The housing market has caught renters between a rocky buying market and a hard place in the rental sector.
The nation's home ownership rate rose slightly from 68.5 percent in the first quarter to 68.7 percent in the second quarter this year, but that's down from the record high of 69.2 percent first set in the second quarter of 2004, according to U.S. Census.
That's because the home buying market is hitting a wall of higher interest rates tacked onto housing costs that grew out of reach during the last housing boom.
The last week in July found applications for home loans at a four year low, the lowest since May 2002, according to Mortgage Bankers Association.
With potential buyers forced to rent, a strengthening landlords' market is moving toward new heights with concessions for renters vanishing like ever-increasing home prices.
The National Multi Housing Council's Quarterly Survey of Apartment Market Conditions for the second quarter 2006 reveals 75 percent of apartment executives surveyed reported tighter market conditions for renters, measured by lower vacancy rates, higher rents or both.
The survey's "Market Tightness Index" increased slightly in the second quarter to 85, the second highest index number on record. (An index reading above 50 indicates that, on balance, conditions are improving for landlords). The index has been 80 or above for five consecutive quarters, and above 50 for 12 consecutive quarters, signaling significant improvement in demand for rental housing. In July 2003, the index was 45, only 39 in July 2002, during the peak of the recession.
"Improving rental demand in the face of rising interest rates and declining sales volume attests to the strong outlook for the apartment sector," said Doug Bibby, NMHC president.
"According to Harvard University's 2006 State of the Nation Housing report, the number of renter households rose in 2005 for the first time in years. The report goes on to say that as echo boomers, same-age immigrants and second-generation Americans move into adulthood, demographic forces will favor rental housing over for-sale housing," he added.
With apartment investors also hit by higher interest rates, a tight supply could exacerbate conditions for renters.
The "Debt Financing Index" increased slightly from 21 to 29 this quarter, as the vast majority, 71 percent, report that conditions are unchanged. The council says that means conditions for borrowing are not ideal, even though they are not getting worse.
Likewise, the surveys' "Equity Financing Index" remained at 50. Nearly 75 percent of executives thought the availability of equity financing had not changed from the previous quarter. Some 11 percent thought financing was less available and 11 percent said it was more available.
Sales activity also revealed a tight rental market. Only 6 percent of apartment executives reported higher sales volume this quarter compared to last quarter. Some 42 percent reported lower sales as the "Sales Volume Index" declined from 35 to 32, the lowest since January 2002, and down from a high of 66 in July 2005.
