City Rents Rise As Buyers Wait Out Housing Bust
Mon, 2012-04-09The turmoil in the housing market over the past few years has scared a lot of people away from homeownership. That means many people who can afford to buy are now renting. With so much demand for apartments, rents are once again on the rise. And in places like New York City, they're near record highs.
There's very little supply, there's lots of demand. People have been staying in the rental market longer cause they're not comfortable jumping into the sales market or they don't have the necessary down payments, so all of those things have been factored into a very tight and successful rental market. - Gary Malin, real estate agent
That's putting it mildly. Rents in the city fell a bit after the 2008 financial crisis, and a lot of landlords were forced to offer incentives like a month's free rent to find tenants, but since then, rents have been slowly climbing. Gary Malin, president of the real estate firm Citi Habitats, says they are now near an all-time high.
"There's very little supply, there's lots of demand," he says. "People have been staying in the rental market longer 'cause they're not comfortable jumping into the sales market or they don't have the necessary down payments, so all of those things have been factored into a very tight and successful rental market."
That pattern is being repeated in many other parts of the country. Chris Herbert, research director of Harvard's Joint Center for Housing Studies, says rents rose more than 5 percent last year in Seattle, Chicago, Minneapolis, Boston, Pittsburgh and other cities. Herbert says the increases reflect growing demand for rental properties.
Regulators say banks and investors buying up foreclosed rental properties are not model landlords.
New housing starts are still low and foreclosure prevention efforts haven't done as much as hoped.
But renting out a home to try to cover costs when it doesn't sell poses challenges for some owners.
"In 2011, there was growth of a million renter households across the country, while homeowner households fell by 350,000," Herbert says. "So in one year to have growth of a million renters, that's a number we haven't seen in a long time."
Herbert says the rental market won't stay this strong indefinitely. Sooner or later people are going to get tired of paying high rents and think about buying again.
"People may decide, 'You know what? It looks like the economy's recovering. I have more confidence in the housing market, I have a job and I am paying so much in rent, I think it's time for me to jump into the homeowner market,' " Herbert says. "So that may be where the release valve comes if demand for rentals keeps going up."
In the long run, he says, developers will respond to the increased demand by building more apartments. In fact, there's evidence that's starting to happen. But it will take a while before they're built.
Excerpt from the article written by Jim Zarroli for NPR.org. Click here to view the original article in its entirety.
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