If you are living in an apartment currently, expect your rent to go up again.
Over the past decade, especially the last 5 years renting has gotten very expensive. On average U.S. rent has climbed 14 percent to $1200 since 2010, this according to commercial property track Reis Inc. It is important to point out, that 14% increase is 4% higher than inflation, and double the price rise for U.S. homes over the same time period.
Apartment construction is booming, and with that should come competitive pricing, but its actually slightly odd that there will be another 3.3% rise this year, and it appears this trend will not go away for quite some time.
“The only relief in sight is rents in the hottest markets are going to go up at a slower pace, but they’re still going to go up,” says Hessam Nadji, chief strategy officer at Marcus & Millichap, a commercial real estate services firm. Credit The Business Insider.
There is one big reason why this is happening, its actually very simple. More people than ever are looking to rent.
Younger people are starting to find more jobs now, and are typically attracted to urban core areas and that means a large increase in development prices and higher cost for lots.
The competition goes both ways, there are tons of new complexes and buildings going up, but as we talked about above there are more people looking to move in, meaning that landlords can keep their prices high, and there will not be as much wiggle room or promotions being ran.
Roughly 2.8 million more Americans have jobs than they did just a year ago, meaning this younger generation can now afford to move out of their relatives home and start to migrate towards major areas with job growth such as metropolitan areas, which in return mean rent premiums.
This trend will eventually lead to more home-ownership, because as rent increases it will make buying a home more alluring than it already is. Especially with interest rates at historic lows, meaning people will want to buy sooner, causing a huge housing boom. It will be inevitable for this to happen, just taking longer than expected because 18-34 year-olds simply prefer renting still.