US Apartment Rents Increase while Vacancy Rates Fall
By the end of 2012, it was observed that rental rates of apartments were shooting up in the U.S. However, home owners have to consider revising their rental agreements as more renters are moving toward buying a house as the charges are crossing budget thresholds.
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According to a data survey by Reis Inc, a property research firm, it was revealed that in the fourth quarter of 2012, the average monthly apartment rent was $1048, which was 3.8 percent more than what it was a year earlier. Vacancy rates also recorded a sharp decline. The apartment vacancy rates went down by 0.2 percent between the last two quarters making it the lowest rate in the past 12 years, reported Wall Street Journal.
"The market has tightened considerably over the last few years and at this point in the cycle a slight slowing should be anticipated," Ryan Severino, senior economist at Reis told Reuters.
Even though the rent prices were the highest in New York, rent levels in the city saw a slight drop of 0.2 percent in the fourth quarter. Vacancy rates in the city dropped by 2.1 percent. Seattle's rents shot up 5.8 percent, the highest among all states while San José, Houston and San Francisco saw an increase of more than 5 percent in its rental prices, reports Wall Street Journal.
The Reis report also analyzed that around 45,162 homes were leased, which was a strong sign of preference for long time home investments and avoiding the increasingly multiplying rent. With mortgage rates riding low and banks offering interesting schemes, more renters are expected to move towards purchasing homes. The fact that contributing to mortgage loans is more of an investment than "rent"- which is an expense will draw people to buy houses, reported Reuters.
The poised rental rush and the demand for homes are pushing developers to supply more buildings and apartments. However, office space demand is still slow with unemployment rates at a standstill now. The more people are employed, the more they can afford a mortgage.
"A lack of job creation combined with a pickup in home sales would be a perfect storm for apartments," Rich Anderson, analyst at BMO Capital Markets told Wall Street Journal.