The Massive Rent Increases Are Going to Keep Coming
BOSTON ( MainStreet) It's no secret renters have been feeling the crunch of a competitive rental market for a few years now. If it seems like rent increases have been unusually high this year, though, that's because they are.
In June, the real estate data firm Trulia
According to Trulia, the five least-affordable rental markets in the country are New York City, Miami, Los Angeles, San Francisco and Boston, all of which seemed to charge rents making up close to or more than half of a renter's average monthly wage.
The cities that experienced the highest rent hikes for 2012-13 were Houston, Miami, Boston, Tampa-St. Petersburg, Fla., and San Diego. Some cities, such as Houston, Texas, had lower rents to begin with than the national average for major cities, whereas others were raised from already higher-than-average rates. For instance, Boston already one of the most expensive cities in the country saw a 5.5% increase in rents this year.
It would seem the recent rent increases are an enduring ripple effect of the foreclosure epidemic that catalyzed the Great Recession, flooding the market with prospective renters. At the same time, the gradual economic recovery has resulted in rising employment rates. With a shortage of available rentals, landlords are in the enviable position of being able to name their price and have their pick among desirable tenants willing to pay it.
In their most recent survey, the apartment-research firm RealFacts not only found that rents are up nationwide in 39 of the 41 markets they analyzed, but that these increases occurred even in cities building rental units at a precipitous pace.
In particular, Seattle experienced a large rent increase this past year despite a projection that 12,000 rental units will be added to the market by the end of the year. Portland, which also experienced an impressive increase in average annual rents, did so even as 4,000 units were added in the city. In fact, Portland saw its occupancy rate jump a full percent this past year. San Francisco, which has also added thousands of units recently, saw an occupancy rate increase of 1.2%.
"So far, it appears aggressive rent hikes and new construction hasn't had a negative impact on occupancy rates," according to the RealFacts report.
Though there seems to be no signs of rent increases slowing down, the report warned that the market will soon become oversupplied: The increased availability of new rentals, coupled with the rise in interest rates, will eventually lead to a downturn in the rental market.