Apartment Rentals Reach High Levels

More and more American residents are choosing to rent, according to a recent report from Real Estate Economy Watch. The national apartment occupancy reached 95% this May - the first time in at least six years. Rent prices have climbed alongside it, with rent growth driving to 3.7% (year to date, ending in May), which is the highest growth since the recession.

Original Image from Real Estate Economy Watch

Axiometrics' recently released the May 2014 Market Trends Report, indicating a 20 basis-point (bps) increase in occupancy. Based on their identified supply, about 180,000 new units have surfaced across the U.S. during the past year. However, these properties are marked by high absorption, and the impact on effective rent growth and occupancy has been positive.

Director of Research at Axiometric, Stephanie McCleskey, speculates the reason occupancy is rising is due availability of Class B units as well:

“One reason occupancy is rising is that not only are people moving into these new units, but they’re also moving into Class B units at a lower price point. Most of the new units are priced competitively with Class A product, so about 80% of existing stock has lower rents than the newcomers, making them attractive to those who can’t afford the highest rents.”

In fact, both top class properties have experienced growth. Class A properties (the top 20% of rent) have generated a 3.5% annualized effective rent growth in May, up from 3.1% in April, while Class B properties have an even stronger growth rate amongst classes at 3.9%, 0.1% up from April and the best we've seen since December of 2012.

“Since most of the new units being delivered are getting absorbed no one should be surprised that rents for Class A properties nationwide are rising,” Axiometric's Vice President of Research Jay Denton supports. “And Class B is leading the other classes because people who can’t afford the high rents being asked at new properties are moving into these units. And while they might not have all the bells and whistles of the new units, many Class B properties are really a good buy for the price and quality.”

What does this mean for prospective homeowners?

If you're pondering whether or not you should become a homeowner instead of a renter, you're not alone. Recent studies have shown that owning a home is officially cheaper than renting one all across the country. This notion is specifically supported with this data, which directly states rent prices are rising. A rent payment can look very similar (or, in fact, even cheaper) than a monthly mortgage payment - and it is going towards a piece of property that you actually have claim to.

What about for homeowners looking to rent their property?

Another rising trend in this market are homeowners who are seeking to rent out their property, as these statistics reveal that the rental market is functioning well. The intrigue lies predominantly in the idea of "passive income" - a means of making money with little need for work. The reality of being a landlord, however, is not as passive as many would like to believe.

Being a landlord requires 24 hour on-call availability for maintenance requests and emergencies, as well as a solid cash reserve already in place to complete these requests. You'll also need to work with a good lawyer who will keep you safe from legal disputes. To determine whether or not your lifestyle will easily adapt landlord duties, evaluate this checklist.

Have questions about these statistics? Looking to make a move? We'd love to hear from you! Don't hesitate to send us an email or give us a call.

 

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