Rents for apartments are forecasted to rise nationally 4.6% next year, and that’s following a 4.1% increase this year, according to the National Association of REALTORS®. That's good news for landlords but tough on renters.
What’s more, rents are expected to continue to climb for the fourth consecutive year as the economy improves, rising more than 4% a year for 2014 and 2015, forecasts Reis, a market research firm.
“The pendulum has definitely swung back in favor of landlords, not renters,” Ryan Severino, senior economist for Reis, told USA Today. The stronger economy and lack of new supply continue to drive apartment rents higher.
The number of apartments under construction at the end of September stood at 194,000 units across the nation's 100 largest metro areas, says MPF Research. That's more than double the level of construction in late 2010 - when it hit a low point - but it's still low by historical standards, says MPF Vice President Greg Willett.
At the same time, household formation is up 1.1% over last year's levels and will grow slightly faster next year, Severino says. With a stronger economy, "more people move out of Mom and Dad's basement," he adds.
Rents are rising even more rapidly in some areas. For example, rents in San Jose, Calif., and San Francisco have been climbing at a 13% to 15% annual rate as of late last year, according to MPF Research.Effective prices for new leases were up 8% for the year in San Jose and 7.5% for San Francisco. That bested the 3.3% rise nationally and a more historical growth rate of 2.5% a year, Willett says.
MPF expects national apartment rents to rise about 3% this year, down from 4.8% last year.
Willett says the stronger economy has emboldened renters to move more often. That affects how aggressive landlords can get with rent increases.
Other large metro area seeing rent increases of more than 5% by the end of September include Oakland, Calif., New York, Denver, Houston, Nashville, and Columbus, Ohio, MPF reports.
More apartment renters are shifting to homeownership, says Willett. Single-family home prices are up this year, but still about 30% below their 2006 peak, and interest rates are at or near historic lows. That makes homeownership more affordable for more people.
Source: “Rents Expected to Climb Steadily, According to Forecast,” USA Today