Another Bullish Sign for Housing Prices in 2012: Increasing Rents

February 1, 2012

by Mike Simonsen

7 comments

Last week I highlighted the bullish signal that the price of newly listed homes after the first of the year were ticking up. This week I have another hint of good news. Rents.

In addition to the active housing market, Altos Research now tracks the active rental market. Our set of 750,000 – 1 million rental units a month is the largest set available anywhere. And it’s powerful.

Rents across the country

US Rental Prices, weekly sample, single family homes and apartments for rent. Sample size is approximately 600,000 per week.

This chart illustrates rents across our Altos 20-City Composite and 10-City Composite as of January 27, 2012 so it’s a national view. This data is a blend of both single family homes and apartments on the market. ┬áThe weekly upticks in rents is one of the signs we’re using to underpin our mildly bullish home price scenario for 2012. The argument goes like this:

  1. Rents are rising because mortgages are harder to get and because the conventional wisdom that “owning always wins” is diminishing. ┬áPercent of American households who own their homes has fallen to 65%. It’ll likely keep falling to closer to 60% over the next few years. This bodes well for rents.
  2. As rents rise, home prices fall, and mortgage money remains unnaturally cheap, we’ve reached the point where investors see growing returns on investment properties. There’s a well-funded investor pool who can take advantage. They’re buying.
  3. As rents rise, those non-investor home buyers see more opportunity buying vs. renting. As long as they can get a mortgage, there are relative opportunities.

So rising rents help provide a floor to home prices. Keep an eye on this space for more as Q1 2012 progress.

 

 

{ 5 comments }

Ruth Bradley February 4, 2012 at 1:49 am

Wow! It seems that putting my properties as rental property this year will be a profitable idea for me. If people is having a hard time to sell homes, now can be the best time to change strategy and put the properties on rental.

Real Estate March 7, 2012 at 2:13 am

Article is very well written and very informative. I will bookmark site for future visits and Refer site to other end users

Boyle March 7, 2012 at 12:54 pm

Good article. I hadn't really connected rents to house prices quite this way before.

Joel April 17, 2012 at 7:17 pm

I agree with you. Since it has been tougher for people to get a loan, the rental market has been heating up. Basic supply and demand. People need a place to live and if unfortunately they are not able to buy, then of course they will rent. One place where it is great to buy is the Bronx. There are a bunch of great Bronx Homes for Sale. Check out this site. http://www.bronxpad.com If you are looking at Westchester homes for sale then check out this site. http://www.westchesterpad.com

TN Real Estate Deals April 26, 2012 at 7:47 pm

Another sign of increased rents is increased vacancy!!!

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