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

Rents Will Continue to Rise - Time to Buy?

By 2025, 13M will pay 50% of income for housing

 

CAMBRIDGE, Mass. – The number of households spending more than 50 percent of their income on rent is expected to rise at least 11 percent – from 11.8 million to 13.1 million – by 2025, according to new research by Harvard University's Joint Center for Housing Studies (JCHS) and Enterprise Community Partners Inc. (Enterprise).

The study, Projecting Trends in Severely Cost-Burdened Renters: 2015-2025, says the U.S. will have a growing renter affordability crisis, with the largest increases expected among older adults, Hispanics and single-person households.

According to the study authors, a rental crisis will occur even if current income trends and rent trends turn more favorable because a variety of demographic forces – including the rapid growth of minority and senior populations – will continue to exert pressure on the number of severely cost-burdened renters.

"Our analysis shows that even in the unlikely event that income growth greatly outpaces rent gains, the number of severely cost-burdened renters will remain near current record levels," says Christopher Herbert, managing director of Harvard's Joint Center for Housing Studies. "Given these data, it is critical for policymakers at all levels of government to prioritize the preservation and development of affordable rental housing as there are simply not enough quality, affordable rental units to provide housing for the millions of households paying over half their income in rental costs."

Trends projected in the report for 2015-2025

• The number of severely burdened households aged 65-74 will rise 42.1%
• The number of severely burdened households aged 75 and older will rise by 38.9%
• The number of Hispanic households with severe renter burdens will increase 27.3%
• The number of severely burdened single-person households will jump by 12.0%

The Harvard study suggests that the U.S. already has problems housing all its lower-income renters.
"At last measure, 11.2 million extremely low-income households competed for 7.3 million homes affordable to them – a 3.9 million home shortfall," say study authors. "Just over a quarter of eligible very low-income households received rental assistance, leaving 7.7 million unassisted very low-income renters with worst case housing needs in 2013 according to HUD. "Meanwhile, the private sector is unable to supply new homes at rents low enough to reach low-income renters: The median rent of a newly constructed apartment of $1,290 was equal to about half the median renter's monthly household income."

Reprint courtesy of and © 2015 Florida Realtors®. The original post appeared here: http://www.floridarealtors.org/NewsAndEvents/article.cfm?p=1&id=328320