Will the cost of renting rise in 2011??

Will the Cost of Renting Rise in 2011?

Even though the Federal Reserve Board and the U.S. government keep telling us that there’s virtually “no inflation” and little if any “inflationary pressures”, most Americans know otherwise.

Major financial news channels like Bloomberg and CNBC are reporting that in many regions around the nation vacancy rates are going down. As a result they say that the cost of renting an apartment or a house has been rising. Will rising rates drive would-be renters to purchase homes?

As the National Association of Home Builders states on their web site “While the national home ownership rate stands at an impressive 68%, millions of American Families struggle to find housing that meets their needs at a price they can afford.”

There have been all kinds of foreclosure numbers proclaimed by the media, so it isn’t an easy figure to ascertain. I’ve read and heard repeatedly that the real number of houses and condominiums going into foreclosure in 2011 alone is closer to 6 million and possibly higher.

This will of course swell the inventory of unsold homes as I recently wrote. It’s also likely to drive property values down. But with the Federal Reserve doing all they can to keep interest rates low and mortgage rates down, there are still people able to buy houses.

Pending home sales improved further in December 2010, marking the fifth gain in the past six months, according to the National Association of Realtors®. This figure apparently is a forward-looking indicator, and it increased 2.0 percent to 93.7 based on contracts signed in December from a downwardly revised 91.9 in November.

The data reflects contracts and not closings, which normally occur with a lag time of one or two months. One has to ask, “Is this an accurate reflection of home sales?” Only time will tell.
It’s like looking at a gigantic see-saw. On one end is the number of unsold and foreclosed houses. On the other end is that nebulous number of actual, qualified home buyers who are out there looking for a home to buy and have the money to make it happen.

Each area and region of the country has varying circumstances and conditions. It’s not fair to compare San Francisco with Chicago. But looking at the major metropolitan areas does give us some clues. One vital factor; how many unsold houses and condos will end up as rentals?

Speaking of Chicago, the Chicago-land Apartment Association forecasts that landlords in that area plan to increase rent as high as 8% in 2011.

In Austin, Texas one of the nation’s top-performing apartment markets, rents are expected to jump nearly 7% during 2011, according to MPF Research. Other areas poised to command higher rents in 2011 due to low multifamily vacancy rates are San Jose, Miami, Boston and Portland.