Lost in the announcement last week that homeownership rates have fallen to their lowest rate since 1998 was a piece of good news for real estate professionals and landlords alike.
Rental vacancy rates are at their lowest since 2003 and still falling, which will drive up rents even faster than the 2-3 percent average annual increase predicted earlier this year. Moreover, with demand outpacing supply the rent to buy equation is turning increasingly favorable in markets across the nation.
The Census Bureau reported that vacancies for rental housing were only 9.2 percent, 1.4 points lower than a year ago and .5 percent below the first quarter. We haven’t seen a 9.2 percent vacancy rate since 2003. The median asking rent for vacant units was %684.
Research firm REIS estimates that rents will rise an average of 3.6 percent in 2011 before the latest vacancy figures came in.
Meanwhile, multifamily is the only busy part of the building business. The National Association of Home Builders (NAHB) Multifamily Production Index (MPI), which provides a composite measure of low-rent, market-rate and “for sale” unit construction, inched up to 41.7 in the first quarter, from 40.8 in the fourth quarter of 2010.
The reading of 41.7 was the MVI’s highest level since 2006. The index is based on whether more multifamily developers and property owners believe conditions are improving or that they have grown worse since the last quarter, with 50 being the break-even point. The highest MVI in the last seven years was recorded in 2005, when the index reached 57.
With mortgage rates falling, median home prices below last year’s levels in most markets and rents taking off towards 4-6 percent, homeownership will make renting look unbeatable in markets where renting was always considered less expensive.