Feeling like you’re on the cusp of an employment breakthrough? Thinking of getting an apartment with pals instead of sharing your parents’ basement with lidless Tupperwares and your sister’s gymnastics trophies? Does the thought of owning a home make your palms sweat?
If you answered “yes” to any of these questions, pay attention: the Economist, and many economic forecasters across the US, have been predicting rents will be rising around the country. That’s because, thanks to an improving economy (and a memory of recent nightmares brought on by foreclosures) lots of people are like you: in the mood to rent.
Urp. What’s a renter to do in the face of rising rents? Well, naturally, it depends on what kind of renter you are.
If you’re a job seeker, and your skills are equally in demand in small or large cities, consider going smaller—or hunting harder. Why? Because rents in big cities will rise faster than those in small cities. According to the Economist article, published April 6, in hot cities the apartment market is already tight: the apartment vacancy rate in big cities dropped from 6.6 percent to 6.2 percent from end 2010 to early 2011. And in big cities unemployment rates are relatively low again. So places like D.C., Seattle, and NYC will be places where supply of apartments is low, too. On the other hand, in “cheaper” locations you can get more bang for your buck, since there’ll be excess supply.
If you’re aspiring to be a tenant again but will be staying in the same city, keep in mind that the competition for apartments and rental units will be on the rise. This means the sooner you (and possibly your friends, if you’ll plan to share) act and sign a lease—even if it takes a bit of groveling and asking the parents for a short-term loan—the better. After all, increased employment, especially for 20- to 34-year olds, is increasing housing demand. (Hint: if you need to make a compelling case for the parents illustrating why they should support your move out of the basement now rather than later, tell them to think of how much more it will cost you if you wait until next year. Some experts forecast rents will be on the rise for around 3 years…)
If you’re an existing tenant, consider talking to your landlord or property manager about renewing your contract early to try to lock in lower rates now. In a CNN Money interview with the president of Rent.com in March 2011, apartment vacancy rates were predicted to reach around 5 percent nationwide by 2012. This would likely cause prices on apartments to go up—fast. Renewing your lease early will benefit your property manager too, who’ll likely appreciate the security of locking in reliable tenants for another term.
Finally, if you’re a former homeowner putting a foreclosure behind you—or if you’ve seen friends or family suffer through a foreclosure—realize you’re not alone in seeking a place to rent to start over and avoid the commitment of buying. That’s great—you can avoid the higher financial costs and risks of home buying. But be aware that everywhere, and especially in places where it costs a lot to own, you’ll be facing lots of competition in finding a place to rent. For example, in Manhattan just 20 percent of the population own their homes; in San Francisco that figure is at 33 percent; and even in Chicago, still less than half own.