA, Nashville TN and Palm Beach FL were up but less than 1%. Seattle indicated the highest rise of 1.5% at an average rental of $1,078. According to a recent report from a real-estate research company, the first quarter of 2013 witnessed the slowest growth rate since 2011 end. A report from industry watchers in the Wall Street Journal believes that rents in the multifamily apartment sector have peaked.
With an increasing number of renters switching to the homeowner market there's not much scope for rents to rise. The change has been fuelled by the surge of lenders riding on mortgage programs sponsored by government for first-time homebuyers and those victims of the 2007-2009 home market debacle. New York City continues as the most expensive market in the nation with rents averaging $2,989. In Wichita, Kansas the lowest market, rents were down to $520.
Overdevelopment is the prime concern across the nation. The Pacific Northwest is witness to a plethora of new apartment buildings exacerbated by hordes of investors grabbing whichever available low-priced houses available to convert them into rentals. A dearth of vacancies in Chicago in 2012 drove landlords and owners to increase rents by as much as 20% over the preceding year. That situation no longer exists with hundreds of new rentals becoming available every month. One industry watcher commented that he had not seen a rise in rent of even 5% during the current year.
Owners and property managers must keep their ears to the ground on changes in the local economy. An arbitrary rise in rent could prod a resident into making the decision to move or seriously contemplate investment in a starter home. A great number of property managers believe that it's preferable to be marginally below the market rent than way above it. If you want to charge a gradual increase in rent make sure you give enough notice to the tenant, and a sufficiently good reason why an increase is justified. But if your problem is vacancies you might have to revert to incentives like tossing in a month rent free when signing for a 13-month lease.
Meanwhile the housing industry continues to stage a spectacular comeback. After the disaster in residential construction in the Great Depression of 2007-2009 the recovery is led by new home construction. According to a March 2013 report of the Commerce Department February saw a rise in housing starts of 917,000 after seasonal adjustment. That makes it the second highest since June 2008 and up from 910,000 during January of 2013. During the same period building permits increase to 946,000 and increase of 4.6%. Building permits is one of the leading indicators of future construction. Construction of single-family homes rose the most it has in 4 years to 618,000 annualized. All bodes well for the housing industry.
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