The Financial Times reported last week that, as buyers are priced out of the home market and as rising interest rates add even more pressure on that sector, more people will rent homes. That drives up rental prices.
Vacancy rates for rental properties are going down nationwide. In 2004, the national vacancy rate was 10.4 percent. It is just over nine percent now and falling.
USA Today reports:
Apartment rents are expected to increase 5.3% this year - about double last year's increase - the National Association of Realtors says. That's the highest jump since 2000, when the Internet boom created lots of jobs for young adults out of college. In April, rising rents were largely to blame for a sharp jump in consumer inflation.
"This is going to be the highest rental increase year since 2000, and it's going to be a broad-based increase in rents, not just limited to a few markets," said Hessam Nadji, who manages research for Marcus & Millichap, a real estate firm in Northern California.
"Renters are already facing higher energy prices and relatively moderate wage growth," Nadji says. "This is going to really squeeze a lot of households."
USA Today says there are four main reasons for the increase in rents:
Job growth. U.S. businesses have generated 4 million new jobs in the past two years. New hires typically look for rental property.
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, Nadji said. 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.
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.
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."
See related story from The Sacramento Bee.
Lenders Flooding Students with Refinancing Offers
I told you a couple of weeks ago that on July 1st, student loan interest rates will rise. The current rate on the popular Stafford loans is 5.3% but that will rise to 7.14 percent July 1st. Students who consolidate their loans can lock into current lower rates.
The Wall Street Journal said students face a bewildering selection of offers that range from cashable checks to those who refinance with one lender to official looking notices that have phrases like “Final Notice” or “Notice of Congressional Action” on them. The tactics are reminiscent of the scare tactics that marketers use to frighten senior citizens about Medicare and Social Security. There has been a lot of coverage on this issue in recent days. See these links.
The Milwaukee Journal said:
A graduate of the class of 2006 with $20,500 in loans will save $3,245 over the course of a 10-year repayment period by consolidating before the new rates take effect, according to the College Loan Corp., a student loan provider based in San Diego.
The story continues:
A student with $20,000 in debt who consolidated today at 4.75 percent would pay $129 a month for 20 years, said Richard George, general counsel for Madison-based Great Lakes Higher Education Guaranty Corp. A consolidation loan on $20,000 at 6.625 percent after July 1 would cost $151 over 20 years, he said. Although an extra $22 per month may not seem like a big deal, over the life of the loan it ends up costing the borrower more than $5,000 extra.
RIAA names "Pirated Music Havens"
The Recording Industry Association of America (RIAA) says Atlanta, Austin, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Philadelphia, Providence, San Diego and San Francisco are all havens for pirated music.
Ringtones Go Gold and Platinum
It had to happen, I suppose. The music industry now recognizes phone ringtones with gold and platinum designations, just like records. Billboard magazine even lists hot ringtones now.
