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5% Apartment Rent Increase Expected

An article in USA Today notes that the National Association of Realtors expects apartment rents to rise approximately 5.3% this year, double the increase last year, in the highest jump since 2000.The four factors they identify for the increase are more jobs, higher home prices, fewer available apartments, and greater demand because of displaced residents from Hurricane Katrina.

The first two factors are well known leading indicators for apartment rents for obvious reasons, an increase in the amount of renters. Job seekers who move to a new job will typically rent before they buy, thus increasing the demand on apartment rents. The same applies for home prices/sales and rents, as one increases the other decreases (or stagnates). It’s easier to rent an apartment for $1000 than pay a mortgage for $2000, even if you are “throwing” rent away. An interesting statistic they mentioned that I thought was worth noting was that for twenty years (1980-2000) the ratio of home price to rent was 12, now it’s 21!

The last two reasons are a little hard to accept as the cause of increased rents. Fewer apartments because condos were converted from rental properties to owner-occupied (they were sold)? Does it really affect overall rents that much? I find that a little hard to believe. As for the 100,000 displaced residents? Those last two may be a stretch in terms of being “major” reasons. But what do I know…

via Yahoo Finance [3].