Rent beginning to rise nationwide as fewer buy homes
There is always debate on whether to rent or to buy, and the cost of renting is going up. More people are electing to rent apartments, and vacancies have plummeted nationwide among rental properties. Landlords have also begun charging current tenants more.
Rental vacancies falling as more people turn to rentals
The number of rental property vacancies has been steadily falling for more than a year, according to Bloomberg. The vacancy rate, or percentage of rental properties sitting unoccupied, recently reached 6.2 percent nationwide. Reis Inc., a company that specializes in tracking nationwide real estate data, observed an 8 percent vacancy rate in April of 2010, which fell to 6.6 percent by the fourth quarter. The increased demand is thought to be mostly due to people in the 20 to 34 age group, according to Reuters. More people are being hired and need housing but aren’t in the market to buy. With disappearing vacancies, finding a new apartment may take more time depending on where a person is looking.
Rent is rising
As fewer apartments and other rental properties are available, the cost of those properties goes up. The nationwide average for rent is rising, according to the same Reis Inc. survey. The national average effective rent, which is what people pay every month, is $991 per month, an increase over $967 a year ago. The asking rent, which is what landlords advertise that they charge, rose from $1,027 this time last year to $1,047. That’s a $24 increase in actual rent and $20 increase in advertised rent. New construction on rental properties like duplexes and apartment complexes is slowing as well, which means that until more units are built, landlords may be able to ask for higher rent.
Less incentive to buy
American have less incentive to purchase real estate these days. Values are low, and so are interest rates, but financing is very difficult to obtain. The Federal Reserve, according to CNN, observed that close to 25 percent of all applicants are turned away, and Fannie and Freddie will not back any loans to borrowers with a credit score of 760 or less. Banks are asking for larger down payments as well, and a 20 percent upfront payment on a $200,000 home is not easy for many people.