Rents Rising Faster Than Income

Rents have continued to rise while household income stagnates.

Apartment building

The Wall Street Journal reports that average rents rose in all 79 metro markets tracked by research firm Reis. Nationwide the average monthly rent for an apartment is now $1,099. Led by cities on the West Coast, cities where rents have risen fastest saw increases of about 4% to 6% during the past year.

Meanwhile median household income, adjusted for inflation, is the same as it was in 1990. However, inflation adjusted rents are up nearly 15% during the same period. Ouch.

One reason attributed to this trend is the more stringent mortgage lending standards now in place compared with before the recession began. As fewer people have been able to obtain mortgages and become homeowners, and some have lost their homes to foreclosure, the demand for apartments has increased markedly.

However, rent increases are expected to be tempered somewhat by the availability of more rental units due to new construction. This is reflected by the vacancy rate which has remained steady at about 4%.

Business has been good to landlords the past few years and will probably continue to provide solid returns to those who have already acquired properties in strong markets. Bargains are getting harder to find in those markets but are still readily available in markets that are recovering more slowly.

Source: Wall Street Journal story (requires login)

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