Apartment market shows strength in housing
The Home Front
07/03/2012 10:00 PM
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Landlords from coast to coast are pocketing increased rental dollars as more and more new household formations are centered in apartments.
Freddie Mac’s U.S. Economic and Housing Market Outlook for June reported that apartment rental market activity has been a bright spot for the nation’s housing market.
Rental demand is sparked by those postponing homeownership, and further increases are expected in the coming year, predicted Frank Nothaft, Freddie Mac, vice president and chief economist. Here is an overview of Freddie Mac’s June outlook:
- Over the year ending March of 2012, an additional 1.5 million households moved into rental housing, a 4-percent increase in a single year.
- Rental vacancy rates have dropped roughly 2 percentage points over the past two years.
- While nominal rents rose 2 percent to 4 percent during the year ending March of 2012, average rent on an inflation-adjusted basis remained below where it had been for much of the decade prior to the Great Recession.
- However, Ron DeVries, vice president of Chicago-based Appraisal Research Ltd., is projecting that rents in luxury downtown buildings here will rise 9.68 percent over rents a year ago. This translates to rent of $2,500 to $2,720 a month for a 1,000 square foot two-bedroom, two-bath apartment downtown.
- Multifamily property values are up on average about 25 percent during the past two years from their trough during the first quarter of 2010, reported the National Council of Real Estate Investment Fiduciaries index, but still about 14 percent below their peak prior to the Great Recession.
- Construction starts of rental buildings with at least five apartments have jumped 48 percent in the first five months of this year when compared to the same period a year ago.
“Further increases in rental demand are likely in the coming year as newly formed households postpone homeownership decisions until the economy strengthens and they have accumulated sufficient savings,” said Nothaft. “Overall apartment market trends may show further vacancy declines and rent gains, with property values improving as well.”
However, with rents inching up every day housing experts say renters are beginning to take a longer look at the for-sale home and condo market.
The Illinois Association of Realtors (IAR) reported that home sales in Illinois recorded their best May performance since 2007, and year-over-year median sales prices moved into positive territory in the Chicago area for the first time in more than four years.
A total of 11,984 single-family homes and condominiums were sold statewide in May, up 22.1 percent from 9,815 home sales in May of 2011. This was the best May performance since 2007 when 14,493 homes were sold in Illinois.
The statewide median price in May was $145,000, up 3.6 percent from May of 2011. This was the third straight month of median price increases in Illinois, and marked a $22,650 jump in median prices since January.
Meanwhile, near record-low home-loan interest rates are widely available. Benchmark 30-year, fixed-rate mortgage for the nation’s North Central region was 3.83 percent in May of 2012, reported the Federal Home Loan Mortgage Corporation. In May of 2011 these rates averaged 4.67 percent.
Don DeBat’s weekly real estate column is syndicated by DeBat Media Services. For more home-buying information visit his website at: www.dondebat.net.