Good news for landlords, bad news for renters as U.S. Census Department and Rent.com agree that double digit rent hikes are on the way across America. Traditional news outlets point to this as a sign of economic recovery, we point to it as a sign of the opposite.
Vacancy rates have remained around 10% over the last three years with predictions of 5% vacancy by next year, and with the continuing housing crisis, existing landlords (especially multifamily) are in a good spot- consumers lack confidence in housing and financing is tough, making renting more common. This does not spell economic recovery, it simply spells landlord luck.
The stigma around renting is fading across the board and Realtors who used to be apartment locators are returning to their old stomping grounds despite locator fees having dropped substantially over the years (and most multifamily not paying on send only).
For the last decade, national rent increases have averaged 1% each year and in hot spots, we’ve seen 5% increases quite regularly, making a projected national average of 10% straining on the rental population- here in Austin, we’re seeing some 17% rises and in Boston 30%, leaving some renters in a non-qualifying status, forcing unexpected moves.
In the last six years, 1.2 million American adults have moved back in with their parents. We expect to see that number rise as double digit rent increases set in. We anticipate local tenant councils will be very busy over the next few years as renters are caught off guard by such spikes.
Property owners and multifamily managers will take advantage of this situation to improve cash flow as the housing crisis continues and renters who are scared of buying will have their fears reinforced as they rarely see the difference between the rental sector and the housing sector (they’re all scary now).
Economic recovery? Absolutely not- rapidly rising rental rates point out a weak spot in the market, not strength. Moms and dads of America- you better get the guest room cleaned up, the kiddos are moving back in. It won’t last long though, as this is the unfortunate first step and first bubble on the way to recovery.