Mortgage News

Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years. "The demand for rental housing has already started to increase," said Peggy Alford, president of Rent.com. "Young people are starting to get rid of their roommates and move out of their parent's basements." By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode. Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years -- to a national average that will top $800 per month. In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years.

This is a sharp change from the recession, when many Americans couldn't afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Lesley Deutch of John Burns Real Estate Consulting. Many others doubled up together. As a result, landlords had to reduce prices and offer big incentives to snag renters. Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, millions losing their homes to foreclosure are looking for new places to live. Apartment developers may not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends...q Source: CNN/Money.com