Apartment Values and Rents Rise

High rents and occupancy levels have pushed up the values of apartments nationally. As more Americans shy away from home ownership, demand for quality rentals is rising faster than supply. Investors who bought apartment buildings just a few years ago are selling for nice profits these days.

Effective rents, which include landlord discounts in some markets, have risen to an average of $1004 per month. This was in the third quarter, and 2.3% higher than the same quarter a year ago. Reis, Inc., a real estate data service, reports that of the 82 markets tracked, only Las Vegas saw rents decline compared with a year earlier.

This rise in rents, while great for apartment and rental property owners, is squeezing the middle class at a time of high unemployment and low wage increases. Renters now spend 5% more of their budget on housing costs than do homeowners. This difference is growing as rents continue to rise.

Since 2005, homeowner expenditures for housing have risen from 31.9% of their household budget to 33.2 percent. However, renters have seen an increase from 35.6 percent to 38.4 percent during the same period. Since 1985, homeowners have seen a 12% increase in housing expenditures, but renters experienced a 22% increase.

It isn’t all just higher rents, as a stagnation of income contributes to these calculations, and lower incomes mean a larger percentage spent on housing. Contributing also is the slide in home ownership rates for age groups between 25 and 44 years of age.