As a logical consequence of the way America's supply-and-demand economy works, it appears that since few people are currently looking for new homes while they wait for the market to either improve or to decline further, demand for rents has begun to increase significantly . In response to an increased demand for rental space, rents have moved upward during the first quarter of 2007.
The increases seem to be taking place nationwide, although the amount of the rent hikes varies from area to area. For instance, San Jose, California, reports rent increases of 12.2%, while rents in Boise, Idaho, inched up less than one percent (-4%).
Of the twenty-nine metro markets that are tracked by RealFacts.com, all but one (Colorado Springs, which dipped 1.7%) saw rent increases. The most expensive monthly rentals can be found in Los Angeles ($ 1,588), while the lowest average cost is in Tulsa, Oklahoma ($ 538). For the first time, an area outside of California saw its average monthly rental rate top $ 1,000, according to Realfacts surveys. That city was Seattle, Washington, which saw its average rental units increase to $ 1,004.
Interestingly, the rent increases that were reported nearly across the board were offset by slight slips in the actual occupancy rates of rental units in twelve of the twenty-nine areas. However, it appears that the trend will continue to be towards stronger occupancy rates in the future, since almost all areas had reported dips in occupation during the last quarter of 2006. In all areas tracked, occupancy rates were above 90%, and seven areas reported more than 95% occupancy.
The nation's apartment market started to improve dramatically back in late 2005 as the soaring owner-occupied housing market finally began to lose some of the amazing momentum it had been enjoying for the past several years. That slump in the housing market then forced a larger number people to begin looking for affordable alternatives, and by the first quarter of 2006, rental rates had begun to escalate significantly.
However, the rise in rental prices historically ran out of steam – almost as quickly as it had begun in 2006 – when the combination of a growing backlash from renters and an increasing number of condominiums that entered the rental market began to put downward pressure on rent payments. As more options became available, renters began to enjoy falling rent prices as the market became more and more planned.
If you, like many investors, have rising property costs, take another look at the average rent in your area. You may be surprised to find that you can raise your rents sooner than you planned.