Rental Demand -- and Prices -- Climb Back Toward Peak


While everyone is wringing their hands over the price of gas this summer, few have noticed another budget-buster looming around the corner: rising rents.

Thanks to the recession and housing foreclosure crisis, there are 3 percent fewer homeowners in America, according to Census data. Where did those folks go? While a few moved in with friends and relatives, the bulk became renters. And as we learned in Economics 101: Prices are determined based on supply and demand.

Nobody has built more rental units, although some houses that were once owner-occupied now are leased. But the evidence is clear: Rents have ticked up as homeownership declines.

BusinessWeek reports that in 2010, rents nationwide rose an average 4.2 percent. By contrast -- and proof of what a difference a year can make in the housing market -- in 2009, landlords had to offer discounts to attract tenants, and effective rents (what tenants actually paid) fell 5.9 percent. According to AXIOMetrics, an apartment market research firm in Dallas, last year was one of the best periods for landlords over the past 15 years and may mark a turning point for what lies ahead for renters. In a nutshell, higher monthly rents.