The Real Estate Bloggers

Rental Prices Jump 11.6 Percent in 2010

Posted: 10 Jan 2011 08:53 AM PST

You would think that with the housing crisis in full swing that there would be so many homes available to rent that rental prices would go down. Seeing the recent numbers from HotPads you would be wrong.

The average rental price in 2010 increased by 11.6% during the year.

That is a huge jump on many levels:

For families on a fixed income, that extra rent keeps people from spending their money on other things.
New couples that are saving to buy are seeing higher rents that push them that much further from their goal.
Meanwhile, there are the families that have lost their homes in foreclosure who are in the rental pool that now are paying the increased rent and squeezing their household budgets that much more.

The one good news out the of report is that with housing prices going down and rental prices going down, the Rent-Buy ratio is shrinking. From a rent to buy ratio in 2009 of 15.66 we are now down to a 12.64 at the end of 2010. That means that when families are looking at the cost of buying versus renting they will be more inclined to buy.

As an industry we need buyers to absorb the inventory we are sitting on. Till that day, housing prices will not firm up on a nationwide level and there will be an increased demand for rental units. It is a market and the equilibrium will need to be re-established after the housing boom so all is not lost.

It is just taking longer than any of us expected…

The rental price increase is a factor of uncertainty in the US economic climate, which has forced a transition from a home buying mentality to one more in favor of renting. The growing number of homes lost to foreclosure in 2010 expanded the number of people seeking to rent, creating a renter surplus.

Further, with the US unemployment rate over 9% throughout 2010 (up from 4% in 2006), low risk housing options became more desirable, a trend which may continue in the coming months.

At the same time, HotPads expects to see foreclosed and long standing for sale properties re-enter the market as rentals, which should expand the rental supply, thereby helping ease rent prices. This represents an interesting contrast to the peak of the housing market in 2006, when rental units were being converted into for-sale condos. via Hotpads

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Rental Prices Jump 11.6 Percent in 2010