Good News: Some Rental Markets are Recovering
In Chicago, new downtown apartment buildings are filling up fast. These luxury accommodations, with amenities like spas and state-of-the-art workout facilities—plus the personal trainers to go with them, are drawing affluent tenants and are expected to be 90% occupied within 12 to 15 months.
In San Diego, apartment vacancy rates are finally turning around, and rents should rise again with the next 12 months.
Why the good signs of recovery in these two markets?
- Home buyers came out of the woodwork during the federal government’s first time homebuyer’s tax credit program. But that ended in April, so one incentive to buy rather than rent is gone.
- Home prices have not started rising again in many markets, so potential home buyers may be scared that their home or condo will lose value if they buy now. In Chicago, condo and town house median prices have dropped almost 10% since January.
- Borrowing requirements have tightened up to the point where some potential home buyers aren’t qualifying.
- Renters who prefer flexibility are biding their time, and turning to rental housing until the home market stabilizes again. They’ve seen their friends become stuck in condos they can’t sell, while they have the freedom to move where they want and upgrade when they want.
- People who may have spent the last six months or year looking for work are relocating to land jobs—so they’re more likely to rent until they put down roots in their new communities.
- Tighter supplies will lead to fewer vacancies, just when the job market will begin its recovery. In San Diego, the military and biotech industries are strong, which is leading to more demand.
Experts expect free rent, lower security deposits, and incentive give-aways like big-screen TVs to start going away—all good news for rental housing investors!