Rent prices are climbing faster than asking prices, and the gain in rent prices is seen in metros where asking prices are actually falling, according to a report from Trulia.
Nationwide, year-over-year rent prices were up 5.1% in October, while asking prices were up 2.9% during the same period including foreclosures.
Out of the top 25 rental markets in the United States, Houston led with a 16.5% yearly increase. Miami and Oakland took the next two spots with a 10% gain in rent prices.
After nine consecutive months of appreciation, August was the first month where home values decreased by 0.1% to $152,100, according to Zillow.
2012 has seen a turnaround in the housing market with sustained appreciation that, at times, has been very strong. As we progress through the latter half of this year, we expect home values to see more volatility characterized by months of home value declines mixed with months of appreciation.
Overall, the positive trend will hold as evidenced by home values being up by 1.7% in August 2012 on a year-over-year basis. Rents continued to rise in August, appreciating by 0.2% from July to August. On an annual basis, rents across the nation are up by 5.9%, indicating that demand, fueled by elevated foreclosure levels, is still outpacing investor-driven increases in rental property supply.
Rental households comprise 34% of the housing stock, and are growing at the incredible rate of 1.6 million per year, while owned households are actually declining in number. This is an incredible surge in demand.
In our summary of the U.S. housing market, only 20% of renters live in large buildings (20+ units), and the remaining 80% of renters live in alternative types of housing.
Approximately 55% of new renters are renting single-family homes, while 45% are renting apartments. The single-family rental business, which is already larger than the institutional quality apartment business, is booming. Unprecedented levels of distressed home sales, at home price/rent ratios that are the lowest in decades, is driving the boom.
Gas prices around the country have been steadily increasing and the probability of $5.00 per gallon is a real possibility. Is it a big deal? Some people think so.
According to HUD, people still want to buy homes, particularly the “Y Generation” (those ages 18 to 35). But this group has seen the most precipitous drop in home ownership.
First, these people often enter the work force at a lower pay scale, and this may lead them to believe that higher gas prices will make home ownership prohibitive. Second, they may not look for homes farther away from their jobs (like the suburbs) where they may find lower purchase prices, and third the higher cost of gas may make it too difficult to save up for the down payment and closing costs.
While homes prices continue to be on the decline, rent prices are actually on the rise and showed a 3 percent increase from January 2011 to January 2012, as opposed to home values, which dropped 4.6 percent during that same period, according to a recent Zillow Real Estate Market Report.
“While it seems that rents are rising at the expense of home values, the opposite is true. A thriving rental market will stimulate home sales as investors snap up low-priced inventory to convert to rentals,” said chief economist for Zillow Dr. Stan Humphries in a release.
It used to be that home-ownership was a part of the American dream. Home-buyers would scour for properties that suit their needs whether it was for their growing family or for a second home. But the global economic slump that has plagued the real estate market has created a major shift on the housing landscape.
Oliver Chang, Head of U.S. Housing Strategy at Morgan Stanley, recently explained the reason behind this new housing landscape. He opines, “One of the big reasons why we believe the rate of home-ownership is going to decline and more people are going to rent is that it’s just getting harder and harder to get a mortgage and so as people are not able to buy homes, they’re basically forced to rent and we see that continuing.”
Home prices and sales may be flat, but the rental industry is booming. The percentage of renters is on the rise, the number of households is increasing, and more Americans are downsizing, all of which point in a single direction: rents are on the rise.
At the peak of the housing boom, home ownership in America reached an all-time high at 69.2%. Today that number has plummeted to fewer than 67%, which may not sound like a huge drop, but that represents roughly 3 million households that were owner-occupied and are now tenant-occupied.
The high foreclosure rate has accelerated the transition toward leasing, but there are a myriad of other trends coalescing to boost demand for rental housing.
Housing and rental vacancies have hit unprecedented levels. Included in these record vacancy numbers are a plague of abandoned properties fated for demolition, and millions more homes being withheld from market. Of the more than 19 million empty homes recorded by the US Census, just under 2 million are up for sale, many of them in uninhabitable condition.
Even though the economy remains weak and the housing market, in particular, is still years from recovery, some news suggests that stronger growth can be expected as the year progresses.
A record 19.2 million U.S. homes are vacant, representing the highest number of residential properties that are vacant of all-time, according to the U.S. Census Bureau. The figure represents 14.5% of all the homes in America.
The dismal figure was issued as part of the Census Bureau homeownership quarterly survey for the first quarter of 2010. A total of 19,230,000 homes are vacant, according to the report. The same study shows that 10.6% of all rental properties in the nation are vacant, also an all-time record.
