US Housing Watch: Rent Rising As Demand Continues To Grow
By Ian McKendry
WASHINGTON (MNI) - Rental rates in the United States continue to
rise as demand for rental properties grows in an already constrained
market, according to industry experts.
"Apartment demand has been extremely strong," Anika Khan, an
economist with Wells Fargo told Market News International.
A recent report by Wells Fargo showed apartment vacancy rates fell
1.8% over the last year and they estimate multifamily starts will
increase by 40% in 2011 compared to 2010.
"You have traditional renters due to upward momentum in traditional
household formations starting to strike out on their own and definitely
rent apartments," Khan said.
A report from MPF research published Wednesday said apartment
revenues rose 2.5% in the second quarter as occupancy increased by 0.8%
and effective rental rates rose 1.7%.
"The last time quarterly revenue growth came in at such strong
levels was at the height of the tech boom in 2000 and early 2001," Greg
Willett, MPF Research vice president said in a statement.
Khan said multifamily completions "have basically winded down to
nearly zero" and that supply will become constrained, potentially having
the effect of forcing renters to rent up vacant residential space.
Bob Satawake, a Chicago based real estate agent told MNI he is
seeing more and more property owners renting their property.
Satawake who will occasionally rent property for clients, said he
listed three properties this year and was able to rent all three above
market value within 48 hours.
"Rentals, you can't keep them," Satawake said.
Satawake said tight lending standards have contributed to the
demand for rentals because some borrowers who would be interested in
buying a home are not able to get the financing.
Tight lending standards could also be contributing to less turnover
in the apartment sector.
"The churn traditionally seen in the resident base just isn't there
at this point," Willet said, adding "very few households are exiting the
apartment sector to make first-time home purchases."
There might also be other social demographics that are contributing
to the demand in housing.
Willet said while the employment situation in the U.S. remains
tough, young people -- who typically rent -- are capturing a
disproportionate amount of the jobs.
"Some who previously went home to live with mom and dad or doubled
up into roommate living arrangements are now forming their own
households," Willet said.
Khan also suggested older generations now consider renting as a
more appealing alternative to buying.
"You even have some baby boom generation that are considering that
their large homes are not as necessary as they thought they once would
be," Khan said.
"They are looking to downsize and potentially move into apartments
and rent," Khan added.
** Market News International Washington Bureau: (202) 371-2121 **