Apartment Renters Can See Increase In Rental Prices
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Apartment dwellers are going to find that, despite a rise in apartment construction, their rent is going to increase 3.3 percent this year, averaging around $1,161. It’s a little slower than last year’s 3.6 percent but still continues that upward trend of the last five years.
Marcus & Millichap Chief Strategy Officer Hessam Nadji said the only real relief is that the hotter markets are going to increase at a slower pace.
The key reason for the increase is that more people are searching for apartments. Younger people are finding employment and moving away from their parents’ home. And, rising housing prices are causing many renters to stay where they are.
On top of that, new apartments are geared to affluent tenants and have higher than average rents, especially true for locations that have new buildings in urban core areas.
For instance, Denver rents have seen a five percent increase since 2010 with a 9.2 percent increase in 2014. 23 percent of the new apartments were developed in urban core areas.
Since there is competition for apartments, renters may not be able to negotiate with their landlords or win bonuses like a month’s time rent-free.
A Closer Look Why Renters Will See Increasing Prices
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Additional Jobs, Additional Competition
When the recession hit, people lost their jobs and had to move in with relatives or bring in roommates. However, hiring has turned around and 2.8 million Americans have a job than they did one year ago.
Trulia Chief Economist Jed Kolko said young people with jobs have seen an increase, helping them to move from under their parents’ watchful eyes. Many of these folks are going to be first-time renters.
Delay In Home Buying
Renting, in the past, has been seen as the stepping stone to homeownership. With higher rent prices, people tend to buy a home sooner, especially with low interest rates like now. However, higher rates mean more money from the bank account and less money to put toward down payment and ability to qualify for a home mortgage.
Many people, ages 18 to 34 years, are choosing to rent, not buy. Many cite the ability to move at a moment’s notice if there is job opportunity in another location. And, with fewer units available due to extended stays, rent prices are going up.
New Expensive Apartments
Last year, developers added about 238,000, with another 210,000 anticipated for this year. One would expect that more rental units means lower prices; but, Nadji said about 80 percent of the new buildings are going to be high-end projects geared toward renters who want to pay for the offered amenities – concierge service, gourmet kitchens, etc.
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