As the owner-occupied housing market hits a bump in the road, the rental market is accelerating.
Renters who plan on staying put for a while should consider negotiating longer term contracts.
Rents for new and existing units in buildings with five or more units were approaching record highs as the national vacancy rate sank to a four-year low at the end of 2005, according to Elliot F. Eisenberg a housing policy economist with the National Association of Home Builders (NAHB).
For all existing units, the median asking rent nationwide was $593 during the fourth quarter of 2005, which is $21 lower than in the third quarter, $15 lower than in the first quarter, and just $27 dollars less than a year ago but still up from 2003.
"Because asking rent data on new apartments are volatile from quarter to quarter and can change directions quickly, we have constructed a four-quarter moving average, and calculated year-over-year changes based on those moving averages," reported Eisenberg.
Based on the moving average, year-over-year, rents have increased steadily from late 2003 -- from a fourth-quarter 2003 low of 1.6 percent, the rate of increase in rents has risen every quarter to 5 percent by the fourth quarter of 2005.
During the fourth quarter, the Northeast had the highest median asking rent at $727, followed closely by the West at $725. In the South it was $551, while in the Midwest it was $513.
The vacancy rate for buildings with five or more units stood at 9.5 percent for the three months ending December 2005, down from 10.8 percent during the third quarter of 2005, and lower than at any time since early in 2001.
The vacancy rate for all rental properties (of which nearly a third are single-family units) stood at 9.6 percent in the fourth quarter of 2005, down slightly from 9.9 percent in the previous quarter, and down from 10 percent during the last quarter of 2004.
For units completed during the fourth quarter 2004, median asking rents were $972, down from the record asking price of $1,025 during the second quarter of 2004, but still the third-highest level ever recorded.
The Northeast and West continued to have the highest median asking rents for units completed during the fourth quarter of 2004, both at more than $1,050. The South came in at $910, and the Midwest at $854.
"Rents are clearly highest on both coasts, median asking rents in the Midwest are at their highest levels ever, and the median asking rent in the South is within $38 of its highest monthly reading," Eisenberg said.
Rentals being converted to condos has created some of the rental market's tightness.
Novato, CA-based RealFacts, for example, reported notable conversions in California, where last year 17,177 units were converted in 80 communities; Florida experienced 24,736 unit conversions in 72 communities; Arizona, 6,696 conversions in 29 communities; and Nevada, 8,167 conversions in 21 communities.
New households adds to the squeeze but portend an owner-occupied housing market that may soften only temporarily.
There were 108.9 million total households in the U.S. in the fourth quarter of 2005, up from 107.5 million in the fourth quarter of 2004 and 105.9 in the fourth quarter of 2003. Each quarter in 2005 revealed year-over-year growth of 1.4 households or more. The first quarter of 2005, for example, revealed 1.9 million more households than during the first quarter or 2005, the first NAHB reported.
"This generally robust growth in households helps explain the first sustained increase in renter households since the one ending in the first quarter of 1995 -- more than 10 years ago. At that time, the number of such households was about 35.5 million, and it now stands at 33.7 million," NAHB reported.
