A "For Rent" sign in front of a house in Chicago.(Photo: Scott Olson, Getty Images)
Apartment rents will go up again next year for the fourth consecutive
year as the economy improves - good news for landlords but tough on
Rents for apartments - which make up about half of all
rental housing - will jump 4.6% nationally next year after a 4.1%
increase this year, the National Association of Realtors predicted
Monday in its commercial forecast.
Rents will keep rising, more than 4% a year for 2014 and 2015, says market researcher Reis.
"The pendulum has definitely swung back in favor of landlords, not renters," says Ryan Severino, Reis senior economist.
The stronger economy and lack of new supply continue to drive apartment rents higher.
number of apartments under construction at the end of September stood
at 194,000 units across the nation's 100 largest metro areas, says MPF
That's more than double the level of construction in
late 2010 - when it hit a low point - but it's still low by historical
standards, says MPF Vice President Greg Willett.
At the same time, household formation is up 1.1% over last year's levels and will grow slightly faster next year, Severino says.
With a stronger economy, "more people move out of Mom and Dad's basement," he adds.
Apartment rent growth is slowing in some markets, MPF data show.
September, San Jose and San Francisco ranked as the country's rent
growth leaders, MPF says. Effective prices for new leases were up 8% for
the year in San Jose and 7.5% for San Francisco. That bested the 3.3%
rise nationally and a more historical growth rate of 2.5% a year,
But rents in San Jose and San Francisco had been growing at a 13% to 15% annual clip as of late last year, MPF says.
MPF expects national apartment rents to rise about 3% this year, down from 4.8% last year.
says the stronger economy has emboldened renters to move more often.
That affects how aggressive landlords can get with rent increases.
apartment renters are also shifting to homeownership, Willett says.
Single-family home prices are up this year, but still about 30% below
their 2006 peak, and interest rates are at or near historical lows. That
makes homeownership more affordable for more people.
metros showing annual apartment rent increases in excess of 5% as of the
end of September included Oakland, New York, Denver, Houston,
Nashville and Columbus, Ohio, MPF says.
Despite the rising rents
of recent years, rents nationally are up only 5.3% from where they were
in October 2008, says market researcher Axiometrics. That's due, in
part, to rent declines in 2008 and 2009.
The multi-family sector
is the strongest part of a slowly improving commercial real estate
market, the National Association of Realtors says.
NAR's forecast calls for industrial, office and retail rents to rise 1.4% to 2.8% in 2013 and 2014.
demand for commercial space will gradually rise with an economy
expected to grow 2.5% next year, modest job growth and no fallout from
the tax increase and spending cut challenges facing congressional
lawmakers, says Lawrence Yun, NAR chief economist.