Wikinvest Wire

Trouble for the Consumer Price Index?

Thursday, May 07, 2009

A story this afternoon notes an increase in apartment rents now that hundreds of thousands, perhaps millions, of "homeowners" are returning to their former status as renters.

Florida is a state hit hard by foreclosures, and now apartment rents there are on the rise, according to a new report released on Thursday.
There are several possible explanations, but Maya Brennan, research associate for the center, said that one seems particularly likely: "The number of foreclosures in Florida is pushing homeowners into the rental market."

Because demand has risen for apartments in the area, rents have gone up.

Rents seem to be on the rise in other parts of the country too. "Overall, it looks like rents have been on a slight increase," Brennan said.
This does not bode well for the inflation statistics since rental costs contribute almost one-third to the overall index. Earlier in the decade, modestly rising rental costs in combination with soaring home prices were the keys to our low-inflation, high-asset price prosperity.

Rising rental costs and falling home prices are not what the economists want these days.


Dan said...

Yep. Rentals are creeping upward, although, they never really ever seemed to stay flat - they've always been increasing.

What I don't get is... all of this "new" demand for rentals, but at the same time, all of the pent up supply of empty condo units... does the squeeze have to exist? It seems a bit unethical and immoral to me. Let the damn thing collapse so that the empty units make it back onto the market place and increase the supply pronto.

In my area, I would guess that a good 25% of the market is unoccupied simply because the sellers/owners want too much money. Within a 2 block radius, I've got three brand new condo buildings that are completely unoccupied because they are all too expensive, both to buy and to lease. Not every single thing can be a Luxury item.

The house in back of mine has been for rent for nearly a year with no takers. It's probably due to the fact that it has a $12K move-in. It's only 800 square feet. It's tiny and old and... just nasty. It's an eyesore in the neighborhood. The owner hasn't been able to get the building occupied so he has been renting out the parking spaces in the driveway. I just stopped by and re-read the "for rent" sign as it appeared to be updated and... the owner upped the asking price for the rent and has increased the total move-in to $18.5K. I have never gotten a look at the owner, but I'm very curious to see if he can stand on his own without falling over or to check for other signs of mental deficiencies.

This market needs to collapse very hard and very fast. Many lessons need to be learned. Many herds need to be thinned.

Anonymous said...

I'd be curious to know how much of the (supposed) increase in the rents is actually caused by a fall in supply. As I understand it, a disproportionate number of foreclosures (incl. pending) are rental properties, which effectively takes the property off the market. Probably little doubt that the price movement is mainly demand-driven, but there probably is "double-squeeze" going on...

Anonymous said...

I don't know rents seem down a bit in Los Angeles. It's because noone is selling so they are now RENTING OUT THEIR HOUSES! And houses are now competing with apartment rentals.

Anonymous said...

My rent in Los Angeles was decreased by 15% in November and now my complex is giving 20% reductions just to get folks to stay.

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