Taperman articles

Renters to see increased rents 

Landlords are forecast to increase rental unit prices for the third year in a row in 2007.  This will further increase the percentage of monthly paychecks which is spent on housing.  The growing cost of rental housing makes saving for a first home even more difficult for most people.

The projected increase in 2007 expected to be 5%, the cost of the average rental unit will be 14% higher than at the end of 2005.  During the same time frame, income from paychecks is expected to increase just 4% after an adjustment for inflation.

The increasing gap between income and rental housing rates is particularly onerous for workforce housing in coastal cities.  The national trend shows rental costs are increasing in most markets and that is likely to continue through 2010.

During the period between 2000 and 2004, landlords pretty much had to keep rental prices level because many tenants were vacating in order to purchase condos or houses.  Over the past three years, nearly three hundred thousand apartments were put up for sale as condominiums.  During 2007, there are over 92,000 new apartments available for rent, but the demand is outpacing the availability of rental units.

In Manhattan, where rents are projected to increase more than 7% during 2007, those searching for apartments may have a wait of six months or more.  Manhattan rents are the highest in the country with costs of  $2,000 per month common.  Unfortunately for apartment dwellers in New York, rents are increasing due to the widening gap between renting and owning.  The national median rent in this country is now $943 per month, which is 60 percent of the national median payment for mortgage which comes in at $1,566.

In other parts of the country, such as San Diego, Miami and Las Vegas, investors purchased thousands of condominiums in pre-construction phase with a plan for flipping the properties in order to make a quick profit.  When late 2005 showed a faltering real estate market, many condos have not been sold.  Investors in these areas are courting tenants just to help pay the mortgages.  Investors are willing to lower rental prices below the rest of the market in the area if it makes the difference between holding on to the property and losing it to foreclosure.   This situation has worked to the advantage of potential renters.

In Las Vegas, investors who purchased condos in 2005 were hurt in two ways.  First, as the housing market dwindled, many of the developers needed to move more condos so they cut prices in order to move their new construction units.  This pulled the market value down on everything, and made it difficult for the small investor to sell at even a slight profit.  The good news is that even with this damper on prices, rents in the area are likely to increase during the balance of 2007.

All in all, renters are finding it more difficult to find housing at any price, in spite of the increase in inventory in the pre-owned market.

Author