Makin' Money

Landlords hiking prices

Chris Farrell Mar 11, 2011

It has been a good couple of years for renters. But it looks like the days of relatively cheap rents is over. The demand for apartments is up and landlords can charge a higher price for their units. But bad news for renters may be good news for homeowners eager to sell.

First, here’s what’s happening in the rental market, according to Bloomberg Businessweek:

AXIOMetrics tracks 88 metro areas nationwide and surveys about 16,131 apartment properties, with more than 4.3 million units. As U.S. rents rose 4.2 percent in 2010, overall consumer prices rose only 1.6 percent, according to the U.S. Bureau of Labor Statistics. U.S. vacancies fell to 7 percent, from 8.1 percent, and concessions in the fourth quarter dropped to 5 percent, from 7 percent. (A concession of 8.33 percent is equivalent to one month of free rent on a 12-month lease.)

The story adds that a number of people who doubled or tripled up in apartments during the recession are now feeling secure enough in the recovery to look for their own place. Then there’s this intriguing source of new demand:

Also, more than 1.2 million young adults moved home with their parents from 2005 to 2010, creating “huge pent-up demand for rentals,” reports John Burns Real Estate Consulting.

My guess is that the increase in rental rates will slow down. A major reason is that landlords hiking prices will encourage some households to get off the proverbial fence and buy. Yes, home prices continue to decline. But the sense is growing that bottom will be reached sometime in 2011.

For anyone thinking about buying a home for the first time, this Smart Money column offers some timely and sound advice. Among the new rules it emphasizes: Only buy if you can stay in your new home for a decade.

Not only are the days of flip-and-move long gone, but buying a house has become truly a long-term investment. In many cases, 10 years long, says Paul Bishop, vice president of research at the National Association of Realtors — if buyers are hoping to make a profit or just break even. As mortgage fees rise, buyers have to recoup larger costs, which takes a longer time… Of course, buying a home may still make financial sense, but buyers’ focus should shift from rising prices to building equity.

When it comes to owning, it’s back to the future.

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