Thursday, August 25, 2005
Rents are rising again across the country, squeezing tenants who are already coping with high gasoline prices and improving returns to landlords after a deep five-year slump.
The turnaround appears to be another sign that the boom in house prices and sales is finally slowing, as homes have become so expensive in many metropolitan areas that some people have decided to rent instead.
A government report yesterday also offered new evidence that the housing boom could be reaching a peak. The median price of a newly built home fell to $203,800 in July from $219,500 in June, after having risen in the winter and spring, the Commerce Department said.
Still, the number of new homes that were sold continued to grow, and economists cautioned that the recent housing slowdown could turn out to be a pause.
But rents have clearly changed direction, even if the increases have been relatively small. With the economy growing and mortgage rates inching up, more people are looking to rent apartments and homes rather than buy them. At the same time, many buildings are being turned into condominiums, reducing the supply of rental property.
"It seems like the tide has finally turned," said Michael H. Zaransky, co-chief executive of Prime Property Investors, which owns 15 buildings in Chicago.
Rents in about 85 percent of large metropolitan areas have climbed in the last year, according to Global Real Analytics, a research company in San Francisco. Late in 2003, rents were falling in 85 percent of markets.
Only in the hottest markets like New York, Southern California and South Florida have average rents been rising generally.
In Chicago, people who moved into a small brick building on the leafy corner of Sherwin Avenue and Paulina Street two years ago had it very good. They did not have to put down a security deposit, the $50 application fee was waived and, best of all, they got to live rent-free for two months.
By last summer, the enticements had shrunk to one month of free rent. Today, all that a new tenant receives for signing an $1,100-a-month lease are the keys to the front door.