Is Rental Real Estate the Next Big Opportunity?
It could very well be. Residential rental vacancy rates are below the 10-percent mark, where they had been lodged for most of the past three years. Peggy Alford, president of Rent.com, predicts that by 2012 the vacancy rate will hover at a mere 5 percent.
Since 2002, rental rates have been flat, and down of late (inflation-adjusted). If Rent.com projections are anywhere close to expectations, we could see a rise in rents of 15 percent over the next two years. That would be a significant reversal of fortune: rent hikes have averaged less than 1 percent annually over the past decade, according to Commerce Department statistics.
Pent up demand appears real: More than 1.2 million young adults moved back with their parents from 2005 to 2010, according to John Burns Real Estate Consulting. Many others doubled up together. Now that the recession is over, many of these young people are ready to find new living quarters, mostly as renters. Where there are renters, there must be property owners (even if they are not occupants). As rental rates increase, the capitalized market value of property increases too – that means rising real estate prices.
We’ve frequently noted that opportunities always abound, regardless of the perceived direness of current circumstances. The outlook in the rentals is another reason we think they abound in the residential real estate market.
Info from Prucal Voices Real Estate Blog.