As Rents Soar, 2015 May Be the Year to Buy a Home

31 Dec 2014 | Author: | No comments yet »

Average Boston rent rises to $1,200 this year.

WASHINGTON (MarketWatch) — Rent payments zoomed this year in cities across the U.S., including a blistering 14% in San Francisco, and 2015 is likely to be another year of heady growth.

Although Boston’s rent hike is smaller than the increase in 17 other cities, the rise breaks out to an additional $696 a month for each of the Boston metro area’s 684,000 renting households. “Over the past fourteen years, rents have grown at twice the pace of income,” said Stan Humphries, the chief economist at Zillow, which conducted the survey. “Next year, we expect rents to rise even faster than home values, meaning that another increase in total rent paid similar to that seen this year isn’t out of the question.LOS ANGELES — U.S. renters paid $441 billion for apartments and houses this year, a $20.6 billion increase, as fewer Americans owned their homes and landlords with tight inventories raised leasing charges, Zillow said Tuesday.

American renters continued to foot the bill for the uneven housing recovery in 2014, as growing rental demand outpaced the available supply of properties. As landlords both cranked up prices and rented out more units, renters in the U.S. paid a total of $441 billion this year, up 5% from last year, according to data released Tuesday by real estate site Zillow. The number of rental households grew by 2 percent, or 770,000, nationally during 2014, according to the Seattle-based real estate information service. Locally, the Bay Area, consisting of the San Jose and San Francisco metros, saw the largest jump in cumulative rent paid in 2014, up 14.4 and 13.5 percent respectively.

Looking at the country’s largest cities, those totals rose almost 8% in the Miami-Fort Lauderdale area, more than 7% in Chicago and Houston, and almost 7% in Boston. Demand for rentals has grown after owners of more than 5 million U.S. homes went through foreclosure since 2007, mortgage lending tightened and younger families postponed buying because they can’t afford or prefer not to own property. The smallest amount of cumulative rent was paid by renters in Birmingham, Ala. ($1 billion), Louisville, Ky. ($1.2 billion) and Buffalo, N.Y. ($1.2 billion). The most expensive cumulative rents were seen in the New York-Northern New Jersey and Los Angeles metro areas, which paid $50 billion and $34 billion in rent, respectively.

Home prices will rise more slowly than rents because fewer investors are competing to buy a smaller supply of discount- priced foreclosures, while the inventory of non-distressed properties is growing as prospective home sellers gain equity with appreciating prices, Olsen said. The cheapest cumulative 2014 rents were in Birmingham, Alabama, where renters paid $1 billion; Louisville, Kentucky, where renters paid $1.2 billion; and Buffalo, New York, where they paid $1.2 billion.

While some economic factors are improving, demand for apartments should remain high in 2015, extending the “landlord’s market,” the National Association of Realtors recently forecast. In fact, it’s probable.” Zillow, Inc. (NASDAQ: Z) operates the largest home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. The rental vacancy rate dropped to 7.4 percent in the quarter, creating a shortage of about 350,000 homes by historic standards and giving landlords leverage to raise rents. According to Zillow, the total number of renters is estimated to have grown 1.9 percent in 2014, or by about 770,000 additional renters. “As rents continue to increase and rental affordability becomes more and more of an issue, that also will send people back to the homebuying market when they can,” Olsen says. “Both rents and housing values … will be seeing a return to normalcy in coming years as everything balances out.” Markets such as California’s Orange County and Sacramento have particularly low rental vacancy rates, while it’s easier to find a place in Memphis, Tenn. and Raleigh-Durham, N.C.

Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. A separate government reported showed that annual rent inflation recently hit the hottest pace in six years, blowing past total annual consumer inflation, which has been hit by dropping gas prices.

Builders of multifamily homes broke ground at an annual pace of 340,000 in November, compared with an average 266,000 since 1994, according to Commerce Department data. The Zillow, Inc. portfolio includes Zillow.com®, Zillow Mobile, Zillow Mortgages, Zillow Rentals, Zillow Digs®, Postlets®, Diverse Solutions®, Mortech®, HotPads™, StreetEasy® and Retsly™. First-time buyers have played a weak role in the market’s recovery, a hole that makes it harder for other families to trade up into bigger and pricier homes. A report this month by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate showed the median monthly apartment rent in Manhattan was $3,225 in November, up 2.6 percent from a year earlier.

Lastly, results are then scaled by a rental stock adjustment factor which controls for differences in the footprint between the rental stock and the total housing stock. ii Zillow based this analysis in part on data available at the local and national level from the American Community Survey (ACS) and the Current Population Survey (CPS).

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