Low Supply Drives Up Renting Costs

Thinking of renting your next place to live? You may want to pu that thought on hold. According to REIS Inc., a real estate research data firm, the average effective rent rose by 3.6% in the second quarter compared to the same time in 2014. In fact, the cost of renting has been rising continuously since 2012, with typical annual growth of around 4%.

What is the culprit behind these soaring rent costs? According to REIS, a small supply of new units as well as a low vacancy rate for existing units (just 4.2%) are driving competition among potential renters, resulting in higher costs. However, some relief may be on the horizon, as there are 230,000 new units projected to be built this year, which is nearly double average.

Several of the markets with the largest rent increases are in areas with strong technology sectors, such as San Jose and San Francisco, where rents rose 7.2 percent and 6.8 percent, respectively. Average rent in San Jose now stands at $1,951 a month, while in San Francisco the average is $2,316 per month. These both pale in comparison to the nation's most expensive rental market, New York City, where rent is now $3,294 per month. On the plus side, that figure represents only a 1.7% increase from the same time last year.

All in all, this just means that there is another good reason to get out there and buy a home!

Source: Renters Face More Cost Increases