A record number of prospective renters are actively seeking an apartment residence that meets their lifestyle needs. The national occupancy rate in May reached 95.3 percent, the highest ever, reports Axiometrics, a real estate analytics firm.
“The May rate historically is the start of each year’s occupancy peak, meaning occupancy should remain at the current level or higher,” says Stephanie McCleskey, Axiometrics’ vice president of research, as quoted in a report by the National Association of Realtors.
Higher occupancy rates have come with higher rents. In May, rents rose 5 percent nationally, making it the fourth consecutive month at or above that mark. “Owners and investors are having a profitable start to the year,” McCleskey says.
Apartment demand has been high from millennials who are forming their own households, as well as baby boomers looking to downsize, CNBC reports.
Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute, recently published a paper claiming that the rental surge will only get bigger. Goodman predicts that out of the 22 million households formed in the next 20 years, 13 million will be renters, it was noted in the NAR report.
“We are nowhere near building enough to meet demand,” Goodman says.
Q: Is activity in the housing market picking up?
A: Yes, substantially. It’s now at a nine-year high. Pending home sales continued to make gains last month, rising to the highest level since April 2006, according to the National Association of Realtors.
Large gains in pending home sales in the Northeast and West helped to offset small decreases in the Midwest and South.
“The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring,” says Lawrence Yun, NAR’s chief economist. “It’s very encouraging to now see a broad-based recovery with all four major regions showing solid gains from a year ago and new home sales also coming alive.”
Q: Are mortgage applications declining?
A: No, both refinance and purchase applications are rising. Mortgage applications increased 1.6 percent from one week earlier, according to recent data from the Mortgage Bankers Association.
The Market Composite Index, a measure of mortgage loan application volume, increased 1.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1 percent compared with the previous week.
The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier.
Q: Are more first-time buyers who have been renting now becoming homeowners?
A: Yes, but many of those prospective buyers are finding themselves stuck in the rental housing market. That’s partially due to the lowering homeownership rate.
The nation’s homeownership rate has plunged for eight years, currently down to 63.7 percent in the first quarter of this year from a peak of over 69 percent in 2004, it was noted in a report by the National Association of Realtors. As the homeownership rate has fallen, the amount of rentals has soared, and so have the costs of renting.
Last year, rents climbed at a 3.2 percent rate – double the pace of overall inflation.
Many renters may struggle to save for buying a home as rental costs continue to soar. The share of renters paying more than 30 percent of their income on rent – which is considered “cost burdened” – remains near record highs.
Nearly half of all renters were in this category in 2013, according to a newly released report by Harvard University’s Joint Center for Housing Studies.
Q: Is it a good idea to contract for a home inspection in a pending sale?
A: Generally, a home inspection is very useful, but there are some downside issues to consider.
For example, in some cases, an inspector may feel obligated to list negative items in his report to justify the payment of his fee. These items may have little or no relevance to the pending sale of the property, but they can sure cause problems in closing a sale transaction.
In a recent survey of Realtors, 8 percent said they had problems in closing a sale due to an inspection report. Some were canceled.
WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.