Photo: Salem Eames / Flickr
Since the economy first took a downturn several years ago, a large portion of Americans have decided to forego homeownership and have opted to rent instead.In fact, the apartment sector (which contains the vast majority of rental properties) is currently undergoing the strongest recovery within all of commercial real estate.
While more individuals than ever are fighting to move into rental units though, the construction of new apartment complexes has been stalled for upwards of 18 months, making rental units more coveted than ever.
Renting is a great short term option for individuals who face the prospects of moving frequently or who do not have the financial means of placing a down payment on a home, but landlords have recognised the recent increase in rental demand and have begun to significantly raise monthly rental costs as a result.
The cost increases are so staggering that the latest statistics may have you thinking twice about renting in the future:
A Closer Look at Cost Increases
UDR, Inc., a self-administered real estate investment trust specializing in managing apartment communities, recently confirmed with Reuters that their quarterly performance has improved due to increasing rent 2.9 per cent to an average of $1,201 a month. Even more astounding, rent has increased 15 per cent to an average of $3,346 a month in the Manhattan area alone. UDR predicts that as long as demand for rental properties continues, there will be an additional increase in prices for 2012.
Elsewhere in the US, cities like San Francisco are reporting a similar demand for rental properties which, according to CBS San Francisco, are now averaging $1,792 a month in Santa Clara County and $1,866 a month in San Mateo County. Additionally, Post Properties, Inc., a company specializing in acquiring and managing luxury apartment communities across the US, has cited a 6.7 per cent increase in rental prices for 2011 while AvalonBay Communities, a competing company, has cited a 5.8 per cent increase.
A Money Saving Alternative
Before committing to another rental contract, first consider if homeownership might be a long term, financially feasible option for you. While rent costs continue to skyrocket, the cost of owning a home — especially for first time homebuyers — is the cheapest it has been in years and is currently more affordable than renting in 74 per cent of the country’s 50 largest cities. And while renting a home is essentially just money down the drain, owning a home is not only an opportunity to save money in the present, but is a chance to turn your cherished place of residence into a long-term investment.