Rents are rising faster than they have in six years
By Noelle Knox, USA TODAY
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% 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.\
rental increase year since 2000
"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
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% 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% 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."
Posted 5/29/2006 10:17 PM ET