Rents Accelerating

By now most are aware of the rising rent phenomenon.  Our Realtor® survey indicated only a sliver of the market will see falling rents, with a vast majority of areas experiencing positive though not higher than 5 percent rent growth.  According to the ‘rent index’ in the consumer price index as measured by government statisticians, rents are rising by 2.5 percent.

Rent growth will, more likely than not, accelerate higher.  Demand for rentals has been much greater than the supply coming onto the market.  It is just inevitable that rents will rise at a faster rate over the next 12 to 18 months, unless there is another economic recession or if there is sudden ramp-up housing permits for multifamily units.  Multifamily housing starts are slowly coming around.  But they are still well below normal and there is a lag time between starts and eventual completion.  In addition, the number of single-family homes available for rent is no doubt shrinking because of the overall decline in inventory of homes for sale.  Therefore, rent growth in 2013 may reach 5 percent on average.  San Jose may even witness 10 percent rent growth because of Facebook millionaires.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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