Renew your lease - rents could rise 10%

chart_rent_up.top.gif By Les Christie, staff writer


NEW YORK (CNNMoney) -- Renters beware: Double-digit rent hikes may be coming soon.

Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years.

"The demand for rental housing has already started to increase," said Peggy Alford, president of Rent.com. "Young people are starting to get rid of their roommates and move out of their parent's basements."

By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode.

Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years -- to a national average that will top $800 per month.

In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years, according to Lesley Deutch of John Burns Real Estate Consulting. In San Diego, she anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%.

This is a sharp change from the recession, when many Americans couldn't afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Deutch. Many others doubled up together.

As a result, landlords had to reduce prices and offer big incentives to snag renters.

Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live.

Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends.

"There will be an envelope of two or three years," said Macke, "when the rise in demand for rentals will exceed the industry's ability to meet it."

Plus, Alford added, "there's been a shift in the American Dream. We're learning from our surveys that a huge proportion of people are choosing to rent."

They've experienced the downsides of homeownership -- or seen friends and family suffer -- and don't want to take the risks or pay the higher costs of homeownership.

Where homeownership costs are particularly high, there are many more renters than owners. In Manhattan, for example, only about 20% own their homes; in San Francisco, about of third of the population does; in Los Angeles, less than 40%; and in Chicago, about 44%.

There's one factor that could rein in rent increases: the huge number of foreclosed homes that could hit the market over the next few years.

In many markets, like Phoenix and Las Vegas, there are neighborhoods filled with recently built, single-family homes going for fire-sale prices. When the cost of owning homes falls well below the costs of renting them, more people will buy.

"That's always been the biggest competition for rentals," said Deutch. To top of page


Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.85%3.81%
15 yr fixed2.95%2.91%
5/1 ARM3.37%3.07%
30 yr refi3.85%3.82%
15 yr refi3.02%2.98%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
  • Find Homes for sale
    Real estate and homes for sale on Trulia

  • Property Type
  • Find a home in: New York | Atlanta | Chicago | Los Angeles
  • Washington D.C | Houston | Philadelphia | More options
Index Last Change % Change
Dow 17,678.70 6.10 0.03%
Nasdaq 4,771.76 13.88 0.29%
S&P 500 2,057.09 5.27 0.26%
Treasuries 1.83 0.01 0.61%
Data as of 11:14pm ET
Company Price Change % Change
Bank of America Corp... 15.85 0.12 0.76%
Apple Inc 113.10 0.12 0.11%
Microsoft Corp 47.01 -0.17 -0.36%
Safeway Inc 35.10 -0.19 -0.54%
General Electric Co 24.59 0.11 0.45%
Data as of 4:02pm ET

Sections

The league announced on Monday that fans will be able to watch official NFL highlights on YouTube. More

Solid economic growth over the next few years should help keep the federal deficit at a very modest level until 2018. But after that, the nation's deficit will start growing again, the Congressional Budget Office said in its latest 10-year outlook. More

On demand delivery startup WunWun is expecting its order volume to double by the time they close up shop on Monday. All thanks to a blizzard. More

Identity thieves are stealing people's Social Security numbers and other key pieces of personal information in order to file a fraudulent tax return and claim a refund, the IRS warned Monday. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2015 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2015. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2015 and/or its affiliates.