Home > multifamily, Uncategorized > Apartment Values Rise, As Do Rents

Apartment Values Rise, As Do Rents

December 6, 2011 Leave a comment Go to comments

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By Jeff Louderback

As Americans shift away from home ownership because of difficulty securing mortgages despite historically low interest rates, strong growth of rents and occupancy levels of rental apartments have catapulted some building values to record levels, according to the Wall Street Journal.

Apartment rentals continue to rise due to demand from millions of people who are victims of foreclosure or are unwilling or unable to buy their own homes, the Wall Street Journal reported.

Reis Inc., a real estate date service, indicated that 5.6 percent of the country’s apartments were vacant at the end of the third quarter compared to 5.9 percent in the second quarter. This is the lowest level since 2006, according to Reis Inc.

Occupancy rates at apartment communities are even up in cities that have been ravaged by high unemployment and real estate issues, like Orlando, Detroit and Phoenix, the Wall Street Journal wrote.

Of the 82 major markets that Reis tracks, only Las Vegas saw rents decline compared to the previous year, according to the Wall Street Journal.

An index compiled by Green Street Advisers indicated that values of apartment buildings located in prime locations and featuring modern amenities like resort-style swimming pools and outdoor movie viewing areas reached record numbers during the third quarter. The previous record was established in the second quarter of 2007, according to the Wall Street Journal. Because of rising rents and occupancies, some analysts predict that real estate companies will have the highest growth in property net income this year and in 2012 since 2006, the Wall Street Journal wrote.

The main reason for the increase in rentals is a faster-than-anticipated decline in the home ownership rate, Green Street reported.

If the country encounters another recession hits and unemployment escalates, there could be a decline in demand for rentals if millions of renters double up or move home with their parents, according to Green Street.

“People just aren’t going to write bigger and bigger rent checks into infinity,” Andrew McCulloch, a Green Street analyst, told the Wall Street Journal.

Read more: Apartment Values Rise, As Do Rents | REALTOR.com® Blogs

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Categories: multifamily, Uncategorized
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