Expect Apartment Rent to Go Up Again

Are you living in an apartment? If so, you should expect your rent to be going up again in the near future. Rent has skyrocketed in the last five years. The average renter in the U.S. has had their rent raised by 14% since 2010, and the average monthly rent is $1,124. This is four percentage points faster than inflation and more than doubles the rise in home prices for that same period!

 Even though apartments have been popping up rapidly, rent is still expected to rise another 3.3 percent for an average of $1,161. This isn’t as drastic of an increase as it has been, but it’s still an increase nonetheless.

 The reason

 Now more than ever people are searching for apartments. They do not want to buy houses because they simply cannot afford it. Prices of homes are rising (not at the rate of apartments) which makes renters stay put.

 Another reason is that most apartments that are being built today are aimed at the affluent tenants. They are built for luxury and want top dollar for their living quarters. This is undeniably true in big cities where these buildings are being built in urban core areas, and builders need to regain their costs.

 A good example is Denver, their rent has gone up 5% in the past five years, and 9.2% in 2014. Out of the total 9,400 new apartments built last year, 23% were built in these urban core areas.

 Because competition is so high right now among apartments, renters do not have the wiggle room to negotiate with the landlord for concessions, or a free month of rent for whatever reason.

 Here is why renters should expect rent to go up for a sixth straight year:              

 More jobs means more competition: during the last recession, many of the works who were laid off had to move in with their relatives, or take on roommates. 32% of the U.S. adults were living with roommates or family members in 2012. On the other hand, 2.8 million more Americas have jobs than this time last year. Since job growth is looming and booming, people need a place to live and renting is the more practical solution.

 Home buying delayed: Usually, renting is a stepping stone towards home ownership. Once rent begins to rise, it pushes renters to start looking for homes, especially when interest rates are as low as they have ever been.

But the truth is, todays renters are taking longer than ever to buy. The U.S. homeownership rate ended last year at 64.4%, which is almost a 20 year low. First time homebuyers are having a hell of a time saving for a down payment when rent keeps rising, and prices of homes are too. Renters are also staying put because they prefer renting. This makes apartments less available, which leads to price increases.

 New apartments are pricey: Last year alone, developers built a total of 238,000 apartments across the nation. This is a 14-year high and another 210,000expected this year. Theoretically, building more apartments increases the supply, bringing down rent. However, 80% of new apartments are premium living quarters with premium amenities.

 How much of a premium apartment are we talking? Well, the average rent for these places was $1,721. This is 46% higher than the average apartment for older units. There is an influx of supply, but a different kind of supply.

 If renting is your game, so be it. But now is the best time to buy a home. We have Louisville’s best real estate agents and they’d be happy to help you find your dream home.

 Good luck!

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