Rents Driving Decision to Buy Volume
Times are tough if you're a renter. The Census Bureau reports that vacancy rates are at a 30-year low, at 6.8%. That can mean only one thing – rising rents. Rents have already climbed 3.5% in the past 12 months through June. The median asking price for monthly rent is now above $800, a new record. Things are unlikely to improve. Economists at Capital Economics Ltd., in a note to clients, wrote, "Our forecasts that rents will grow at an annual rate of 5% both this year and next would represent the fastest rate of rental growth since the 1980s."
Relentless rent inflation should help reverse the downtrend in the homeownership rate, which is at a 48-year low. We see more people motivated to lock in a predictable monthly payment. If you pay $800 in monthly rent, in five years you'll pay $1,021 if rents rise 5% annually. If they rise 3.5% annually, as they have over the past 12 months, you'll still be paying $950 in monthly rent.
Low vacancy rents and relentless rent increases are yet more reasons to remain bullish on the long-term out lookout for home sales.
Information provided by Jessica Regan.
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