Rents Are Going Up Again... Are You Ready to Buy Instead?

Renting? Brace yourself. It’s going to cost more

 

Rents skyrocketed in 2014 and many analysts didn't think those escalating costs could continue – but they were wrong so far. Rising rents have yet to slow in 2015 – and in fact, rents have gotten higher – and the increases likely will continue into next year.

Annual rent growth in September was 5.2 percent – the highest since 2011, according to Axiometrics, an apartment research firm. That also marks the eighth consecutive month the rate has been 5 percent or higher. A year ago, annual rent growth was 4.1 percent.

"The eight months the rate has been above 5 percent is the longest sustained period of strength we have seen," says Stephanie McCleskey, vice president of research at Axiometrics. "The last growth cycle was only four years, and this cycle is already five years long – with no sign of stopping."
Apartment construction has been increasing to meet rising demand, but some say it's still falling far too short.

"New inventory coming to market is weighted to the high end – it's urban, Class A, with a rich set of amenities, targeting the coveted college-educated millennial," Sam Chandan, president of Chandan Economics, told CNBC. "Overall, we still have an affordability crisis in the United States with rents rising faster than incomes for the fourth-consecutive year."

In September, apartment vacancies were low – at 95.3 percent occupied nationally. Axiometrics considers anything above 95 percent as a "full" market.

But weak income growth may not support rent growths much longer in some markets.
"There is only so hard you can push on rents," Chandan says.

Some studies are showing that it is more affordable to buy a home than rent. But inventory constraints in the for-sale market – particularly on the lower end – can keep renters renting and unable to save for a downpayment due to the high rental costs.

Lately, rent gains are highest in cities with boom tech sectors, such as Seattle, Denver and Portland, Ore. Rental prices are also above average in Nashville, Tenn., Charlotte. N.C., and several cities in Florida, Axiometrics reports.

"Younger, newly formed households continue to move out of their parents' or roommate living arrangements and rent an apartment, driving up the demand for more rental units," says David Crowe, chief economist for the National Association of Home Builders.

Meanwhile, homebuilders – such as Lennar and Toll Brothers – are adding more rental apartments to their mix.

"Thirty-five percent of new home starts in 2015 have been multi-unit," CNBC reports. "That is higher than a year ago and the highest share since 1973. Developers are simply going to where demand is highest and most lucrative."

Reprint Courtesy of Source: "Think Your Rent's Too Darn High? Just Wait," CNBC (Oct. 20, 2015)
© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688 Original Post Here: http://www.floridarealtors.org/NewsAndEvents/article.cfm?p=5&id=329554

Study: Right now it’s better to buy a home than rent

 

BOCA RATON, Fla. – The latest national housing market index produced by Florida Atlantic University (FAU) and Florida International University (FIU) faculty finds that it's becoming more favorable for renters than buyers in terms of wealth accumulation.

The Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index attempts to answer one of the toughest questions American consumers face: Is it better to rent or buy a home in today's housing market?

The quarterly index is designed to signal whether current market conditions favor buying or renting a home in terms of wealth creation. To do so, it considers a fixed holding period in a particular market relative to historical market conditions and alternative investment opportunities. It examines the entire U.S. housing market and isolates the markets of 23 key cities.

According to the latest BH&J Index, as of the end of the first quarter of 2015, the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.

Three cities (Dallas, Denver and Houston) are clearly in rent territory, with property pricing clearly out-pacing rents, meaning buyers should proceed with strong caution.

In contrast to the latest Standard & Poor's/Case-Shiller Home Price Indices, which recently reported a five percent year-over-year property appreciation rate, the BH&J Index suggests that potential purchasers in many cities around the U.S. should begin to bargain more aggressively.

"Potential buyers should be cognizant that 'the deals' are out of the marketplace, and that it is essentially a tossup between rent and ownership as to which way will, on average, index author and associate dean in FAU's College of Business. "Miami, in particular, deserves attention as it has been trending toward rent territory for several reporting periods. In Miami, potential buyers should seek to bargain more aggressively."

Seven cities (Miami, Honolulu, Los Angeles, Pittsburgh, Portland, San Francisco and Seattle) are at or near the indifference point between ownership and renting. Here the spread between monthly rent payments and ownership payments appears to be at a point where neither ownership nor renting is statistically favored.

Four cities (Chicago, Cincinnati, Cleveland and Detroit) remain in strong buy territory with scores that have historically favored wealth accumulation through homeownership.

The index conducts a "horse race" comparison between an individual that is buying a home and an individual that rents a similar quality home and reinvests all monies otherwise invested in homeownership. Johnson's collaborators in this ongoing independent research are Eli Beracha, Ph.D., assistant professor in the T&S Hollo School of Real Estate at FIU, and William G. Hardin III, Ph.D., director of the T&S Hollo School of Real Estate at FIU's College of Business.

The index's results are standardized between 1 and -1, with negative scores favoring ownership and positive scores favoring renting. The BH&J Index provides information on both the direction and health of varying housing markets, as well as collateral information for real estate professional, developers, lenders and housing policy makers.

The BH&J Index is published quarterly. The raw data is available online.
© 2015 Florida Realtors® Original post here: http://www.floridarealtors.org/NewsAndEvents/article.cfm?p=2&id=328166