Rise in Housing Costs Causes Rental Market to Tighten

Photo courtesy of www.technobuffalo.com

Photo courtesy of www.technobuffalo.com

To all of the recent college graduates and young adults thinking about leaving the nest, know this: It ain’t going to be cheap. According to a recent study by real-estate research firm Reis Inc., the average monthly rent in the third quarter of 2013 was $1,073, up 1% from the second quarter and a total of 3% from the third quarter a year ago. The Wall Street Journal reports that the increases were stronger than experts in the industry expected, a trend they attribute to rising mortgage rates, an increase in home prices, and the rising cost of homeownership.

On the Rise

In the past five years, Reis reports that rents have risen 7.6% nationally and in excess of 10% in certain markets. New York City remained the nation’s most expensive market in the third quarter with an average rent of $3,049 per month, up 2% from 2012 and Seattle saw the biggest rent gains from a year ago at 7%.

Not So Fast, My Friends

Relief for renters, however, may be in sight. According to the Wall Street Journal, some experts are arguing that rents couldn’t possibly continue to climb at the current pace. Additionally, an increase in new supply should also help slow rent increases. Roughly 170,000 units are expected to be built in the 54 largest metropolitan markets in the U.S. this year and as many as 490,000 units could be constructed by 2016. Currently, the national vacancy rate is at 4.2%, which is down .5% from 2012 and almost four percentage points from the aftermath of the housing crisis.

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