Rents rising at highest rate in 6
years
WASHINGTON -- May 30, 2006 -- If you're a renter trying
to save for a down payment, or you're just trying to
move out of your parents' home, it'll likely get harder
this year. Rents are rising faster than they have in six
years.Apartment rents are expected to increase 5.3
percent this year -- about double last year's increase
-- the National Association of Realtors® says. That's
the highest jump since 2000, when the Internet boom
created lots of jobs for young adults out of college. In
April, rising rents were largely to blame for a sharp
jump in consumer inflation.
"This is going to be the highest rental increase year
since 2000, and it's going to be a broad-based increase
in rents, not just limited to a few markets," said
Hessam Nadji, who manages research for Marcus &
Millichap, a real estate firm in northern California.
"Renters are already facing higher energy prices and
relatively moderate wage growth," Nadji says. "This is
going to really squeeze a lot of households."
No one needs to tell Rosa Shephard. The $1,600 rent
she pays for a two-bedroom apartment in Laguna Beach,
Calif., will rise by $100 a month this Friday. It's a
6.3 percent increase, and Shephard's salary as an
administrative assistant isn't rising as much, so she's
trying to find a cheaper place to live.
"I'm trying to find a one-bedroom for $1,200," says
Shephard, 53. "It just doesn't exist."
There are four driving forces:
- Job growth. U.S. businesses have generated 4
million new jobs in the past two years. New hires
typically look for rental property.
- Rising home prices. From 1980 to 2000, the
median price of a home was 12 times higher than the
annual average rent. By this spring, it was 21 times
higher, Nadji said. The median-priced home now costs
$223,000, making the American dream a fantasy for
more renters, whose competition for apartments then
drives up rents. There's little relief in sight in
such areas as Phoenix and South Florida, where home
prices soared more than 30 percent in the first
quarter of this year over the same quarter last
year.
- Condo conversions. When the housing market was
at its blazing peak, many investors who owned
apartment buildings kicked out tenants and sold the
units as condos. One out of three apartment
buildings sold last year were converted into condos
for sale. That took 191,400 apartments off the
market, according to the NAR. In addition, the
number of new apartment buildings under construction
is down this year.
- Hurricane Katrina. About half the 100,000
displaced families in the New Orleans area haven't
returned. Most of them were renters, says Lawrence
Yun, an NAR economist, and "that's putting
additional pressure on rental units throughout the
country."
© Copyright 2006 USA TODAY, Noelle Knox, a division
of Gannett Co. Inc.
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