Rental Costs Rise Along with Home Prices

As many across the state are defaulting on their Florida home loans, others may be hesitant to purchase property at the moment. They may be hoping to save money as they rent for another year before entering into the ownership market.
This may be difficult, however. According to the National Association of Realtors, apartment rents are expected to increase 5.3% this year - about double last year’s increase . That would repreent the highest jump since 2000, when the Internet boom created lots of jobs for young adults out of college. In April, rising rental costs were largely to blame for a sharp jump in consumer inflation.

As the FHA looks into reforms in order to make a Florida home loan more affordable and open up that world again, there are four driving forces behind this rental price surge:

1. Job growth. U.S. businesses have generated 4 million new jobs in the past two years. New hires typically look for rental property.
2. Rising home prices. From 1980 to 2000, the median price of a home was 12 times higher than the annual average rent. By this spring, it was 21 times higher. The median-priced home now costs $223,000, making the American dream a fantasy for more renters, whose competition for apartments then drives up rents. There’s little relief in sight in such areas as Phoenix and South Florida, where home prices soared more than 30% in the first quarter of this year over the same quarter last year.
3. Condo conversions. When the housing market was at its blazing peak, many investors who owned apartment buildings kicked out tenants and sold the units as condos. One out of three apartment buildings sold last year were converted into condos for sale. That took 191,400 apartments off the market, according to the NAR. In addition, the number of new apartment buildings under construction is down this year.
4. Hurricane Katrina. About half the 100,000 displaced families in the New Orleans area haven’t returned. Most of them were renters, says Lawrence Yun, an NAR economist, and “that’s putting additional pressure on rental units throughout the country.”

All of this leaves individuals in a difficult position. Do they continue to rent and, as some would claim, waste money without building equity? Or do they have hope that the Florida home loan market is on their side and a housing bubble barely even exists?