As the mortgage crisis continues, a lot of people being foreclosed upon are forced into rental properties. In addition, younger generations are not looking to buy because of the high costs of home ownership. With the amount of renters increasing, the price of rent might increase, too.
More people may be renting condos rather than buying.
Yahoo! Real Estate reported that the percentage of available rental properties has dropped to below 10 percent, which is where the level has stayed for the past three years. Peggy Alford, president of Rent.com, told Yahoo! this number will continue to decrease and that by 2012 it will be at only 5 percent.
“The demand for rental housing has already started to increase,” Alford said. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”
In the past 10 years, the rental rate has never increased more than 1 percent; however with demand increasing, Alford predicts it will rise around 7 percent per year for the next two years. Alford also predicts that some of the major cities’ rental rates will increase even higher, such as San Diego, Seattle and Boston. In certain cities, like Manhattan, Los Angeles and Chicago, where the costs of owning a home are high, there are more renters than owners.
Landlords were forced to reduce the prices of rent between 2005 and 2010 due to recession in the economy. Much of the younger generation was forced to move home with their parents and, in turn, the availability of rental properties went up.
Now it seems the younger generation is looking to rent, along with many people who are losing their homes to foreclosure. Chris Macke, a real estate analyst with CoStar, is not sure that apartment developers will be able to contend with the rising demand and this will increase rental prices.
“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.”
Yahoo! Real Estate reported that the one thing that could stop this increase in rental prices is the amount of foreclosed homes that will become available for purchase at bargain prices.