Rental rates in the United States continued to rise during the second quarter of 2012. Maybe that’s not so great news for those writing an ever-larger amount on the money rental check, but it’s great for investors with the foresight to have invested in income producing properties. In other words, landlords are happy! Here are the new numbers:
The average vacancy rate in the US was 4.7, which is the lowest recorded since the fourth quarter of 2001. Lower vacancy rates mean there are more people competing for the available pool of apartments and rental houses. All you budding capitalists out there should know that when more people want something, the price usually goes up. It’s the law of supply and demand, plain and simple.
The other number of concern to landlords and renters alike (though for different reasons) which increased during the second quarter is the “asking rents.” Asking rents is the average price across the nation landlords are advertising for the units they own. This rate increased by 1% in the second quarter of this year, landing at $1,091 per month currently.
The Bottom Line
Taken together, these two new numbers (low vacancy + higher asking rents) mean that landlords are asking for more rent and people are paying it, which is a welcome trend for real estate investors. There are a few reasons the rental rate continues to rise even in the face of declining home prices. A primary one is that, although the price to buy a house in America has perhaps never been lower, qualifying for a loan is tougher than it has been in a while.
Thanks to the foreclosure mess, which isn’t completely over yet, banks and other lending institutions are more than a little nervous about handing over money to simply anyone. Gone are the days when five percent down (or even zero down) would get you a mortgage. Potential homebuyers should prepare themselves to pay as much as 25% down in today’s market, and that’s a chunk of change not everyone has laying around.
Here’s the real bottom line. Until something changes, nothing is going to change. If you’re an investor, there’s nothing wrong with the status quo. Tenants aren’t quite so enamored with the trend.
The Solomon Success Team
Flickr / brianDhawkins