Rents are still going through the roof, just not as quickly.
Rents were up for the third consecutive year in 2012, when they rose a bit slower than in 2011, but forecasts call for rent increases in 2013 to match 2012’s increases, according to MPF Research.
That puts more pressure on housing consumers to buy and lock in housing costs to beat both the rising cost of rent and the growing costs of owning a home.
Buyers who move now can still enjoy record low interest rates, distressed property bargains and relatively affordable home prices.
However, most renter movement in the apartment sector consists of households opting for one apartment over another.
Loss of renters to the owner-occupied housing market sector is having only a very small impact on apartment sector fundamentals, according to MPF Research.
“While the number of apartment renters opting to buy is rising a little, it remains far below the levels apartment operators were accustomed to prior to the recession,” said Greg Willett, MPF Research vice president.
“Families that have been renting single-family homes, rather than apartments, comprise a big portion of the first wave of homebuyers seen in the cycle. By far the biggest component of the apartment resident base, particularly within large urban areas, consists of young singles living alone or young-couple households. Single-family homes just aren’t the right housing option for many of them, regardless of shifts in the pricing relationship,” Willett added.
MPF Research said apartment rents climbed 3.0 percent in 2012, down from 4.8 percent in 2011, but a bit above the long-term norm of 2.5 percent recorded during the past two decades.
An increase of 3.0 percent is similar to the average results posted during shorter past periods when occupancy was sustained at strong and generally stable levels, according to MPF Research.
Those shorter periods of annual price increases of 3.0 percent came in 2005 through the middle of 2008, and earlier in the middle to late 1990s.
Among large individual metros, top markets include three San Francisco Bay Area markets – San Francisco, San Jose and Oakland – where rents rose 8 percent, 7.7 percent and 7.1 percent, respectively.
Other top rent increases were in the Denver-Boulder area where rents rose 5.9 percent in 2012; 5.1 percent in Nashville and New York; 4.8 percent in Houston; 4.6 percent in Charlotte; 4.4 percent in Portland and 4.3 percent in the Seattle-Tacoma area.
MPF also said property owners and operators didn’t push as hard for higher rents in 2012 as they did a year or more ago. They’d rather hold onto existing tenants.
“Many on the operations side of the apartment industry have focused on sustaining their very tight occupancy levels during a period when job growth and new household formation have been fairly sluggish at the same time that renter movement has begun to inch up from the unusually low levels experienced in the previous few years,” Willet said.
The average apartment occupancy rate of 94.9 percent at the end of 2012, was up a tiny bit from 94.7 percent at the end of 2011. The rate was 92 percent in 2009, when the nation’s apartment occupancy rate bottomed, MPF reported.
MPF says look for 2013’s rental market performance to be similar to the strong 2012 marlet.
“Most places are starved for new product right now, so properties that will complete over the coming year appear likely to do incredibly well, generally without hurting the results for the existing stock,” Willett said.
Written by Broderick Perkins, Realty Times
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